The Auditor General’s teams are currently auditing all 47 counties, an exercise meant to uncover the financial rot that has become synonymous with Kenya's devolved governments. As with previous audits, there’s little hope that the gleefully corrupt culprits in our counties will be brought to book.
Our county governments have unfortunately been transformed into hotbeds of corruption where governors run their fiefdoms with impunity, siphoning public resources while refusing to pay pending bills, neglecting crucial projects and manipulating budget allocations.
Aided by loopholes in legislation and laxity within oversight institutions, governors continue to evade accountability despite clear evidence of financial misconduct.
The root cause of the county corruption crisis lies in the payment system itself, particularly in the manipulation of the Integrated Financial Management Information System. This flawed system allows county treasury officials to divert payments away from legitimate suppliers and contractors. To curb this rampant corruption a fundamental shift in how county finances are audited is necessary.
According to the County Governments Budget Implementation Review Report for FY 2023-24, Narok, Homa Bay and several other counties had some of the highest development expenditure absorption rates. While the media often touts these types of findings, it's the Auditor General (not the Controller of Budget) who holds the final authority in determining whether a county is truly serving its people.
Therefore, instead of merely reviewing financial statements, the Auditor General must audit the projects on the ground. Project-based audits would force counties to justify every shilling spent and tie financial allocations to tangible outcomes.
Such an audit would not only expose corruption but also improve revenue collection. For example, when county governments pay contractors, a 16 per cent VAT should be remitted to the KRA. But in many cases, contractors register new companies with the sole purpose of obtaining contracts, pay the county kickbacks and then vanish, leaving taxes unpaid.
If KRA were diligent, it would pitch camp in the counties, demanding a list of vendors and contractors, and ensuring that taxes are paid. Such a system could recoup billions in lost revenue.
The legislative framework is partly to blame for these governance failures. It is clear that the existing laws, such as the Public Finance Management Act, have loopholes that allow governors to line their pockets with impunity.
For example, counties frequently approve budgets far beyond their means knowing they will never be able to fund them. Narok, for instance, with a combined revenue of about Sh12 billion, approved a Sh14 billion budget, an impossible figure to sustain.
Additionally, counties have accrued massive unpaid debts to statutory bodies like Laptrust, NSSF and KRA. These unpaid debts, coupled with interest and penalties, have ballooned to unsustainable levels. In Narok, for instance, a principal debt of Sh10 million has spiralled into Sh285 million due to compounded interest and penalties.
These debts have become another avenue for corruption, with counties negotiating “asset swaps” to settle their debts, deals that often result in corrupt land transfers that enrich county officials.
This financial mismanagement puts the future of county employees and retirees in jeopardy. To break this cycle, we need legislative reforms to tighten the PFM Act, ensuring that counties only receive funds after accounting for pending statutory deductions.
Kenyans deserve better financial accountability. IFMIS must evolve into a true end-to-end system where, once a department head inputs an expenditure under a specific line item, it cannot be altered until payment is processed. This may ultimately require an amendment to the PFM Act to eliminate the need for a secondary approver.
Once the department head approves the expenditure, the CEC Finance may review but not modify it. The only additional oversight should come from the Controller of Budget, ensuring the payment is correctly allocated and free from fraudulent activity.
The Auditor General, KRA, Central Bank and Controller of Budget must collaborate and enforce a system that ensures fiduciary discipline across all levels. There must also be a clear, unalterable list of pre-approved vendors, with payments directly tied to verified accounts.
Misinterpretation of laws, like Article 228, must be addressed to prevent manipulation. Counties should not be allowed to operate multiple bank accounts, which breeds financial indiscipline. The time to act is now or we risk perpetuating a cycle of misused public funds and failed development.
Narok senator
