How outsourcing legal services has slapped counties with Sh50bn fees nightmare
Auditor-General Nancy Gathungu during a past event.
What you need to know:
- Despite having functional legal departments, counties opt for expensive external law firms.
- A Senate watchdog committee raised concerns over undisclosed legal pending bills in counties amounting to billions of shillings.
- Counties continue to incur avoidable legal fees in a scheme that puts their officers at the centre of the scams, according to the Auditor-General.
- Some county governments are at risk of being declared insolvent should law firms simultaneously insist on settlement of the outstanding fees.
Collusion between county officers and law firms, negligence and failure to utilise county’s legal officers have left most devolved units grappling with legal pending bills of at least Sh50 billion.
At the heart of the headache is the penchant by some counties to outsource legal services at high fees despite having fully-fledged legal departments.
A report by Auditor-General Nancy Gathungu for the financial year ending June 30, 2022, has laid bare how counties continue to incur avoidable legal fees in a scheme that puts their officers at the centre of the scams.
Although the report did not reveal the extent of each county’s legal pending bills portfolio, it exposed machinations behind accumulation of the staggering legal fees and subsequent questionable payments.
It comes just months after a Senate watchdog committee raised concerns over undisclosed legal pending bills in counties amounting to billions of shillings.
An interim report by the Senate County Public Accounts Committee painted a grim picture of undisclosed contingent liabilities that put some county governments at the risk of being declared insolvent should law firms simultaneously insist on settlement of the outstanding fees.
The report revealed that most regions have been opting to outsource legal services instead of utilising the office of the county attorney or exploring alternate dispute resolution.
It fingered counties for their penchant for big-name lawyers even in minor cases that could be handled internally.
Nairobi, Machakos and Uasin Gishu are some of the biggest culprits, with a combined total of about Sh30 billion in legal pending bills. City Hall is grappling with at least Sh21 billion in outstanding legal fees after outsourcing over 50 external law firms to represent it in various cases as its county attorney office remains understaffed.
Uasin Gishu has more than 886 pending court cases, however, the county government has been under-declaring pending cases, disclosing only 42 cases amounting to Sh103 million.
“This is a potential liability running into billions of shillings which if you (county government) lose can potentially render Uasin Gishu bankrupt,” said Senate committee chairperson Moses Kajwang’.
In Machakos county, the administration is grappling with more than 400 court cases worth at least Sh1.1 billion.
Interestingly, the county government paid Sh408 million to only two law firms in the financial year ended June 2021.
In Machakos, out of its Sh3 billion total pending bills, Sh1.14 billion, or 37 per cent, is related to pending legal fees and on-going court cases.
The legal pending bills stood at Sh607.7 million as of June 2022 with Sh172.3 million being interest due to non-payment of the outstanding bills.
Ms Gathungu fingered the county government for continuing to irregularly source for external legal services despite having legal departments warning it risks losing huge resources on settlement of legal suits and interests on unpaid bills.
Kilifi county is reeling under a Sh3.3 billion debt. However, a third of the money is owed to a firm contracted by the county to draft an agreement for collection of cess and parking fees in 2014.
The firm would later raise a fee note of Sh1 billion in May, 2022 as opposed to in 2014 for services rendered.
Interestingly, the county government could not provide documents to confirm that the legal fee of Sh1 billion was based on the Advocates (Remuneration) (Amendment) Order, 2014.
Nakuru county is grappling with legal pending bills of Sh439.85 million owed to 417 law firms for the provision of legal services with no record of services the firms provided.
However, Section 5(1)(d) of the Nakuru County Attorney Act, 2017 provides that the County Attorney shall represent the county government in any legal proceedings arising from county legislation or any other legislation which the county government is party to or has interest, other than criminal proceedings.
Of Migori’s Sh473.9 million pending bills, Sh149.9 million were incurred on legal services with the leadership failing to provide adequate explanation for outsourcing legal services despite the existence of the office of the County Attorney staffed by two legal officers.
Mandera is grappling with pending legal fees of Sh82.3 million with the county government paying Sh27.7 million during the year under review.
Further, one firm was paid Sh19.7 million, or 71 per cent, of the Sh27.7 million contrary to Section 106(2)(b) of the Public Procurement and Asset Disposal Act, 2015, indicating skewed procurement of legal services to the disadvantage of other firms.
Makueni county was noted for engaging law firms without necessary approvals, high amounts, lack of fees notes and invoices to indicate how the charges were arrived at and the hiring not competitively done. The county paid Sh23.5 million during the period under review.
Laikipia county government was on the spot for doubtful payment of legal fees, paying Sh23.8 million during the period under review.
For Kisii county, there are 266 court cases pending against it, some of which were inherited from the defunct local authorities. Out of these, nine were ruled against the county executive and the plaintiffs or claimants awarded a total of Sh1.6 million in two of the nine cases, while amounts awarded in the remaining seven (7) cases had not been provided for audit.
In Kericho, the county government paid Sh12.89 million to law firms but a review of case files and payments revealed that the amount was paid to various law firms for provision of legal services reported to have been provided to the county executive.
Homa Bay county paid Sh12.2 million in legal services without proper documentation including the case files containing respective invoice raised, court rulings/judgment, subject matter in dispute, fee note and related work as basis for billing.
Bungoma county paid Sh8.9 million to five law firms for provision of legal services, however, procurement documents relating to the law firms including advertisements, tender opening and evaluation minutes, professional opinion, letters of award and regret letters, were not provided for audit review.
Also Read: Controller of Budget report sparks alarms over salaries and travel splurge by county governments
The same scenario played out in Tana River where the county government spent Sh110.78 million on legal fees without proper documentation.
Interestingly, the county paid Sh35.5 million to two firms that were not prequalified to provide legal services to the county executive.
Baringo county was also flagged over the same after paying Sh12 million to 10 law firms without proper documentation.
Further, private law firms were engaged to represent the county without approvals by the relevant county executive committee despite the county having recruited its own attorney.
Embu was flagged for unsupported pending legal fees of Sh37.5 million paid as legal fees to various law firms during the year. Nonetheless, a review of the payments revealed that they were not supported by user requisition, identification and subsequent engagement of the law firms.
Kitui county government was fingered over irregular legal expenses of Sh36 million where the county legal office engaged the services of several consultants without the approval of the County Executive Committee as required under Section 16(1-3) of the County Attorney Act of 2020.
For Narok County government, out of its Sh625.9 million total pending bills, Sh149.8 million were pending legal fees.
In Siaya county, Ms Gathungu flagged the payment of Sh9.7 million in legal fees without initial fee notes.
Wajir county paid three law firms Sh37.42 million without details of the court cases, the status of the cases, including date of commencement, appearances from commencement, the procurement details, date of judgment and the verdict, if any, and the instructions to act on behalf of the County not provided for audit review.
In Trans Nzoia, payment of Sh6.19 million as legal fees were not supported by case files.
Murang’a county government was flagged for irregular procurement of legal services paying Sh46.2 million to various firms in respect of legal fees with two firms receiving Sh25.22 million.
