Economy

Senators eye law to speed up release of county funds

senate

The Senate building in Nairobi on Sunday, May 24, 2020. PHOTO | DENNIS ONSONGO | NMG

Newly elected senators plan to make changes in law to impose sanctions on Treasury officials who fail to remit county resources within the set timelines in a bid to curb the accumulation of pending bills.

Uasin Gishu Senator-elect Jackson Mandago and his Mandera counterpart Ali Roba say counties continue to accumulate debts owed to contractors and suppliers despite the law requiring the Treasury to remit allocation to counties every 15th day of the month, in line with the County Allocation of Revenue Act.

The Treasury allocated counties Sh370 billion in equitable share in the current financial year.

Governors have repeatedly expressed disappointment over delays in the release of funds from the Treasury, which they blame for the financial problems dogging their counties that have resulted in industrial action by workers and stalled projects.

Majority of counties continue to accumulate unpaid bills despite the Treasury repeatedly issuing circulars to State entities from 2019 to prioritise payment of debts, especially to contractors and suppliers to support economic growth and sustain jobs.

The unsettled obligations include payments to contractors of State projects, suppliers of goods and services as well as unremitted statutory deductions like payroll taxes, pension and medical cover contributions.

The arrears have continued to mount amid tough rules requiring payments be made within 60 days of goods or services being supplied.

Rising supplier debt at national and county levels has deepened cash flow challenges for firms, especially the micro and small-sized, forcing some of them to close down.

“My foremost agenda as a Senator is to know why money allocated to counties cannot reach on time. I want to ensure that the law is changed to punish the Treasury officials who fail to release cash to pay contractors and suppliers on time,” Mr Mandago said during registration and orientation session of the 47 newly elected Senators ahead of swearing-in Thursday.

“I will be exploring ways of amending the law further to eliminate the Treasury’s inordinate delay in ensuring funds get to counties by the set deadline.”

Mr Roba said he will push for laws to strengthen the systems at the developed level and ensure that counties and national governments should ensure devolution works.

“I will first want the Senate to help counties improve systems so that governors are not pursued as criminals when the problem lies with the national government that delays cash for payment of suppliers and contractors’ dues,” Mr Roba said.

In May, Cabinet Secretary Ukur Yatani revealed the Treasury was considering drafting a legal framework that would penalise accounting officers for failure to honour verified bills for goods supplied or services rendered to State entities as a first charge.

“Government is exploring legal mechanisms to resolve the issue of pending bills,” Treasury officials wrote in the Budget Policy Statement (BPS) for 2022. “The accounting officers will be compelled to clear pending bills and failure to do so, penalties will be charged against the accounting officers.”

In July, suppliers threatened to file a class action suit over arrears owed by parastatals, ministries, counties and other State agencies

Treasury statistics show pending bills climbed to Sh504.7 billion at the end of the last financial year in June, a 40.39 percent jump over Sh359.5 billion the previous year, making it the biggest annual jump on record.

Many Kenyan small and medium-sized businesses bid for government contracts because the State is the biggest spender in the country.

The Association of Public Sector General Suppliers said it will be seeking a legal interpretation on how the mounting pending bills will be paid by the national government and county authorities, which took power after the August 9 General Election.

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