County Governments flagged for irregular, unsupported payments in financial audit

Kenyan taxpayers are losing billions of shillings due to widespread financial mismanagement within county governments, with irregular and unsupported payments being flagged as significant issues.

A combination of weak internal controls, poorly qualified staff, and reluctance to adopt best financial practices has left taxpayers bearing the brunt of these inefficiencies.

Deputy Auditor General Isaac Kamau highlighted the persistent problems across devolved units, with some counties employing unqualified personnel in accounting departments.

"We have observed some very systemic weaknesses within the financial management and staff of county assembly and county executives," he said.

These shortcomings have led to widespread financial mismanagement, with many counties failing to maintain adequate internal controls, resulting in unsupported transactions.

One of the most troubling issues is the continued occurrence of unsupported payments, which have been noted in various county audits.

These payments, often without the necessary documentation, are a recurring problem from one audit to the next.

"The Auditor General has always asked herself, loudly, how we have unsupported transactions, yet from planning, we knew a transaction was going to happen," Kamau added.

The lack of adoption of accrual accounting, a more robust financial reporting system, has also been a critical concern.

Accrual accounting records financial transactions when they occur, rather than when cash changes hands, offering a more accurate picture of liabilities, assets, and revenues.

However, many counties continue to rely on cash-based accounting, which fails to fully capture the financial position of county governments.

Human resource management

Human resource management is another area of concern. The Institute of Certified Public Accountants of Kenya (ICPAK) pointed out that high wage bills and a lack of structured payroll systems have led to inefficiencies.

Many counties also lack approved staffing structures and expenditure limits on salaries, putting further strain on budgets. Frequent staff turnover in key financial roles has also contributed to governance challenges.

The scale of financial mismanagement is evident in several counties. In Nairobi, over Sh1 billion was spent on services with no traceable documentation, while unsupported payments for the 2022-2023 financial year amounted to Sh226 million in salaries, Sh60.9 million in goods and services, and Sh620.6 million in the defunct Nairobi Metropolitan Services contracts.

Mombasa County revealed unsupported figures totalling Sh5.4 billion, including unexplained transactions and deposits.

Similarly, Kisumu and Nakuru counties reported unsupported expenditures in the millions.

The financial audits have raised alarms, with ICPAK expressing concern over the quality of financial management in counties.

"Counties without certified professionals are prone to low-quality financial statements and oversight challenges," said ICPAK's Director of Public Policy and Research, Hillary Onami.

The lack of certified accountants in senior financial roles has exacerbated delays in submitting county financial reports, often breaching legal deadlines.

ICPAK has stressed the need for counties to adopt accrual accounting fully, a recommendation that has been a cornerstone for strengthening public financial management at both the national and county levels.

However, the challenge remains for many counties that still rely on outdated cash-based accounting systems.

This rampant financial mismanagement has occurred despite taxpayer funds meant to fund essential services, including healthcare, infrastructure, and sanitation.

With counties struggling to deliver key services, residents feel the strain of higher taxes without corresponding improvements in public services.