State to audit county assets and liabilities starting June

The Government will audit the assets and liabilities of counties beginning June, according to a new report prepared by the National Treasury and the Central Bank of Kenya (CBK).

This is intended to determine the true owners and condition of the assets.

It would also show whether any were missing despite being recorded in the county documents and whether any were wrongly included despite there being no evidence of having been bought or incurred (liabilities) by the units.

The Treasury and the CBK prepared the report as part of an agreement with the International Monetary Fund (IMF) for the Sh153 billion precautionary credit that can only be drawn when the shilling depreciates to a crisis point.

READ: IMF offers Kenya Sh153bn stand-by loan for next two years

“For the list of assets and liabilities of counties, the auditing will start in June 2016,” said the report signed by Treasury secretary Henry Rotich and the CBK Governor Patrick Njoroge.

The report further said the list of assets and liabilities by the devolved units was ready for all but one of the 47 counties. Without revealing which particular county, Mr Rotich and Mr Njoroge added the liabilities were not capable of having a destabilising impact on the larger economy.

“Liabilities from pre-devolution local authorities amount to about one per cent of gross domestic product (GDP)—a level that is not considered macro-critical,” said the report.

With the GDP standing at about Sh6 trillion, the total liabilities therefore stand at about Sh60 billion on a cumulative basis with the Nairobi county alone having over Sh40 billion.

A few years ago, then Transition Authority chairman Kinuthia wa Mwangi expressed fear that some of the assets could be in the hands of individuals.

The audit is supposed to precede any transfer of the same to either level of government.

The report said the audit would be done “to strengthen the accountability and transparency of county finances.”

In a separate report released at the same time, the IMF noted that the government had failed to meet the deadline of December 2015 set for ascertaining the assets and liabilities of counties.

“The audit of assets and liabilities of all counties including those inherited at the onset of devolution [by] end-December 2015 [was] not completed. A first-ever list of assets and liabilities is ready for all but one of the 47 counties,” said Mr Rotich and Mr Njoroge.

The audit had been set as one of the conditions for access to the Sh70 billion precautionary loan agreed on two years ago. However, the failure to meet the condition was forgiven because Kenya had fulfilled most of the other conditions set for the insurance-like facility.

Many local authorities – before the onset of counties under the 2010 Constitution – had incurred liabilities running into billions of shillings. In the budget documents for this fiscal year, Mr Rotich revealed that the units owed the Treasury alone Sh8 billion. There is another Sh52 billion owed to other entities to make a total of Sh60 billion in liabilities.