Counties’ ballooning pending bills affect suppliers, contractors’ business

Suppliers and contractors are no longer keen on dealing with counties fearing that they would not be paid.

Counties keep bills pending for years despite the government releasing billions of shillings to clear pending bills.

Delays in payment of pending bills to businesses who provide services to both National and County Governments has affected liquidity and operations of these entities.

In a number of cases, this has led to closure of businesses and affected livelihoods of the suppliers.

The accumulation of pending bills has seen counties losing reliable suppliers and contractors leading to stalled projects.

In June last year, Treasury CS Ukur Yatani had asked MPs to back his plan to freeze release of cash to counties which have persistently defied presidential orders to clear verified bills owed to suppliers and contractors as a first charge.

Accumulated pending bills both at national and county level has compounded cash flow challenges for businesses—especially SMEs—forcing some of them out of operation.

The Treasury estimated arrears owed to contractors and suppliers by ministries, departments and agencies at national level at about Sh307.8 billion as at end of March 2021, while the debts at county levels also top Sh100 billion.

“I urge this House to support our efforts towards enforcing compliance in payment of all verified pending bills by County Governments by backing our proposal under Article 225 of the Constitution of Kenya to temporarily stop transfers to county governments that persistently fail to comply with the directive to clear pending bills,” the CS said.

Parliament’s Budget and Appropriations Committee had recommended the Treasury to float a long-term bond that would allow the State to go to the capital markets to raise funds to clear the outstanding stock of pending bills.

Apart from the non-payment of suppliers and contractors, the county government has been struggling to pay its worker’s salaries on time.

Last year, the Controller of Budget (CoB) revealed that thirty counties did not spend even a shilling to settle pending bills in the first three months of the financial year (FY) 2021/2022.

Listed in the recent report by Controller of Budget Margaret Nyakang’o are the counties of Baringo, Bungoma, Busia, Elgeyo Marakwet, Homa Bay, Isiolo, Kajiado and Kilifi, Kisumu, Kwale, Lamu, Machakos, Marsabit, Meru, Migori, Nairobi City and Nakuru.

Others are Nandi, Narok, Nyamira, Nyandarua, Samburu, Tana River, Tharaka Nithi, Trans Nzoia, Turkana, Uasin Gishu, Vihiga, Wajir, and West Pokot.

Nairobi topped the list with Sh54.32 billion in pending bills while Nakuru had the lowest amount – Sh17 million.

The audit report revealed that Nairobi County did not submit a payment plan for its pending bills.

The county had faced turbulence after the ouster of Governor Mike Sonko, who has since been replaced with Anne Kananu.

Baringo County as per the report had outstanding pending bills of Sh195.27 million as of June 30, 2021.

The Sh195.27 million comprised of Sh19.93 million for recurrent expenditure and Sh175.34 million for development expenditure.

“Nonetheless, the county had not prepared and submitted a payment plan to settle the entire bills by the close of the first quarter of FY 2021/22,” read the report in part.

Bungoma County has outstanding pending bills of Sh443.77. Though the audit showed the devolved unit had prepared a payment plan to settle the entire bills in the financial year, the County Treasury did not report any expenditure towards paying pending bills in the first quarter of the financial year 2021/21.

Busia County pending bills stood at Sh740.65 million for development expenditure only.

Elgeyo Marakwet’s pending bills of Sh52.87 million comprised of Sh5.74 million for recurrent expenditure and Sh47.13 million for development expenditure.

The audit revealed that the county had at the beginning of the financial year 2021/22 prepared a payment plan to settle the entire bills. However, during the period under review, there was no payment towards pending bills.

Homa Bay County’s pending bills amounted to Sh575.57 million and comprised of Sh16.97 million for recurrent expenditure and Sh558.60 million for development expenditure.

Isiolo and Kajiado counties had pending bills of Sh1.26 billion each. Kilifi’s pending bills amounted to Sh1.99 billion and comprised of Sh1.19 billion for recurrent expenditure and Sh795.37 million for development expenditure.

Kisumu’s pending bills were Sh2.09 billion and comprised of Sh556.63 million for recurrent expenditure and Sh1.54 billion for development expenditure. Kwale’s pending bill dues amounted to Sh2.29 billion for development expenditure.

Lamu on the other hand had pending bills of Sh111.77 million, which comprised of Sh67.67 million for recurrent expenditure and Sh44.10 million for development expenditure.

Machakos County’s pending bills amounted to Sh2.80 billion for both recurrent and development expenditure while Marsabit reported Sh1.29 billion in pending bills.

Meru’s pending bills amounted to Sh1.01 billion and comprised of Sh215.85 million for recurrent expenditure and Sh790.61 million for development expenditure.

For Migori County, the pending bills amounted to Sh905.87 million and comprised of Sh540.77 million for recurrent expenditure and Sh365.09 million for development expenditure.

Nandi County had pending bills amounting to Sh772.34 million and comprised of Sh254.57 million for recurrent expenditure and Sh517.59 million for development expenditure, while Narok’s pending bills hit Sh2.17 billion and comprised of Sh1.70 billion for recurrent expenditure and Sh476.03 million for development expenditure.

Nyamira County reported Sh334.97 million in pending bills comprising of Sh119.44 million for recurrent expenditure and Sh215.54 million for development expenditure. For Nyandarua County, its outstanding pending bills during the period stood at Sh746.89 million, and comprised of Sh179.44 million for recurrent expenditure and Sh567.44 million for development expenditure.

Samburu’s pending bill amounted to Sh609.75 million and comprised of Sh92.43 million for recurrent expenditure and Sh517.33 million for development expenditure. Tana River had Sh2.67 billion in unpaid bills and comprised of Sh1.05 billion for recurrent expenditure and Sh1.35 billion for development expenditure.

Tharaka Nithi’s pending bills amounted to Sh327.38 million and comprised of Sh117.79 million for recurrent expenditure and Sh209.58 million for development expenditure.

Trans Nzoia reported pending bills of Sh1.89 billion – comprising of Sh512.19 million for recurrent expenditure and Sh1.38 billion for development expenditure.

Turkana on the other hand had Sh1.79 billion in pending bills comprising of Sh626.91 million for recurrent expenditure and Sh1.17 billion for development expenditure. The county did not provide a payment plan for the pending bills in the period under review.

Uasin Gishu County’s pending bills stood at Sh116.3 million and comprised of Sh25.66 million for recurrent expenditure and Sh90.64 million for development expenditure. Vihiga reported Sh589.91 million in pending bills – Sh83.26 million for recurrent expenditure and Sh506.64 million for development expenditure.

Wajir had pending bills of Sh1.42 billion and comprised of Sh302 million for recurrent expenditure and Sh1.12 billion for development expenditure. At the beginning of FY 2021/22, the county had not prepared a payment plan to settle the bills in the financial year according to the report.

West Pokot’s pending bills stood at Sh162.56 million. The Controller of Budget said failure by the counties to make payments when due, constitutes a severe material breach of public finance principles.