City Hall risks funds freeze for breach of law

Nairobi risks being denied cash from the national government following its continued use of internally generated funds before the monies are deposited in the authorised County Revenue Fund.

The Evans Kidero-led government has been using cash generated from car parks, land rates and billboards for its expenses contrary to the law, which requires the money is banked and approval sought from the Controller of Budget before its use.

Now, Controller of Budget Agnes Odhiambo has threatened to ask the Treasury to withhold cash transfers to City Hall, according to Nairobi’s Budget Committee.

“The report has recommended that the Cabinet Secretary for National Treasury should invoke the provisions of Article 225 (3) of the Constitution and Section 96 of the PFM Act which would culminate in stoppage of funds release to Nairobi County due to material breach of its financial obligations,” the committee said last week.

The third quarter report on county funds by Controller of Budget indicated that Nairobi had spent Sh5.2 billion without first depositing the cash in the County Revenue Fund. City Hall said the bulk of money was used to settle bank loans.

“The breach of the law has been consistently raised in previous CoB (Controller of Budget) reports and needs to be addressed in line with Section 95 of the PFM (Public Finance Management) Act, 2012,” said Ms Odhiambo.

The PFM Act says that all county revenues, both local and transfers from the national Treasury, must first be deposited in the County Revenue Fund.

It allows the Treasury to temporarily withhold up to half of the share of a county’s cash from the national government for devolved units in breach.

Nairobi expects to receive Sh11 billion of the Sh228 billion that the national government has allocated to the 47 counties.

A freeze of the cash could hurt City Hall operations given it is one of the five counties that the Senate was told had run out of money last week, prompting an emergency release of Sh14 billion.

City Hall has set a budget of Sh28.7 billion for the year to June 2015.

The bulk of the revenues will come from parking fees (Sh5 billion), land rates (Sh4 billion), billboards (Sh1 billion) and liquor licensing (Sh1 billion).

City Hall’s Budget Committee last week demanded the county treasurer submit to the assembly copies of bank statements by the fifth of every month to ensure compliance the PFM Act and prevent a freeze of equitable revenue from the national government.

“The Budget Committee is not ready to permit Nairobi County to go down in history as the first county that has met the wrath of these statutory sanctions,” said the committee.

“Going )forward, the committee insists that no officer shall be indispensable in this mission of ensuring that we remain a law-abiding county.”