Treasury slams brakes on parastatals' lavish spending on boards of directors

The government has ended the lavish spending on boards of directors of state corporations in new budget cuts.

At the same time, the government has directed the state-owned enterprises to collect all their revenue through the eCitizen platform.

This was even as it sounded a warning to state agencies that still collect revenue outside the eCitizen and submit information in hard copies.

In the tough rules, the National Treasury has restricted all board expenses to be within the budget set aside for the teams.

The move is bound to affect payment of sitting allowances, daily subsistence, training, travel and reimbursement for the use of personal cars.

Treasury CS Njuguna Ndung’u has directed that going forward, payment of allowances and reimbursement for personal cars would be restricted.

Claims for a refund by those operating from their hometowns or not spending the night away from their residences would be disallowed.

“Payment can only be made to a director who will be required to travel and spend a night away from his or her declared residence while attending a board activity,” the CS said.

Treasury has directed the agencies to seek prior approval of their budgets, including board expenses, within which the directors’ activities would be facilitated.

“It is irregular for any state corporation to expense any board activity to other voters than from the approved board expenses budget,” the circular to all principal secretaries and CEOs of state corporations reads.

Auditor General Nancy Gathungu has on many occasions flagged extra expenditure on boards of directors in meetings beyond the allowable threshold and instances where there are extra directors.

The government has also frozen new projects by state corporations with immediate effect, with agencies ordered to seek new approvals in the event of any for the next fiscal year.

“With effect from the date of this circular (March 27), state corporations should not implement new projects without fresh written approval from the National Treasury,” the circular reads.

President William Ruto recently declared looming radical reforms at the agencies, including mergers and dissolutions of non-profitable ones.

Treasury has thus ordered all state corporations against spending any monies generated or received over and above the approved revenue budget.

“Consequently, any revision of the approved expenditure budget regardless of whether or not it is less than 10 per cent or from sub-item to another is disallowed.”

State corporations have also been blocked from funding operations of ministries, state departments, and agencies as well as development projects executed by them.

CS Njuguna further directed that the agencies are barred from paying for individual or corporate club membership fees or annual subscriptions.

In sustained cuts, the Treasury has restated its earlier order for 30 per cent budget cuts for state-owned enterprises.

“Every state corporation should resubmit its 2024-25 financial year recurrent budget which has been rationalised to a level that is not more than 70 per cent of the approved 2023-24 budget.”

Parastatals have also been barred from procurement, printing, and production of corporate wear including T-shirts, shirts, tracksuits and any other branded items.

A March 18 circular by the Head of Public Service, which the Treasury has reiterated, also barred government agencies from purchasing promotional merchandise like calendars, diaries, umbrellas, power banks, key holders, bags, flasks, cups, branded shukas, baskets, and notebooks among other promotional materials.

The Treasury boss said the directives are in furtherance to those issued last December and would guide preparations for the entities’ next year's budget.

In the referenced directive, the Treasury said state corporation chief executive officers needed to seek and secure prior approval of any planned expenditure from their ministry and the National Treasury.

It said CEOs who violate the provisions would be held personally liable for the irregular expenditure.

The memo also announced drastic cuts on travel, training, seminars, consultancies, legal expenses, overtime and all non-core activities.

Treasury also barred CEOs from awarding salary increments and benefits to employees without its prior approval.

It further indicated that it would reallocate any money set aside for non-priority expenditures.

Ahead of the review ordered by Ruto recently, the state agencies are required to update and submit their data in the government investments information system.

This includes updates on the corporate information, audited financial statements, and monthly bank balances.

The parastatals have been further directed to give updates on pending bills, outstanding earnings, quarterly management accounts and project implementation status.

“All principal secretaries, accounting officers, and chief executive officers of state corporations are required to bring the contents of this circular to the attention of the respective boards of directors and councils, and ensure compliance,” the Treasury CS said.

In the earlier call, Treasury directed that profit-making state parastatals would survive on their own starting next financial year.

“SAGAs with capacity of generating revenues should be assessed critically to wean them off the exchequer funding with effect from July 1, 2024,” the ministry said.

The government said it will continue with budget cuts as well as steps to reduce the accumulation of public debt.