Principal Secretaries and accounting officers at counties will now pay a Sh1 million fine or serve a five-year jail term for delaying payment to suppliers.
This is after the Senate passed the Prompt Payment Bill, 2021, that compels State and county agencies to pay business and contractors within the timelines agreed in the contractor.
Delayed payments will attract interest that will be calculated on the lending rate of the Central Bank of Kenya, which is currently seven per cent.
The approval of the Bill comes at a time devolved units, State ministries and agencies owe suppliers more than Sh407.8 billion, leading to a cash crunch that has led to closure of businesses, laying off of employees and default on statutory deductions.
According to a report by the Controller of Budget, the national government owed suppliers and contractors Sh36.35 billion in pending bills by the close of the 2020/21 financial year.
“Accumulation of pending bills by the MDAs affects the overall liquidity in the economy, especially that of the private sector, hence negatively impacting the overall economic growth.
“CoB recommends that all MDAs ensure payment of pending bills is prioritised as a first charge in the FY 2021/22 in compliance with the law to avoid further accumulation of pending bills,” CoB Margaret Nyakang’o says in the report.
The report indicates that as at June 30, 2021, the agencies and ministries had accumulated Sh35.11 billion from previous financial years and Sh1.24 billion in that year.
The amount is a decrease compared to the Sh53.49 billion cumulative pending bills accumulated by 44 MDAs in a similar period in the 2019/2020 FY when 17 state agencies had no pending bills while 10 failed to submit information.
Cumulatively, among the agencies and ministries, the State Department of Transport has the highest pending bill at Sh6,081,485,056, the Independent Electoral and Boundaries Commission (IEBC) at Sh2,793,944,212 and State Department for Regional and Northern Corridor Department at Sh2,218,189,273.
The Judiciary has unpaid bills totalling Sh93,515,159 while that of the Presidency stands at Sh121,816,988.
Others agencies which reported pending bills in that financial year are Vocational and Technical Training (Sh22,500596), State Department for Labour (Sh76,535,746), Social Protection, Pensions and Senior Citizens Affair (Sh2,300,410), Mining (Sh65,175,775) and Auditor General (Sh4,810,295).
