Counties risk losing Sh533 billion in unbudgeted expenditures, stalled projects, Senate report warns

County governments risk losing Sh533 billion in expenditures from the 2023/24 financial year due to widespread financial mismanagement, a Senate committee has warned.

The Senate County Public Accounts Committee (CPAC) has flagged multiple irregularities, including unbudgeted spending, procurement violations and stalled projects.

A detailed analysis of Auditor-General Nancy Gathungu’s report on the accounts of the 47 counties has exposed systemic weaknesses in public financial management, revealing questionable expenditures related to equitable share allocations, conditional grants, locally generated revenue and county assets.

The CPAC, chaired by Homa Bay Senator Moses Kajwang’, highlighted Sh87.13 billion in "egregious violations" comprising irregular, unsupported, unbudgeted and excess expenditures, as well as stalled projects and concerns over value for money.

“These findings paint a concerning picture of financial governance at the county level, revealing both systemic weaknesses in financial management systems and potential instances of malfeasance,” reads the CPAC report.

According to the report, the Nairobi County government recorded the highest financial risk exposure at Sh157.36 billion, followed by Kakamega at Sh41.52 billion and Machakos at Sh28.27 billion. On the lower end, Murang’a recorded Sh5.27 million in exposure, while West Pokot’s exposure stood at Sh115.57 million.

For the first time since the onset of devolution in 2013, Nairobi and Kisumu counties, which had previously received disclaimers and adverse audit opinions, were issued with a qualified audit opinion in the 2023/24 fiscal year.

The Senate committee uncovered widespread financial mismanagement, including deficiencies in financial reporting, procurement violations, budgetary noncompliance, human resource mismanagement, wage bill crises, asset management failures, revenue collection shortfalls and mounting pending bills.

Among the most troubling practices identified was the processing of payments outside the Integrated Financial Management Information System (IFMIS), effectively bypassing financial controls. The report also flagged irregular imprest management, unauthorised funding of the Council of Governors (CoG) and incomplete or unused projects representing wasted investments.

Counties were also found to have engaged in outright violations of procurement laws, questionable spending, irregular and unsupported payments and payroll fraud, exposing them to serious financial risks.

“This rigorous examination revealed systemic weaknesses in public financial management across county governments, with a staggering cumulative fiduciary risk exposure of Sh532.67 billion,” reads the CPAC report.

Mombasa County was flagged for fiduciary risk exposure amounting to Sh7.64 billion, including avoidable legal expenses, irregular human resource practices (Sh6.28 billion), and incomplete or delayed projects worth Sh44.26 million. Other major risk areas in Mombasa included unsupported domestic travel expenditures of Sh17.03 million and unexplained voided transactions totalling Sh921.08 million.

Fiduciary risk, as explained in the report, refers to the likelihood of funds being misused, misappropriated, or failing to achieve value for money due to weak governance and control systems.

Other counties with significant fiduciary risks include Kisumu (Sh15.09 billion), Kakamega (Sh41.52 billion), Kiambu (Sh15.22 billion), Kajiado (Sh22.65 billion), Kisii (Sh12.42 billion), Nyeri (Sh8.10 billion), Kericho (Sh6.79 billion), Nyandarua (Sh6.79 billion), Murang’a (Sh6.70 billion), Busia (Sh6.25 billion), Bungoma (Sh5.83 billion), Elgeyo Marakwet (Sh6.30 billion) and Kwale (Sh6.55 billion).

The report flagged Kilifi County for a staggering Sh12.10 billion risk exposure, including inaccurate pending bills (Sh6.09 billion), unsupported payments for construction (Sh672.52 million) and unsupported imprests and advances worth Sh90.14 million.

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• stalled projects

In Tana River County, Sh7.57 billion was identified as being at risk, with unsupported pending bills (Sh4.15 billion), delayed projects (Sh269.85 million), unsupported payments (Sh170.89 million), and irregular procurement (Sh32.10 million) being key concerns.

Lamu County was also cited, with a total risk exposure of Sh14.54 billion due to excessive wage bills (Sh1.59 billion), stalled projects (Sh1.42 billion), irregular procurement (Sh164.02 million), and grounded vehicles with unverified values.

The report warns that without immediate interventions, counties could continue losing billions of shillings annually.

CPAC has called for stricter financial oversight, improved accountability measures and stronger collaboration between Parliament, investigative agencies and oversight bodies to curb financial mismanagement.

“Governors, as county chief executive officers, must take serious administrative action against officers implicated in the misappropriation of public funds,” Senator Kajwang’ said.

The report also emphasised the need for comprehensive asset registers, enforcement of procurement laws, and effective revenue collection strategies to mitigate financial risks and enhance accountability in county governments.