Before the advent of devolution, some of the large hospitals in the countryside were allowed to retain the revenues and fees that they collected and deposit it in their bank accounts.
But things changed as the law — specifically the Public Finance Management Act — required that all user fees and revenues collected by level 5 hospitals be deposited with the respective county treasury.
The hospitals had lost an important source of revenue. Worse, county treasuries were not disbursing the money back to the hospitals on time.
Many level 5 hospitals found themselves suffering crippling cash flow issues. Procurements of supplies became a major problem for them since the Act did not permit them to operate as fully fledged procurement entities that can buy equipment and supplies as and when required.
The circumstances required governors to innovate.
And, it was the former governor of Kiambu, Mr William Kabogo, who was the first to come out with a way around the straitjacket which county governments found themselves even as they struggled to comply with the dictates of the Act.
Kabogo initiated the passing by the local assembly of the Kiambu Health Services Bill, which allowed Thika Level 5 Hospital to operate as an autonomous procurement entity and retain revenues collected from user fees.
Clearly, devolution could work much better if governors were to think outside the box.
The constant and perennial whining from governors over delays in disbursement of funds by the National Treasury is just but an exercise in responsibility aversion. Governors have not demonstrated that they can use the resources available to them optimally.
Yet when you take a broad view of the public finance space, the inescapable conclusion is that the performance of the National Treasury in terms of the speed of disbursement of county funds is not likely to improve dramatically any time soon. Indeed, the National Treasury has major and intractable cash management issues whose sustainable solutions it is yet to find.
Without a doubt, slow disbursement of funds from the centre has been a major problem. The governors who will make a difference in the lives of the people are those who innovate and make the best of the funds they receive.
Inability to raise adequate local taxes and licence fees has also been a big problem.
But what comes out clearly from successive Auditor-General’s reports is that an even bigger problem for counties is poor standards of accounting for the funds disbursed and spent.
Of late, a good number of counties have been engaging in unsustainable borrowing from commercial banks. I would like to see governors seek technical assistance from donors and partners to allow them to adopt proper and working accounting systems.
I wait to see the time when governors with a solid background in accounting and finance — such as Kakamega’s Wycliff Oparanya and Ndiritu Muriithi of Laikipia — will come out to lead the rest in negotiating changes to the PFM Act to modernise and improve standards of accounting in the counties.
The truth of the matter is that accounting standards and reporting at the county level are in a total mess. Counties are stuck in the antiquated vote book systems, where even rudimentary things such as double-entry bookkeeping or produce and keep trial balances, statement of assets and liabilities and statements on financial performance are not observed.
Most counties are on IFMIS, the computer system that manages all government finances. Yet it is well known that, in terms of generating information critical to financial management, IFMIS is way inferior compared to the so-called enterprise resource planning systems (ERP), which many corporate entities use nowadays.
Indeed, the experience with IFMIS has been characterised by a litany of woes, including connectivity challenges and frequent server downtimes.
I want to see the governors debate the feasibility of using ERPs in the counties. If you don’t address the issues of accounting and financial reporting at the county level, corruption will never end.
We must focus strengthening and modernising institutions of accountability. Where are the ideas around county sovereign wealth funds and county state corporations?
Better management of public finances must be the priority of priorities for devolved governments.