18 counties risk not getting funds from Treasury over high wage bill

Eighteen counties are at risk of not getting any funding from the National Treasury in the current financial year due to not adhering to a 35 per cent threshold on recurrent expenditure for salaries and wages. 

The Office of Controller of Budget says it is seeking clarification from Treasury on how funds can be withheld from counties that persistently spend more than the set limit on wages and benefits.

“The law vests powers on the Cabinet secretary responsible for National Treasury to withhold funding to any government entity or institution that either materially or persistently violates the Public Financial Management Act,” said Deputy Controller of Budget Stephen Masha during a breakfast meeting with the media yesterday.

“There has been need for an interpretation of what constitutes materiality and what is persistent, so that area that is still grey is being discussed. I am sure in due course it will be settled.”

Analysis of personnel emoluments for the first nine months of the 2020-21 financial year as a proportion of income received by counties shows that 18 county governments exceeded the allowable limit of 35 per cent.

These were Baringo, Bungoma, Elgeyo Marakwet, Embu, Garissa, Homa Bay, Kiambu, Kirinyaga, Kisii, Kitui and Machakos.

Others were Meru, Murang’a, Nandi, Taita Taveta, Tharaka Nithi, Vihiga and West Pokot counties.

County governments’ budget implementation review report for the first nine months of the 2020-21 financial year shows that county governments spent Sh117.19 billion on personnel emoluments, which accounted for 52.9 per cent of the total expenditure for the period.

The Controller of Budget has continuously stated that county governments should ensure expenditure on personnel emoluments is contained at sustainable levels and in compliance with Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015.

“We do monitor adherence to public finance management principles. These principles include setting aside a specific threshold for development expenditure, a specific threshold for recurrent expenditure,” Mr Masha said.

A county must not spend more than 35 per cent on wages, he added.

“But when we adopted devolved governance, there are counties that had provincial headquarters and the framework was that all the employees who were working in those counties were deemed to have been absorbed.

“As a result of that, counties took on board many employees that the wage bill occasioned them to surpass the 35 per cent threshold.”

Since then, some workers have either left work through natural attrition or have retired.

“But in spite of that, there was a mismatch in terms of the technical skills that counties required and those available at the time of devolution, which occasioned counties inevitably to recruit more people,” Masha said.

“We have seen a couple of counties move but not all of them because of those historical reasons.”

The Office of Controller of Budget was established under Article 228 of the Constitution of Kenya with the core mandate to oversee implementation of the budgets of the national and county governments by authorising withdrawal from public funds.

High expenditure on personnel emoluments is one of the reasons that hampers effective budget execution by counties.

Others include under-performance on own-source revenue collection, low spending on development budget, high expenditure on travel and delay in submission of financial and non-financial reports to the Controller of Budget.?