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Counties can overcome nagging pending bills

Thursday October 31 2019

Some of the Sh35million hospital equipment

Some of the Sh35million hospital equipment donated to Kimanjo Sub County Hospital in Laikipia County being offloaded from a lorry on May 14, 2017. PHOTO | FILE | NATION MEDIA GROUP 

PAUL NJENGA
By PAUL NJENGA
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Three weeks ago, Laikipia became the first county to embrace leasing of equipment. For counties, most of which are stuck in the quagmire of pending bills, this is the way to avoid them.

The equipment that has been leased is expensive and few counties, if any, would afford to purchase them at once. Leasing frees resources by enabling the county to have more equipment while paying the lessor with the little funds available.

Many counties overcommit themselves by purchasing expensive equipment to satisfy the high demand for service delivery from citizens, ending up with pending bills. And these debts are a potential threat. Should the creditors sue, the county would incur huge costs in paying the principal and accrued interest and penalties.

REPUTATIONAL RISK

They are also a reputational risk. Suppliers and contractors would shy away from delivering goods or offering services based on local purchase orders (LPOs) or local service orders (LSOs).

The county would thus resort to cash transactions, contrary to the Public Procurement and Disposal Act 2015 and the Public Finance Management Act and related regulations. Due to pending bills, suppliers incur huge financial costs from accrued bank interest owing to delays in loan repayments and also suffer reputation risks.

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A good credit rating, assumed and real, is critical. Laikipia has been making its financial statements public on a quarterly basis, partly to fulfil a rarely observed requirement of the PFM Act and, importantly, to improve its credit rating.

Reforms of its systems, both human resource and leverage of technology, has reduced chances of overestimating own source revenue — a pit trap for many counties. Pending bills arise when a county cannot meet own source revenue target yet it has procured or committed against the budget, implying a deficit.

SOURCE OF REVENUE

Laikipia has grown own source revenue, even surpassing revenue targets, by restricting revenue collection to the County Revenue Board, automating revenue collection and real-time monitoring of revenue streaming, formation of synergetic cross-functional revenue teams, routine senior management review meetings and conducting continuous public awareness campaigns.

Streamlining budget making to be more inclusive allows prioritisation of the annual development plan to avoid introducing projects midstream.

Embracing the procure-to-pay module in Ifmis has helped Laikipia to guard against unplanned expenditures emanating from introduction of unplanned-for projects.

Data-driven estimates are key to averting unnecessary contract variations that lead to unbudgeted-for added costs. This is because laziness in designing of the projects leads to poor budget formulation.

Counties can get proper designs of the projects and actualise this through costing with precision, which should form part of the budget estimates.

PROCUREMENT PLAN

Pending bills also arise from incompleteness of projects by the end of the financial year. This can be resolved by incorporating project management training in the formulation of the annual procurement plan.

Properly schedule projects through collaboration with the Ifmis Directorate of The National Treasury to allow full access of development budget in the first quarter.

National development is the sum total of the manner in which all the 47 counties manage resources.

Mr Njenga is the Chief Officer, Finance and County Planning, Laikipia County. [email protected]

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