Sh168bn owed: Mounting pending bills set counties up for debt crisis
Controller of Budget Margaret Nyakang’o.
Counties continue to grapple with mounting pending bills with the debt having risen by a staggering Sh3.86 billion in only three months, a new report shows.
The report by the Controller of Budget Margaret Nyakang’o, shows that pending bills in the 47 devolved units rose from Sh164.76 billion in June to Sh168.62 billion in September.
Worryingly, unlike in the previous years where some counties had zero pending bills, the new report shows that all 47 counties have accumulated debts.
According to the county expenditure review report for between July 1 and September 30, 2023, recurrent expenditure pending bills account for the lion’s share of the debts, amounting to a whopping Sh129.15 billion, mostly exorbitant legal fees debts.
On the other hand, development expenditure debts stand at a paltry Sh34.47 billion, coming at a time the same report fingered counties for failing to allocate more resources to development programmes, with 10 counties recording no expenditure on development during the period under review.
Dr Nyakang’o said Nairobi City County reported the highest pending bills at Sh107.33 billion, accounting for 65.6 per cent of pending bills, pointing to a debt crisis at City Hall.
The debt could be even higher as the report indicated that the figure is only for the beginning of the current financial year as of June 30.
According to the CoB, the governor Johnson Sakaja-led administration did not provide a report on the status of pending bills as of September 30.
Other counties with a large share of pending bills are Kiambu at Sh5.62 billion, Wajir at Sh5.38 billion, and Mombasa at Sh4.10 billion.
The report indicated that Kiambu reported a huge amount of pending bills stock despite having a bank balance of Sh1.14 billion in the County Revenue Fund (CRF).
At the beginning of the fiscal year, the Kimani Wamatangi-led county government reported a stock of pending bills amounting to Sh5.79 billion but only settled Sh168.74 million in three months.
A similar scenario was witnessed in Mombasa where only Sh139.68 million worth of pending bills was settled during the period under review slightly lowering the debt from Sh4.24 billion as reported at the beginning of the current fiscal year.
Audit exercise
In Wajir’s case, the Sh5.38 billion is the debt as was at the end of the financial year ended June 30, 2023, with the amount likely to rise at the end of an ongoing pending bills audit exercise.
“As of September 30, 2023, counties reported outstanding pending bills, which amounted to Sh168.62 billion,” reads in part the report by Dr Nyakang’o.
Shockingly, the CoB said, that pending bills settlement should be the first charge on the CRF to cushion counties from defaulting on their debt obligations, which often attract heavy penalties.
She said according to regulation 41 (2) of the Public Finance Management (PFM) Act, 2015, “debt service payments shall be a first charge on the County Revenue Fund and the accounting officer shall ensure this is done to the extent possible so that the county government does not default on debt obligations”.
Further, Regulation 55(2) b of the PFM Act, 2015 requires that the finalised and signed contracts are budgeted before an accounting officer of the county government entity considers new projects.
“Accumulation of pending bills adversely affects the delivery of public services and disrupts the business community. County governments are advised to settle the eligible pending bills as a first charge on the budget in line with the law,” said Dr Nyakang’o.
Other counties with huge pending bills stock include Mandera (Sh3.09 billion), Machakos (Sh2.56 billion), Laikipia (Sh2.05 billion), Taita Taveta (Sh2.43 billion), Embu (Sh2.11 billion) and Busia (Sh2.03 billion).
Counties with the least amount of pending bills are Elgeyo Marakwet (Sh6.14 million), Lamu (Sh69.35 million), Nyeri (Sh71.71 million), Uasin Gishu (Sh145.55 million) and Baringo (Sh178.43 million).
Affecting the payment of the huge pending bills is low own-source revenue the devolved units raise as well as the National Treasury releasing funds later from the Exchequer.
During the reporting period, county governments generated Sh10.21 billion from their own-source revenue, which was only 13 per cent of the annual target of Sh78.61 billion.
“The underperformance of own-source revenue collection implies that the counties could not implement some planned activities due to budget deficits,” said the CoB.
The report also indicated that as of September 30, the Treasury had disbursed Sh61.11 billion as an equitable share for the current financial year, which translated to 15.9 per cent of the approved equitable share of revenue of Sh385.42 billion.
According to the law, the Disbursement Schedule provides for monthly transfers to county governments by the Treasury but this is rarely adhered to due to cash challenges the national government experiences.
“The cash balance from FY 2022/23 was Sh27.96 billion. Overall, the county governments had a total of Sh99.28 billion available for spending in the first three months of the financial year ending June 2024,” said Dr Nyakang’o.
