Sh19.6bn illegally spent on salaries

A new report shows that 34 counties breached the law and paid nearly Sh20 billion in salaries illegally, escalating the runaway public wage bill and underlining the urgency to weed out ghost workers.

The extra spending on salaries outside the law also reduces the amount counties can channel to development programmes, the report revealed.

The Auditor-General’s report on counties' use of funds in 2020/21 shows that the 34 devolved units went against the Public Finance Management (PFM) law that caps spending on salaries by any public entity at 35 per cent of revenues.

The report also flags cases where some counties reported spending millions of shillings in salaries but could not provide evidence, pointing to the possible existence of ghost workers and a trend by counties to pay salaries manually, which is prone to abuse.

Nandi County was the worst, spending 52 per cent of its Sh6.9 billion in revenues on salaries. The county’s wage bill during the year was Sh3.57 billion, which breached the ceiling set for salaries by Sh1.15 billion.

“This was contrary to Section 25(1)(b) of the Public Finance Management (County Governments) Regulations, 2015. No explanation has been provided by management for the failure to adhere to the legal threshold on personnel emoluments expenditure,” Auditor-General Nancy Gathungu notes.

She further questions the county’s Sh175 million salary payments outside the Integrated Personnel and Payroll Database (IPPD), as required of public entities. “A review of the payroll data revealed that salaries totalling to Sh175,286,645 were processed and paid outside IPPD contrary to IPPD manual and regulations. In the circumstances, management was in breach of the law.”

19 counties flagged

The Auditor-General reveals that at least 19 counties spent over 40 per cent of their revenues on salaries during the financial year, which sums up to about Sh15 billion paid illegally. While Nandi leads in the list of shame in terms of the amount of money paid as salaries as a ratio of the county’s revenues, in actual money spent, Machakos and Kiambu counties paid the highest amounts.

Machakos County, which used 47 per cent of its Sh11 billion to pay salaries, spent Sh1.74 billion on compensation to employees illegally. The county had a wage bill of Sh5.6 billion during the year, Ms Gathungu reported. Kiambu County used Sh6.78 billion to pay its employees, overshooting the legally required maximum budget spending by Sh1.5 billion. The county’s wage bill was 45 per cent of its Sh15 billion revenues.

The other counties that used more than 40 per cent of their revenues to pay employees were Taita-Taveta, Garissa, Meru, Tharaka-Nithi, Nyeri, Kirinyaga, Elgeyo-Marakwet, Baringo, Laikipia, Bungoma, Kisumu, Kisii and Nyamira.

The Controller of Budget’s report during the year also shows that Isiolo, Wajir and Vihiga counties spent over 40 per cent of their revenues to pay employees.

“On aggregate, county governments spent Sh176.03 billion on personnel emoluments, which accounted for 44.2 per cent of the total expenditure of Sh398.01 billion and 40.3 per cent of available revenue of Sh436.61 billion in FY 2020/21,” Controller of Budget Margaret Nyakang’o stated in the report.

“The OCoB (office of the Controller of Budget) recommends that county governments should ensure that expenditure on personnel emoluments is contained at sustainable levels and in compliance with Regulation 25(1)(b) of the Public Finance Management (County Governments) Regulations, 2015,” the office stated.

The Public Finance Management (County Governments) Regulations, 2015 state that “The County Executive Committee Member with the approval of the County Assembly shall set a limit on the county government’s expenditure on wages and benefits for its public officers pursuant to section 107(2) of the Act,” adding “the limit set shall not exceed 35 per cent of the county government’s total revenue”.

Impact on budgets

The Sh19.6 billion spent illegally has huge implications on counties' budgets since it could have otherwise funded impactful development projects. The amount is equivalent to 5.3 per cent of the Sh370 billion all the counties received as an equitable share from the national government during the year.

Even among counties that had spending on salaries within the legal threshold, the Auditor-General revealed possible cases of loss of public money.

In Nairobi City County, for instance, Ms Gathungu pointed out instances of employees being paid through the same bank accounts and a lack of a staff establishment.

“Review of payroll data revealed that salaries for several employees were disbursed to accounts whose details were shared between two or more persons. Management did not provide an explanation for the staff sharing bank accounts ...,” the report states.

In Turkana, the report noted that out of the Sh3.8 billion paid to employees, there was no justification for a Sh293 million payment reported as arrears to employees.

Siaya was faulted for paying 20 employees a total of Sh5.6 million outside the IPPD, while Migori also paid Sh169.4 million to 731 employees outside the IPPD.

“In addition, the manual system requires a manual calculation of deductions and net pay by the human resource officers and regular monthly update which is prone to human error,” the report warns.

Bomet County could also not support a Sh53 million payment to casuals, as the devolved unit failed to provide requisitions from departments for the additional workforce, payment vouchers and relevant payment schedules. Kericho and Tana River counties also had queries relating to salary payments, mainly inconsistencies in figures.

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