Treasury on the spot over Sh50bn county workers pay

A team of experts appointed to assess the socio-economic impact of the 2010 Constitution has found a Sh50 billion spending discrepancy in the National government’s wage bill.

This is yet another credibility setback weighing on the Treasury’s management of public funds.

In a report submitted to Parliament’s Budget and Appropriations Committee last week, the team raised the red flag over the rise in the national government’s wage bill despite the transfer of thousands of employees and their wages, amounting to Sh50 billion, to the counties.

The report found that county government wages rose as expected to Sh71 billion in the 2013/14 financial year from Sh21 billion in the previous period.

But there was no corresponding drop in the national government’s wage bill, which rose to Sh281 billion from Sh274 billion in the same period.

“Adjusted for the transferred workforce, this translates to a 25 per cent increase in the national government wage bill implying that there was either a significant pay increase for State workers or an equally significant increase in hiring,” the committee says in its report. “It is not evident that either is the case.”

Kenya National Bureau of Statistics (KNBS) data shows that 53,100 national government employees were transferred to the counties with the advent of devolved government in July 2013.

Doctors, nurses and agricultural officers make up the bulk of public servants moved to the counties in line with the transfer of their functions to the devolved governments.

The increase in national government’s wage bill has recently come under intense scrutiny with the emergence of reports that state agencies and departments are lagging behind in absorbing money set aside for salaries this financial year.

The Budget Controller’s report for the first nine months of the current financial year shows that the national government was yet to pay salaries amounting to Sh19 billion.

“Recurrent expenditure for national government amounted to Sh603.7 billion against a target of Sh614.4 billion, with underperformance recorded in wages and salaries, and pensions which accounted for Sh18.9 billion and Sh215 million, respectively,” the report says.

The increase in the national government’s wage bill is even more puzzling because it came after Mr Kenyatta’s 2013 announcement of a freeze on Civil Service recruitment.

The Jubilee government, which came to power in April 2013, also imposed a freeze in the salaries and allowances of public officers and launched a staff rationalisation programme.

READ: Uhuru sets the tone for public wage bill cut

The president, his deputy and Cabinet secretaries also agreed to take pay cuts as sign of their commitment to reducing the wage bill which Mr Kenyatta termed unsustainable.

Official data from the KNBS actually shows that public sector employment growth reduced to 2.6 per cent last year compared to 3.2 per cent in 2013 – meaning the freeze had an impact.

The National Treasury did not respond to our enquiries on this matter. The Ouko committee’s revelations came as pressure mounted on the government to tame the public wage bill, which is currently equivalent to 11 per cent of the GDP against the global benchmark of seven per cent.

Kenya has a large public workforce whose ratio to the population stands at about 16 per 1,000, compared with an average of 6 per 1,000 in most middle-income countries.

Budget experts said the discrepancy in the national government’s wage bill was important, especially coming at a time when the government is running a massive budget deficit.

Dr Jason Lakin, the executive director of International Budget Partnership said the discrepancies could arise from the fact that some of the functions that were to be eliminated or cut back under the new Constitution such as the provincial administration and parastatals have yet to be touched, creating room for continued hiring.

The Sh50 billion wage bill accounting puzzle came as Parliament raised more queries over a number of provisions in next year’s budget.

Last week, the parliamentary budget office (PBO), which advises parliamentarians on public finance, raised concern over double expenditure allotments that appear to create loopholes for embezzlement of public funds.

The PBO, for instance, noted that the Treasury had set aside Sh5 billion for emergencies (or civil contingency reserves) even as the State Department for Devolution was allocated Sh1 billion for the same purpose.

Other mystery items and discrepancies include a Sh5 billion allocation for “temporary employees”, and a lack of details on how Sh6 billion allocated for tourism sector recovery will be spent.

The budgeting queries come barely three months after the auditor-general reported massive financial irregularities and suspect spending in the run-up to the March 2013 elections by top national security officials.

The auditor’s report for the year 2012 unearthed the existence of a secret account at National Bank that senior accounting officers in the Office of the President used to siphon public funds. At least Sh2.8 billion was found to have been wired to the account and spent on items marked as “confidential”.

Investigations into the auditor’s claims, however, turned out to be a double-edged sword that sparked a major credibility crisis in Parliament leading to the dissolution of the Ababu Namwamba-led Parliamentary Accounts Committee.

The committee was dissolved after it was alleged that senior civil servants implicated in the reported irregular spending of the Sh2.8 billion had bribed the committee chairman, his deputy and a number of committee members to doctor the report.

The President has personally admitted to the existence of powerful cartels in government, including in his office, who he accuses of working at the behest of shadowy investors to fleece taxpayers.

Mr Kenyatta recently suspended 178 top government officials over claims of involvement in graft, among them four Cabinet secretaries and four principal secretaries.

The president gave the Ethics and Anti-Corruption Commission 60 days to investigate those asked to step aside to facilitate investigations.

Equity Bank’s chief operating officer Julius Kipng’etich, Justice Linnet Ndolo, Dr Elizabeth Owiti, Dr Abdirizak Nunow, Susan Mang’eni, Mwarapayo wa-Mwachai and Erastus Wamugon served in the Ouko committee that investigated the socio-economic impact of the Constitution.

It had a joint secretariat headed by PwC Africa chairman Philip Kinisu assisted by lawyers Milcah Ondiek and Wanjiku Wakogi.