Senators grill Sakaja over pending bills, procurement gaps

The Kenyan Senate Committee on Finance and Budget has intensified its scrutiny of county governments regarding persistent pending bills, procurement irregularities, and non-compliance with statutory reporting requirements. This oversight, rooted in Article 96 of the Constitution, highlights systemic failures in public financial management at the devolved level. The accumulation of pending bills, often constituting public debt, and deviations from the Public Procurement and Asset Disposal Act, 2015, pose significant legal and economic challenges. This article examines the legal framework governing county finances and procurement, the roles of key oversight institutions, and the implications for legal practitioners advising county governments and affected entities in Kenya.

Kenya's devolved governance system, established under the Constitution of Kenya, 2010, grants significant autonomy to county governments, but also imposes stringent accountability standards for public finance management. Recent reports indicate a worrying trend of escalating pending bills, widespread procurement irregularities, and a consistent failure by many counties to adhere to financial reporting obligations. This has prompted the Senate Committee on Finance and Budget to intensify its oversight, grilling county officials, including Nairobi Governor Johnson Sakaja, over these critical issues.

The Senate's heightened scrutiny underscores a broader national concern regarding fiscal discipline and transparency within devolved units. These financial malpractices not only undermine public trust and hinder service delivery but also cripple small and medium-sized enterprises (SMEs) that are owed billions in unpaid dues. This article delves into the legal and regulatory landscape governing public finance and procurement at the county level in Kenya, analyzing the statutory provisions, the roles of oversight bodies, and the potential legal ramifications for non-compliant county officials and entities.

The legal framework for public finance and procurement in Kenya's county governments is primarily anchored in the Constitution of Kenya, 2010, and operationalized through key statutes. Article 201 of the Constitution mandates principles of public finance, including openness, accountability, and prudence. The Public Finance Management Act, 2012 (PFMA), provides comprehensive guidelines for managing public funds at both national and county levels, prohibiting commitments without budgetary provision and requiring accurate record-keeping of debts. Complementing this is the Public Procurement and Asset Disposal Act, 2015 (PPADA), which gives effect to Article 227 of the Constitution, establishing a framework for fair, equitable, transparent, competitive, and cost-effective procurement and asset disposal by all public entities, including county governments.

Under the County Governments Act, 2012, counties are empowered to manage their functions and responsibilities, including financial management, subject to the overarching public finance laws. The Senate, as per Article 96 of the Constitution, plays a crucial oversight role, particularly over national revenue allocated to county governments. This oversight is further buttressed by institutions such as the Office of the Controller of Budget (OCOB), which monitors budget execution and implementation, and the Office of the Auditor-General (OAG), which conducts audits of public accounts. Despite these robust legal and institutional frameworks, persistent challenges in compliance have led to the current crisis of pending bills and procurement irregularities.

The persistent accumulation of pending bills by county governments constitutes a significant breach of the Public Finance Management Act, 2012, particularly Sections 15 and 44, which prohibit commitments without budgetary provision. These unpaid obligations, which include supplier invoices, statutory deductions, and court awards, are legally considered public debt under Articles 212-214 and 260 of the Constitution. The Public Procurement and Asset Disposal Act, 2015, specifically Section 96, further mandates the timely settlement of obligations. Failure to clear these bills not only attracts penalties and interest, which taxpayers ultimately bear, but also negatively impacts the implementation of subsequent budgets, as outstanding bills form a first charge on future allocations.

Procurement irregularities are equally pervasive, with audit reports frequently highlighting violations of the PPADA, 2015. Common issues include non-compliance with supplier qualification verification, late or missing procurement plans, misuse of direct procurement methods, lack of transparency in advertising, and unauthorized high-value procurements. Section 91 of the PPADA outlines the conditions for direct procurement, while Section 63(1) mandates public advertisement for transparency. Deviations from standard tender documents, as noted by Senator Boni Khalwale during a recent Senate hearing, raise serious questions about the legality of such practices. Article 226(5) of the Constitution introduces personal liability for public officials who authorize irregular expenditures, underscoring the severe consequences of such breaches.

The oversight mechanisms, while constitutionally mandated, face implementation challenges. The Office of the Controller of Budget (OCOB) regularly publishes reports detailing budget implementation, often highlighting counties' failure to meet revenue targets and their reliance on facility improvement funds. The Auditor-General's reports consistently expose procurement violations and unsupported expenditures across numerous counties. Recent legislative efforts, such as the County Oversight and Accountability Bill, 2024, aim to strengthen the Senate's oversight role by establishing dedicated county oversight offices and mandating rigorous public engagement protocols. Similarly, the County Public Finance Laws (Amendment) Bill, 2023, seeks to streamline budgeting and enhance oversight by county assemblies, aligning county financial frameworks with national standards.

Despite these efforts, a significant gap remains in the proactive enforcement of existing policies. The absence of real-time tracking of outflows from county accounts and the manipulation of approved requisitions by some county governments contribute to non-compliance. Court rulings, such as those by the Public Procurement Administrative Review Board (PPARB), have overturned high-profile tenders due to non-compliance with PPADA, emphasizing the need for strict adherence to tender criteria and timelines. Cases of willful failure to comply with procurement law can also lead to charges under the Anti-Corruption and Economic Crimes Act, 2003, as seen in various EACC investigations and convictions.

The ongoing scrutiny by the Senate on county governments over pending bills and procurement irregularities signals a critical juncture in Kenya's devolved governance. The systemic nature of these issues, as revealed by oversight bodies like the OCOB and OAG, demands urgent and decisive action. Legal practitioners advising county governments must emphasize strict adherence to the Public Finance Management Act, 2012, and the Public Procurement and Asset Disposal Act, 2015, particularly concerning budgetary provisions, timely payments, and transparent procurement processes. The potential for personal liability under Article 226(5) of the Constitution and other anti-corruption laws means that county officials face significant risks for non-compliance.

Practitioners should guide clients on establishing robust internal control systems, ensuring accurate financial reporting, and fostering genuine public participation in financial planning. The evolving legislative landscape, including proposed amendments like the County Oversight and Accountability Bill, 2024, suggests a future with increased accountability and stricter enforcement. Staying abreast of these developments and advising on proactive compliance measures will be crucial for mitigating legal risks and fostering sustainable financial management within Kenya's county governments.