• The governments' 48 agencies have been the subjects of audit queries following cases of improprieties.
•The National Assembly’s PIC flagged a dozen state corporations whose officials it wants probed for graft.
Image: FILE
Treasury has slammed the brakes on a spending spree by parastatals and imposed tough measures to instil budgetary discipline as the realities of tough economic times sink in.
It will not be business as usual at the 48 entities facing directives on budget elements they must consider as they prepare next financial year's estimates.
The new rules by Cabinet Secretary Ukur Yatani greatly reduce the spending autonomy of the parastatals as virtually every shilling will have to be approved in advance by the Treasury.
Expenditures on travel, training, seminars, consultancies, legal expenses, overtime, and all non-core activities will be capped at the bare minimum.
Going forward, parastatals will only undertake “critical activities and programmes that maximise on returns and efficient service delivery".
Yatani's January 14 circular bars state corporations from initiating new capital projects without prior approval by their line ministries and the Treasury.
“No state corporation shall commence implementation of programmes or incur expenditure where approval has not been granted by the line ministry and Treasury,” Yatani said.
“The National Treasury will not approve or recommend to line ministries for approval proposed budgets that are not in line with the circular.”
Treasury will also have to approve staff recruitment as well as acquisition of ICT-related software, hardware, equipment and installations.
Yatani said CEOs of parastatals will be held personally liable for expenditure not approved by their line ministries and National Treasury.
Such expenditures will be treated as irregular, curbing them considered necessary to ensure they are cost-effective
Parastatals have also told to comply with the directive barring them from engaging external lawyers or legal services consultants without the Attorney General’s prior approval.
The entities have been told to "take steps to building internal legal capacity to defend litigation matters internally.”
Projects will not be approved unless a parastatal has obtained all required approvals from state authorities.
The Treasury will thus approve projects only after funding is secured and conditions, including land acquisition, are fulfilled.
Approval will require completed detailed designs, with approvals where applicable.
State entities will have to provide detailed resource requirements, including funding sources and personnel to implement projects.
Approvals will take into account funding requirements for ongoing projects and multi-year funding requirements of capital projects until their completion.
As such, the 48 agencies will be required to conduct a programme performance review before allocating funds to it.
This will be based on the previous budgetary allocations, actual expenditure and achieved outputs.
Yatani said Treasury will not approve or recommend a proposed budget with an operating deficit.
State corporations are also barred from take loans, taking overdrafts or any form of credit facilities without prior approval of their line ministry, with Treasury's concurrence.
There will be no all-clear for borrowing or guarantees for entities in default if there are loan repayment issues and pending bills.
Yatani cited low compliance with the directive on paying pending bills – more than 90 days from due date – the first charge in a new financial year.
He said accumulation of confirmed and verified pending bills and liabilities is prohibited and may invite punitive action.
Treasury will also have to approve recruitment of staff as well as acquisition of ICT- related software and installations.
Treasury circular
The CS says trouble will follow violation of the law against initiating procurement without budgetary provisions and confirmed sources of funding.
In further restrictions, no state corporations will be allowed to open or operate bank accounts without prior Treasury approval.
The Treasury has developed Government Investment Management Information System (GIMIS) for preparation, submission, analysis and approval of budgets.
Going forward, state corporations will be required to submit their bank account balances at the end of each month through GIMIS.
On salaries and allowances, parastatals will have to first confirm from the National Treasury the availability of funds before pay adjustments.
Entities would be required to first get written Treasury approval before requests for pay adjustment are put to the Salaries and Remuneration Commission.
Apart from Treasury approval, capital projects will be prioritised based on whether they can mobilise the requisite resources – donor grants, borrowings and Exchequer funding.
Any revisions of expenditure exceeding 10 per cent of the approved budget must be submitted for review and approval by line ministry and Treasury.
“Treasury will not approve any expenditure which has already been incurred,” Yatani said in the new rules.
He further warned state corporations against failure to make full disclosure of internally generated revenue or underestimating it.
“Revenue over and above what the National Treasury has approved will require fresh approval before spending,” he said.
State parastatals will be required to submit a letter from their line ministry confirming the agreed funding levels from the national budget.
“GIMIS will block the submitted budget if the letter is not provided. Those that lack the letter will have the expenditure capped to previous financial year allocations," the circular reads.
Parastatals are also required to immediately submit approved dividend policies together with annual estimates, unremitted dividends and surplus funds.
This followed findings that most entities do not honour their pension obligations, the remittances running into billions of shillings.
In this regard, they would be required to include in their budget submissions the status of pension contributions for the last three years.
Already, national and county governments are doing without newspapers, benchmarking trips, delegations accompanying ministers on foreign trips and non-priority advertising in austerity measures initiated in September 2019.
MPs in a July 2020 report exposed the waste and misspending of some state corporations and called on the EACC to probe them for flawed procurement and financial improprieties.
The National Assembly’s Public Investments Committee flagged 11 state corporations whose officials it wants probed for graft.
Among those flagged were the Kenya National Highways Authority, the Kenya Airports Authority, Kenya Pipeline Company, Kenya Ports Authority, Communications Authority of Kenya and the Kenya Investment Authority.
Others were the Kenya Ferry Services, Kenya Plant Health Inspectorate Service, Kenya Maritime Authority and the National Social Security Fund.
(Edited by V. Graham)