In a recent revelation, National Treasury Cabinet Secretary John Mbadi disclosed that nearly half of the verified pending bills in Kenya are not authentic, casting doubt on the legitimacy of compensation claims submitted by suppliers. As of June 2022, the National Treasury reported that pending bills claims totaled Ksh663 billion, prompting the Cabinet to establish a special committee to review these claims.

Verification Findings

The Pending Bills Verification Committee, led by former Auditor-General Edward Ouko, has so far verified Ksh475 billion worth of bills. Out of this amount, only claims totaling Ksh206 billion have been deemed genuine. This indicates that approximately 56.6% of the verified bills were found to be inauthentic.

As of September 2024, the national government owed suppliers and contractors more than Ksh528 billion, while county governments separately owed Ksh168 billion. State corporations accounted for the highest portion of these debts, owing Ksh410 billion, whereas ministries and state departments had unpaid bills amounting to Ksh118 billion. The pending bills from state corporations included payments to contractors and projects, suppliers, unremitted statutory and other deductions, and pension arrears.

Prioritization of Payments

CS Mbadi emphasized that over 90% of the verified pending bills are between Ksh1 million and Ksh10 million, with only 5% exceeding Ksh10 million. He stated, “We are going to deal with the bills which are less than Ksh0-10 million first because most of it is owed to the Small and Medium Enterprises, to ease cash flow in that sector.”

Composition and Mandate of the Verification Committee

The Pending Bills Verification Committee comprises representatives from various government departments and professional bodies, including the Attorney General’s office, the State Department of Roads, the State Department of Public Works, the State Department of Housing and Urban Development, and the Public Procurement Regulatory Authority. It also includes members from the Ethics and Anti-Corruption Commission, the Law Society of Kenya, the Institute of Engineers of Kenya, and the Institute of Certified Public Accountants of Kenya.

The committee’s primary mandate is to audit liabilities incurred between 2005 and 2022. In a meeting chaired by President William Ruto at State House, the Cabinet noted that pending bills remain a persistent issue. The National Government’s pending bills from June 2005 to June 2022 stood at Ksh481 billion, while counties owed Ksh159.9 billion.

Recent Developments

As of January 31, 2024, the Pending Bills Verification Committee had received claims from 1,537 companies, totaling Ksh145.5 billion. These claims were submitted by 38 Ministries, Departments, and Agencies (MDAs) and encompassed 309 claims for goods, 995 for services, 1,197 for works, and 2 employee- or labor-related claims.

By June 30, 2024, the National Government’s pending bills had risen by Ksh29 billion to Ksh516.3 billion, highlighting the financial constraints the state faces in clearing these debts. This increase occurred as the Pending Bills Verification Committee was mapping out all outstanding debts to expedite clearance.

Government’s Commitment

President William Ruto has affirmed the government’s commitment to addressing genuine pending bills promptly. He stated that authentic public sector pending bills would be prioritized in the government budget, emphasizing that it is not the government’s role to drive enterprises to ruin but to support them.

Challenges and Implications

The revelation that nearly half of the verified pending bills are not genuine underscores significant challenges in Kenya’s public financial management system. The existence of inauthentic claims suggests potential issues such as fraudulent activities, lack of proper documentation, and weaknesses in procurement processes.

The substantial amount of pending bills, both at the national and county levels, has far-reaching implications for the economy. Delayed payments to suppliers and contractors can lead to cash flow problems, particularly for Small and Medium Enterprises (SMEs), which constitute a significant portion of the verified pending bills. This delay can result in business closures, loss of employment, and a slowdown in economic activities.

Efforts to Enhance Transparency and Accountability

The establishment of the Pending Bills Verification Committee is a critical step toward enhancing transparency and accountability in the management of public funds. By involving various stakeholders, including professional bodies and anti-corruption agencies, the government aims to ensure a thorough and impartial verification process.

The committee has made significant progress in developing and adopting a work plan and strategies for the verification process. This includes the development of a digital system where pending bills can be submitted and tracked until a final decision is made. Such measures are expected to streamline the verification process, reduce the incidence of fraudulent claims, and facilitate timely payments to genuine suppliers.

Future Outlook

The government’s focus on settling pending bills, particularly those owed to SMEs, is anticipated to ease cash flow constraints in the sector and stimulate economic growth. However, the revelation of a high percentage of inauthentic claims highlights the need for continued vigilance and the implementation of robust financial controls.

Moving forward, it will be essential for the government to strengthen procurement processes, enhance record-keeping, and enforce strict compliance with financial regulations to prevent the accumulation of illegitimate pending bills. Additionally, fostering a culture of accountability and integrity within public institutions will be crucial in restoring public trust and ensuring the efficient utilization of public resources.

In conclusion, while the government’s efforts to verify and settle pending bills are commendable, the discovery of numerous inauthentic claims serves as a stark reminder of the challenges that persist in public financial management. Addressing these issues will require sustained commitment, comprehensive reforms, and the active participation of all stakeholders to ensure fiscal discipline and promote economic stability.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

4th January, 2025