Report exposes mismanagement of Nairobi's health fund, other county resources

Nairobi County's health sector has come under scrutiny for poor record-keeping and lack of regulations on the use of funds aimed at improving health services.

A new report by the Controller of Budget, Margaret Nyakang'o, reveals that while the health sector consumes up to 40 per cent of the county's revenue, there is little clarity on how these funds are being spent.

The report, covering the first three months of the Financial Year 2024-2025, highlights major gaps in the management of the Facility Improvement Support Fund (FIF), which is intended to upgrade health services.

According to the report, the county government has failed to develop clear rules for how the fund should be used, leading to unaccounted spending.

The FIF is supposed to support improvements in health facilities across Nairobi, but the report notes that the county did not budget for the fund in FY 2024-2025.

As a result, the Sh382.45 million collected for the fund during the period under review was spent without proper documentation or oversight.

"The county did not budget for the anticipated FIF in the approved budget for FY 2024/25," the report states.

This lack of planning meant the collected funds were spent at source, bypassing the usual budgetary processes.

The lack of transparency is a major concern. Health facilities that received FIF funding did not submit reports detailing how the money was used, which raises the risk of misappropriation or embezzlement.

The Controller of Budget's report also pointed out that this failure to account for the funds violates the Facility Improvement Financing Act of 2023, which mandates reporting on the usage of FIF resources.

"The collected amount was retained and utilised at source in line with the Facility Improvement Financing Act, 2023. The county has, however, not developed regulations to operationalise the FIF Act of 2023. The health facilities did not provide a report on the utilisation of the FIF during the reporting period, contrary to Section 18 (e) of the FIF Act, 2023," the report says.

In addition to issues with the health fund, the report also criticizes the county for managing certain funds through commercial bank accounts, which is a violation of the Public Finance Management (PFM) Act of 2012.

Commercial accounts

Specifically, the Biashara Ward Revolving Fund and the County Assembly's car and mortgage funds, each worth Sh100 million, are being operated through commercial accounts instead of accounts at the Central Bank of Kenya as required by law.

"The county government uses commercial bank accounts to operate the established funds contrary to Regulations 82 (1) (b) of the PFM (County Governments) Regulations, 2015, which requires that county government bank accounts must be opened and maintained at the Central Bank of Kenya," the report says.

The report also highlights that Nairobi County allocated Sh200 million to county-established funds in the 2024-2025 budget, which represents 0.5 per cent of the county's overall budget.

Additionally, Sh100 million was allocated to the Emergency Fund, which is in line with Section 110 of the PFM Act, 2012.

Despite these financial shortcomings, the administration of Governor Johnson Sakaja, who had promised to transform Nairobi into a "city of opportunity," has been focusing on several initiatives, including the Biashara Fund.

This revolving fund is designed to support businesses owned by women, youth, and people with disabilities across the county's 85 wards.

The fund is part of a broader plan to assist small businesses, similar to the national government's Hustler Fund.

In 2023, Nairobi had the highest number of Hustler Fund subscribers and ranked fourth in repayment rates at 73.8 per cent.

The city is also working on a plan to build 20 new markets to accommodate more than 500 hawkers.