Senate wants county bills paid in financial year

The Senate Committee on Public Accounts and Investments wants all county accounting officers to institute measures to ensure that all bills are cleared within the financial year.

It further wants them to give county assemblies quarterly appraisals on outstanding bills and, if necessary, establish a task force to verify and confirm the authenticity of the bills and submit a report to the county assembly. Any accounting officer who fails to do this will be held accountable.

In its report on fiduciary risks in the counties regarding public financial management, the committee notes that the risks range between 50 per cent and 80 per cent. For example, in the 2014/2015 financial year, 40 of the 47 counties had pending bills.

FISCAL INDISCIPLINE

Other factors the Auditor-General has identified as risks are lack of expenditure controls, expenditure not accounted for, under expenditure, underreporting of revenue, irregular payments, low absorption of annual budgets and poor record-keeping.

On development the committee laments the low absorption rate.

“The absorption rate of development expenditure indicates that few development projects were undertaken during the period under review. No explanation has been made confirming the under absorption of funds,” it says in the report tabled by Chairman Moses Kajwang before the House adjourned for the Christmas Holiday.

The county governments incurred expenditure on votes such as imprests, foreign travel, and conferences, which were not properly supported with documents.

“The poor record-keeping may be the source of huge, unsupported expenditure. During the2014/2015 financial year, total unsupported expenditures stood at Sh16.89 billion, a huge leap from the Sh6.58 billion reported in the 2013/2014 financial year.

But the committee insists that pending bills are an indicator of fiscal indiscipline, where the budget is not the basis of commitments in the course of the year.

The report, which assesses the misapplication and misappropriation of resources, covers the 2013/2014 to 2015/2016 financial years.

INCREASED LITIGATIONS

It is based on the Auditor-General’s financial reports and relates to the likelihood that funds are not used for the intended purpose, do not achieve value for money and are not properly accounted for in line with the constitutional provision that public money should be used prudently and responsibly.

The report states that a number of county governments did not settle bills amounting to Sh62.8 billion in FY 2013/2014, Sh108.9 billion in FY 2014/2015 and Sh74.9 billion in 2015/2016.

Similarly, in the 2012/2013 financial year, the office of the Auditor General raised queries amounting to Sh2.433 billion. In 2013/2014, the queries rose to Sh83.24 billion, and by end of the 2014/2015 financial year, they had more than doubled to Sh298.451 billion.

However, the report argues that pending bills are an eyesore and an avenue for rent seeking; they affect businesses negatively not only for suppliers but also the economy.

“Some of the pending bills could be avoided as they relate to fines, penalties and interests especially those pertaining to statutory deductions,” the committee states, noting that failure to pay outstanding pending bills in time may cost county governments good reputation among service providers as well as increasing the likelihood of litigations against them.

DELIVERY NOTES

“It is important that these are only those pending bills that are captured in the financial statement. There is a possibility that the quantum of pending bills could be much higher than is reported. The Public Financial Management Act and the procurement law provides that no commitment and no tender should be issued without adequate budgetary allocations. Thus a rise in pending bills is also an indication the relevant laws are not being followed.”

The committee states that pending bills for the 2013/14 financial year were worth Sh62.8 billion of which, Nairobi county had the largest pending bills worth Sh58 billion, followed by Nakuru at 1.3 billion and Machakos at Sh712.9 million.

The committee notes counties incur pending bills which usually disrupt budget activities at the beginning of the following years since it is the first charge at the beginning of the financial year. However it is observed that the schedules which give rise to these pending bills do not include invoices, fee notes and delivery notes which makes it difficult to ascertain the authenticity of the pending bills across most of these counties.

At the end of the financial year 2014/15, for instance, Nairobi City County had a total of pending bills amounting to Sh78,905,504,184 whose completeness, accuracy and validity could not be confirmed.