Revenue officers of county governments across the country pocketed and in some cases failed to collect more than Sh17 billion in local taxes and levies across the country, a parliamentary audit has revealed.
The loss is a huge jump from Sh1.66 billion that the counties recorded in June 2014, the first year of the devolved system of governance.
The notable counties with huge uncollected revenue are Mombasa with under reporting of Sh2.49 billion, Nairobi (Sh1.91 billion), Narok (Sh1.7 billion) and Kiambu with uncollected revenue of Sh1.1 billion.
“Counties with high potential for revenue collection are reporting huge disparities,” states the Fiduciary Risk Report on county governments tabled in the Senate.
Counties have constitutional powers to collect local taxes, parking charges, rent, business permit and licence fees, fines, levies and market cess.
The counties are however required to submit the cash to the consolidated fund for re-allocation through the national Budget.
The report prepared and tabled by the Senate Public Accounts and Investments Committee accuses counties of failing to apply sections 61 and 62 of the Public Finance Management Act (PFM) which require County Executive Members for finance who are receivers of revenue to authorise public officers to be collectors of revenue for county government.
“Counties seem not to apply this provisions and hence the low revenue collection. This perhaps explains the reason behind lower revenue collections compared to defunct local authorities.
“It could also be a case of revenue leakage and low automation,” says Moses Kajwang, the chairperson of the committee, in the report.
The committee found out that there was under-reporting of revenues collected but not submitted to the County Revenue Fund. Part of the revenue was collected and utilised at source.
The committee says it stumbled on revenue differentials that could not be accounted for.
It singled out Mombasa, Nairobi, Narok, Kiambu, Marsabit, Wajir, Kisii, Kisumu, Nyeri and Kirinyaga as some of the counties that under-reported their revenues from the financial years 2013/14 to 2015/16.
“Even though the National Treasury has developed a national policy on enhancing county government revenue collection, most counties are still using manual recording, no modernisation of their revenue systems and use of third-party receivers of revenue,” the report states.
Mr Kajwang’s team found that most counties have several bank accounts that have not been submitted to the Auditor-General Edward Ouko for audit.
“The partial disclosure of revenue accounts could perhaps explain the lower revenue collection across most counties,” Mr Kajwang said. The report indicates that a total of Sh1.7 billion could not be accounted for in 2013/14, reflecting the possibility of resource misappropriation or loss.
“For counties like Migori, this involved theft, use of inaccurate cash books and failure to receive cash withdrawals and the non-reflection of such collected revenues,” the report says.
The committee says the non-reporting of revenues was a cross-cutting matter in all the 47 counties and reflected a lack of adherence to revenue collection guidelines such as collection and retention of revenues by counties in hospitals and arbitrary waiver of taxes such as cess by Mombasa County.
The Senators say all counties are under-collecting revenues and generating less than what the defunct local authorities used to collect.
The committee attributed the low revenue collection to weak revenue bases, absence of internal audits, poorly trained personnel, manual revenue collection system and reluctance by some county revenue officers to embrace change.