City Hall has oddly removed Sh39.8 billion from its stock of pending bills following an audit, exposing possible fake supplies that have previously cost Nairobi County billions of shillings.
The Controller of Budget (CoB) reckons that there is an unexplained drop in Nairobi’s supplier arrears from Sh121.8 billion to Sh86.8 billion over the year to June, reflecting a 32.7 percent reduction.
This has emerged at a time when counties and the national government are failing to pay many of their contractors on time, as corruption drains funds for legitimate projects from State coffers, suppliers and officials say.
Non-payment of government invoices has featured in a number of corruption cases where officials and business people are charged with the theft of billions of shillings of public funds. The officials are accused of using doctored invoices to bill fake suppliers.
Of the Sh39.8 billion, CoB Margaret Nyakang’o notes that the purge on Nairobi’s pending bills stock caused overall pending bills by the 47 counties to reduce from Sh181.9 billion in June 2024 to Sh176.8 billion by end of June 2025.
“This reduction was primarily attributable to the reconciliation of pending bills in Nairobi City County, which decreased by Sh39.78 billion. The county government undertook a reconciliation of its pending bills stock; however, it did not provide a detailed analysis of how it conducted the same,” said Dr Nyakang’o, demanding that Nairobi County inform the Auditor-General how its supplier arrears dropped unexpectedly.
City Hall on Wednesday told the Business Daily that it eliminated inflated bills from lawyers, a contested Sh300 million bank loan and paid Sh1 billion outstanding pension.
“First we assessed all legal fees pending bills and whittled down many that were unjustifiably high. And still on legal, some of the calculations had effected interest when none had been granted by the court,” said Charles Kerich, Nairobi’s county executive committee member for finance and economic affairs in responses to Business Daily questions.
“Further, the pending bills register had wrongly captured as a debt a dispute of over Sh300 million we have with National Bank, when the matter is in court. We also aligned our contingent liabilities (money owed to the national government for loans borrowed in the 80s) to be in line with the amounts acknowledged in the Transition Authority report. Not more.”
Of the Sh39.8 billion, Nairobi directly accounted for Sh4 billion, but did not provide figures for inflated legal arrears and downgrade of loans owed to the national government.
In the CoB report the Sh39.8 billion cut from the pending bills were recurrent expenditures.
“They must explain that to the Auditor-General. We have captured their figures as provided,” Dr Nyakang’o told the Business Daily on Wednesday.
The remaining recurrent pending bills for Nairobi are mainly supplier arrears for goods and services (Sh32.79 billion) and unpaid salaries and statutory deductions (Sh45.3 billion). The county also holds Sh1.47 billion in the form of staff claims, the CoB reported.
Pending bills tied to development spending increased by Sh2 billion following the reconciliation, the CoB report added.
Despite knocking off the billions of shillings from its stock of pending bills, Nairobi remains the county with the largest unpaid debts at Sh86.77 billion, followed by Kiambu (Sh7.89 billion) and Machakos (Sh6.73 billion).
All the 47 counties owe suppliers Sh176 billion.
Many Kenyan small and medium-sized businesses bid for government contracts because the State is the biggest spender in the country.
But some have decided that the financial pain that comes with years of late payments on everything from consultancies to supplies of construction materials is too much to bear.
Hundreds of business people who have contracts with the government say they have ended up being blacklisted by credit reference bureaux after falling behind on loan repayments or defaulting.
Assets seizure among government suppliers has also increased.
City Hall has previously lost millions of shillings through fake invoices and multiple payments.
The missing funds were allegedly stolen in a scheme involving senior officials and ghost suppliers.
In April, the Ethics and Anti-Corruption Commission (EACC) revealed in court filings how rogue City Hall officials paid Sh407 million to shadowy businesses through fraudulent transactions.
“Investigations revealed that between 2016/17 and 2021/22, senior county officials approved irregular payments amounting to Sh407,926,503.20 for no deliveries/supplies made to the county to 14 un-prequalified business entities, thereby facilitating fraudulent transfer of public funds,” the EACC said in court filings.
The CoB raised the alarm over continued accumulation of pending bills in the counties, with new arrears for the year to June accounting for nearly a third of what is due to suppliers.
The 47 counties added Sh48.9 billion to their unpaid bills between July last year and June, a trend Dr Nyakang’o reckons is risky given the Treasury disbursed all funds to the devolved units.
Eleven percent (Sh19.78 billion) of the bills was accrued one to two years ago, 12 percent (Sh20.34 billion) are two to three years old, and a majority of them at Sh85.42 billion had been pending for over three years.
“The significant amount of bills under one year is concerning, especially since full disbursement of the equitable share for FY 2024/25 had been provided,” she says.
The CoB also says many counties have discrepancies between the pending bills they reported to her office and records in their financial statements.
