A parliamentary committee has warned that county governments risk losing Sh533 billion in expenditures made during the previous financial year due to widespread systemic weakness in public financial management.
The revelations by the County Public Accounts Committee (CPAC) of the Senate were laid bare following “a comprehensive” analysis of the reports of Auditor-General Nancy Gathungu on the accounts of the 47 county governments for the 2023/24 financial year.
Financial mismanagement relates to questionable expenditures in terms of equitable shares and conditional grants to the 47 devolved units from the national government, own-source and their moveable and immovable assets.
The committee, chaired by Homa Bay Senator Moses Kajwang’ specifically identified Sh87.13 billion “in egregious violations” attributed to irregular, unsupported, unbudgeted, and excess expenditures as well as stalled projects and value-for-money concerns across the devolved units.
Chairperson Senate County Public Accounts Committee Senator Moses Kajwang' during a session at the Bunge Tower, Nairobi.
Photo credit: Dennis Onsongo | Nation Media Group
“These findings paint a concerning picture of financial governance at the county level, revealing both systemic weaknesses in financial management systems and potential instances of malfeasance,” the CPAC report states.
The report shows that Nairobi City County Government emerged with the highest exposure at Sh157.36 billion, followed by Kakamega at Sh41.52 billion and Machakos County at Sh28.27 billion, while Murang’a at Sh5.27 million and West Pokot Sh115.57 million, recorded the lowest exposures.
The CPAC noted that Nairobi and Kisumu counties that were issued with a certificate of disclaimer and adverse opinions since the onset of devolution in 2013, were issued with a certificate of qualified opinion for the first time in the 2023/24 fiscal period.
The House’s committee uncovered multiple layers of financial mismanagement, including financial reporting deficiencies, procurement violations, budgetary noncompliance, human resource mismanagement, wage bill crises, asset management failures, revenue collection shortfalls, and pending bills.
This even as the committee identifies “troubling practices” that included processing payments outside the Integrated Financial Management Information System (IFMIS) platform, hence circumventing financial controls.
Auditor-General Nancy Gathungu during a past event.
Photo credit: File | Nation Media Group
Also identified included irregular imprest management with multiple unrecovered advances, unauthorised funding of the Council of Governors (CoG), and incomplete and non-utilised projects representing wasted investments.
The committee flagged Sh39.09 in irregular expenditures, which is about 44.9 per cent of the total violations identified by the Auditor-General, unsupported expenditures Sh4.97 billion, unbudgeted or excess expenditures Sh13.93 billion, stalled projects Sh7.59 billion and value for money concerns recording Sh9.57 billion.
“There is widespread failure to maintain accurate financial records, with significant discrepancies between financial statements and IFMIS balances. Many counties presented incomplete documentation during audits, rendering verification impossible,” the CPAC report says.
Under the procurement violations, CPAC noted systemic breaches of the Public Procurement and Assets Disposal Act (2015) “through irregular single sourcing, contract splitting, and unauthorized variations.”
The budgetary non-compliance involved frequent reallocation of development funds to recurrent expenditures without the approval of the respective County Assemblies “coupled with severe under-absorption of development budgets.”
The committee further noted that Nairobi City County at Sh32.6 billion, Samburu at Sh880.8 million, Kiambu at Sh746.6 million, Wajir at Sh664.8 million, and Nandi Sh500.5 million are the counties where the highest expenditure was incurred irregularly.
The others are Bomet Sh413.3 million, Kilifi Sh395 million, Marsabit Sh392.7 million, Lamu Sh347.7 million, and Bungoma Sh300.4 million.
“The county governments’ increased irregularities in payment will likely lead to loss of public funds in complete disregard of laid down public procedures in various laws,” the committee says.
The Public Procurement and Assets Disposal Act of 2015 and the Public Finance Management (PFM) Act of 2012 are among the sector laws that govern payment for services rendered or procurement of goods.
The rampant irregular recruitment practices across the 47 counties led to ghost workers, excessive casual employment beyond legal limits, and improper compensation, including overpayment of allowances.
In terms of the wage bill crisis management, 11 counties complied with the 35 percent wage bill ceiling, while 16 counties exceeded 50 percent of their revenue on wages, “severely constraining operational and development budgets.”
The issues under asset management failures included the lack of updated asset registers for both inherited and newly acquired assets, exposing counties to significant risks of mismanagement and loss.
The collection was not spared either, as the persistent failure to collect outstanding revenues- property rates, land rates, and mineral royalties was identified.
This was blamed on the ineffective enforcement and outdated valuation rolls based on historical rather than current market values.
