Governors went on a spending spree in the final financial year of their first term in office, dishing out contracts and local purchase orders yet there was no money to pay for them, the Controller of Budget told two Senate committees.
The reckless spending left in its wake bills of Sh100 billion with suppliers facing auctioneers as banks seize their assets to recover unpaid loans.
Controller of Budget Agnes Odhiambo told the committees on Finance and County Public Accounts and Investments that the amount owed to suppliers of goods and services shot up by 158 per cent.
“At the end of the year, the (National) Treasury had released all shareable revenue, in some cases in the last two days of the financial year,” Ms Odhiambo said.
“Counties should not use that as an excuse. When you have captured invoices on Ifmis and internet banking, you are ready to pay. So, when you get the money, you just click and pay.”
She spoke at a meeting with Auditor-General Edward Ouko called by the senators, who were concerned about reports — some in the Nation last week — that counties owed suppliers billions of shillings, putting them at risk of tough actions by their lenders.
Mr Moses Kajwang, chairman of the CPAI committee, said the legislators were confused because, while the media put the amount at Sh90 billion, the last CoB report had it at Sh38 billion.
“It is a disaster; whether it is Sh30 billion or Sh90 billion,” the Homa Bay senator said, adding: “People took out loans and they haven’t paid.”
Ms Odhiambo said the amount reported late last year did not include the figure for Nairobi, which would later report that it owed Sh59.6 billion.
At the end of the first quarter of the financial year last September, the pending bills stood at Sh99.2 billion.
That is equivalent to more than three times the Sh30 billion spent on the expansion of 42 kilometres of Thika Road.
It is also slightly more than the Sh98.3 billion the Treasury allotted the Department of University Education this financial year and nearly a third of the Sh306 billion that counties have been allocated in the current Budget.
Pending bills grew from Sh37.8 billion in FY 2014/15 to Sh37.3 billion in 2015/16 to peak at Sh96.5 billion last June.
Ms Odhiambo flagged the sharp increase in the last year of the first term of devolution thus:
“We need to know whether these commitments are authentic.”
It emerged that counties had been basing their budgets on over-estimated revenue collections.
“All counties are not meeting revenue targets, yet when they prepare budgets they budget as if they will collect all that money,” Ms Odhiambo told the senators.
Procurement is also planned on the unrealistic budgets, she said, and counties are left saddled with supplies that they cannot pay for.
Governors and other officers could also have used the opportunity to make money.
Ms Odhiambo told counties to align procurement plans with their budgets and cash flow to avoid pending bills.
Mr Ouko said a special audit of the bills would be needed and that he had also received pleas from suppliers.
“My office is inundated with people suffering and asking whether I can do anything,” Mr Ouko said.
The top auditor described the pending bills for Nairobi as especially worrying, seeing as they are 60 per cent of the national total.
Governor Mike Sonko has asked the High Court to authorise the stopping of the payments until an audit is carried out.
The good news for the affected suppliers however is that there have been discussions among the agencies on how to end their plight.
Ms Odhiambo said a meeting to prepare for the Intergovernmental Budget and Economic Council agreed that the pending bills be audited within two months and payment for the genuine ones included in the next Budget.
Mr Ouko said the matter had been discussed with the Treasury last year and asked for an additional Sh200 million to hire an audit firm for the job as he does not have enough staff.
With the Treasury last year reducing budgets after the electioneering period was extended, revenues dipped and austerity measures became necessary; the amount was not allocated.
Mr Ouko said the audit would break down the amounts per county and separate the genuine from the irregular.
“I would like that we concentrate on the year before the elections because we suspect there were commitments made that didn’t give value or were motivated by other things,” Mr Ouko said, alluding to the suspected corruption.
Kiambu Senator Kimani Wamatangi said of the suspicious transactions:
“We can stop being morticians and get involved before the bad things happen.”
His Makueni colleague Mutula Kilonzo Junior said pending bills were a constant worry, even in the Finance Committee in the last Senate, as they could cause the collapse of counties and, hence, failure of devolution.
“It’s fraud, and we must call it what it is,” Mr Kilonzo said.
“We’ll put more laws in place. If we don’t do this, we’ll have failed in our work to protect counties.”