Parliament warns of gaps in Treasury’s Sh2.2trn budget

The Treasury has allocated billions of shillings to dozens of mystery projects in the Budget for the year starting July, raising concerns about possible loopholes for leakages and embezzlement of public funds.

Experts in the Parliamentary Budget Office (PBO), which advises Parliament on the matter, say in a report that they found duplicated allocations, unexplained budget items, missing project descriptions and a lack of supporting documents.

The Treasury has, however, not given Members of Parliament the information they need to scrutinise the proposed spending despite being required to do so by law, the report says.

Treasury secretary Henry Rotich had not responded to queries raised in the PBO report by the time of going to press.

The Treasury has, for instance, increased overall expenditure for ministry departments and agencies by Sh97 billion without providing enough details on increments to Defence, Planning, Environment, Livestock and Fisheries.

The PBO notes that the Treasury is also setting aside Sh5 billion for emergencies (or civil contingency reserves) even as the State Department for Devolution gets another Sh1 billion for the same purpose.

“The allocation of funds for a similar function in two separate agencies raises the concern of duplication of functions,” says the PBO, while pointing out that the State Department for Devolution’s allocation has no outputs listed to allow for future performance review.

Other mystery items and discrepancies are a Sh5 billion Treasury allocation for “temporary employees”, and a lack of detail on how the Sh6 billion recently allocated for tourism recovery will be spent.

The Budget does not present a full list of projects to be implemented in 2015/16 or the budgets for State agencies, the public finance experts say.
“Information provided [on allocations to State corporations] is general and given as one-line items with no details,” says the PBO.

These loopholes, budget experts warn, indicate possibilities for leakage or embezzlement of public funds.

“One would want to know about these projects. Where are they, at what stage are they in implementation? Generally, their status should be known. But when we ask the Treasury we are told they are too many to fit in the Budget Estimates documents,” said John Kinuthia, a public finance expert with the Nairobi office of International Budget Partnership.

The lack of detail makes tracking the use of public funds impossible.

“It is not possible to tell what the money will be used for even though you will see there is a provision or line showing ‘Grants to State agencies’,” said Mr Kinuthia.

It also makes double allocations harder to find in cases where the national government allots money to an item for which a county has also set aside funds.

“With the huge increase in development spending, you would expect more transparency on the projects being funded,” said Mr Kinuthia.

The PBO has advised Parliament to ensure a freeze in new projects by the national government until those that have already been allocated funds are completed. The parliamentary advisers note that the national government has 1,109 live capital projects with a total cost of Sh4.2 trillion.

The government will, however, have spent Sh1.6 trillion by June, indicating there will still be a balance of Sh2.6 trillion required to be spent on the projects, with Sh721 billion allocated in the coming fiscal year.

After June 2016, Sh1.9 trillion will be required to be allocated for the projects that should be completed by June 2018.

“The guidelines for sharing out development expenditure prioritises ongoing projects and indicate that emphasis should be given to their completion,” says the PBO. “In this regard, the government should not undertake any new projects in 2015/16 and the medium term until the current ongoing projects are finalised.”

The PBO recommends an increase in the funds for the capital projects so that they can be completed by the June 2018 deadline.

It says that the 2015/16 Budget estimates have not comprehensively presented the actual performance of 2013/14 and the status of the 2014/15 budget implementation.

“This [failure to disclose performance] limits the National Assembly from using past performance of the Budget in deciding the allocation for 2015/16 and the medium term,” says the PBO.

However, the Institute of Economic Affairs (IEA) noted that a key problem in implementation is actually low absorption of budgeted funds with some of the projects, despite being allocated money, having hardly started or progressing at a slow pace. The pace of capital expenditure has especially been low.

“The underperformance in development expenditure is attributed to slow takeoff of domestically funded development programmes and foreign-financed programmes,” the IEA said in a recently released report.

The experts at the PBO note that there are many pending bills during the financial year which government ministries and departments fail to prioritise in the initial estimates and end up introducing them at the supplementary budget stage.

“All spending entities should indicate to the respective departmental committee their procedure for settling their pending bills in the current estimates so that this cannot be carried to the supplementary estimates,” says the budget office.

The budget experts say that the Nairobi City Water and Sewerage Company has furnished the National Assembly with a list of pending bills owed to it by various government entities.

The PBO has also criticised the slow implementation of the Equalisation Fund — the money allocated to marginalised areas — noting that it has led to non-utilisation of some Sh18.3 billion allocated to it in the past four years.

“These funds have not been utilised since inception due to lack of operationalisation framework for the fund. The National Assembly should fast track the implementation of the Equalisation Fund,” the report says.

The presentation of the audit report for the 2013/14 fiscal year has been delayed for reasons not yet given and the experts say that the Auditor-General should explain the delay to Parliament.

Most expenditure items are either maintenance of historical expenditures or increment in their allocations, raising the issue of whether there has been any effort to identify and remove overlaps and wastage, the PBO says.