Blow for suppliers as Treasury declares Sh270 billion pending bills invalid

Thousands of suppliers across the country are facing a financial nightmare after the National Treasury declared nearly half of Sh665 billion in pending government bills ineligible for payment.

A special audit committee led by former Auditor General Edward Ouko has cleared only Sh230 billion as legitimate, dealing a crushing blow to many businesses that have waited years to be paid.

The verification process has left Sh270 billion worth of claims hanging, many of which are now labelled irregular or lacking proper documentation.

Treasury Principal Secretary Chris Kiptoo told the National Assembly Finance Committee that these bills would not be honoured unless claimants can prove their legitimacy.

“If the audit team declares a bill unpayable, the burden of proof shifts to the claimant,” Kiptoo said, underlining the Treasury’s strict position aimed at stopping fraudulent claims.

Among the cleared bills, Sh80 billion was allocated to infrastructure projects, some of which have already received payment.

The rest of the approved amount covers supplies made to government ministries and agencies.

The committee has so far reviewed 75 per cent of the total pending bills, which include those owed by the national executive, Parliament, the Judiciary, commissions, state corporations, and county governments.

The final list of approved and rejected payments will be made public once the review is complete.

Treasury has pledged to settle the cleared Sh230 billion swiftly, with some payments expected before the end of June and the rest after the current budget process.

However, the government made it clear that no bill will be paid without adequate supporting documents.

While the Treasury says the move is meant to eliminate fraud, many suppliers now face the harsh reality of being left out, despite having delivered goods or services.

Some complain their documents were misplaced or dismissed unfairly, and are now preparing for court battles.

The Ouko-led team’s mandate includes identifying false or fraudulent claims, a task that has already left a trail of disputes between suppliers and state agencies. The financial squeeze is already being felt, with many businesses warning of potential closures.

A report by Auditor General Nancy Gathungu flagged Sh194 billion in pending bills as of November 2024.

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“Failure to settle the bills has an effect of withholding circulation of cash in the economy and affects the smooth operations of suppliers and MSMEs (Micro, Small and Medium Enterprises),” she noted.

Gathungu’s report showed the Office of the President held Sh14 billion in pending bills, mostly inherited from projects under the former Nairobi Metropolitan Services.

The Ministry of Defence topped the list for 2024 with Sh22.9 billion in unpaid bills, a sharp rise from the previous year.

Other key defaulters include the Agriculture department at Sh13.6 billion, the National Police Service at Sh9.9 billion, and Correctional Services at Sh5.2 billion.

One notable shift was seen in the Medical Services department, where pending bills dropped drastically from Sh41 billion to Sh4.9 billion.

Meanwhile, the Teachers Service Commission had Sh3.3 billion in unpaid claims. Gathungu warned that delays in settling these bills not only cripple businesses but also reduce revenue collection from taxes such as VAT and Withholding Tax. “All these factors viewed holistically call for the Executive to put in place measures to deter the escalation of pending bills and to enforce discipline in public sector entities,” she said.