Are County Governments in Kenya Always Looting?
The Controller of Budget releases consolidated quarterly budget implementation reports for the County Governments and an annual report. The Auditor General audit reports should be annual reports that come out by December of every year.
When these reports become public, the media becomes picky. It focuses on the stories that will create the most sensation. Particularly, they focus on the stories that feed the ‘looting’ narrative.
For example, this article by the Star claims governors looted millions of shillings by refusing to declare the amounts collected in local revenue. The newspaper termed this as an attempt to “fleece the public”.
Looking through the web for such stories, you will find many of them. Most local media houses carry such stories. Nevertheless, are the counties always on a looting spree? Or is it a case of exaggeration and/or misreporting by the media?
Not every penny that is unaccounted for is always looted
Dr Jason Lakin says in this article that the media should know that money that is unaccounted for is not always looted.
While acknowledging without a doubt that there is theft happening in the counties, Dr Lakin gives three scenarios that the media mistakenly reports as theft in the counties. They are — poor forecasting, budget indiscipline and poor accounting.
Let’s discuss these terms in depth below.
Poor forecasting is simply making budget priorities, projections, targets, or estimates that are (too) ambitious or not well thought-out that the county government is unable to meet at the end of the financial year.
For example, a county government might target to collect KES 25 billion by the end of a particular financial year. However, it only has the capacity to collect KES 10 billion in that particular year. That is an example of poor forecasting.
When a county government fails to meet its revenue targets, the media may attribute the shortfall to theft. This may not be the case always.
Forecasting presents a key challenge to do it with accuracy. The county governments need to make important assumptions for good forecasting. These assumptions and key metrics may not be clear always.
Nevertheless, historical performance is the most reliable and recommended forecasting tool for a county government. That is, the counties looking at their past track record before doing any forecasting.
For some (or most) counties, the first year was difficult after the 2013 general elections. They were victims of poor forecasting with regard to revenue and expenditure. They had very ambitious budgets that they failed to meet. Some of the counties continue to do so even now.
It is the failure (in this case) by the county governments to stick to the spending plans set to achieve the target priorities or goals. Most of the cases concerning excess expenditure and pending bills fall under this category.
Excess expenditure is the instance where a county government overspends its budget without authorization (for example, from the County Assembly). Pending bills are expenses (or unpaid bills) carried over from the previous financial year to the new financial (or fiscal) year.
Excess expenditure violates Section 154 of the Public Finance Management Act (2012). This law limits the power of an accounting officer to reallocate (previously) allocated funds. For pending bills, they are a bad budget practice. There is no basis for carrying forward commitments from the previous financial year.
The county government operates on a single year budget, which must be accompanied by cash and book expenditure. A county department should return any unspent money to the county treasury. The county treasury then budgets the money afresh for the next financial year.
It relates to poor record keeping and poor management of expenditure.
Unsupported expenditure, where county governments report about an expenditure but fail to provide supporting documents, demonstrates poor accounting.
Most times, media reports concerning ‘looting’ and ‘massive theft’ of public funds borrow heavily on the reports concerning this kind of expenditure.
Instances where theft of county funds may occur
Two items that can lead to loss of funds are unsupported expenditure and non-surrender of imprests.
For unsupported expenditure, a county department may fail to provide paperwork to show that they actually ordered and received goods and services even though there is an indication they spent money on the goods and services.
The unsupported expenditure may also result from the county reporting an expenditure but fail to provide supporting documents for the expenditure.
For non-surrender of imprests, county officials may receive cash advances (imprests) to perform their duties, such as attend meetings, but fail to return the money or provide documentation to show how they used the money.
Article 154 of the Public Finance Management Act empowers the county accounting officers to grant cash advances to public officers employed by the county. If the public officers fail to account for the money, they are liable to pay the debt with interest.
Errors and Fraud
Also, when reporting about ‘massive looting’ in the counties, the media should take a keen interest to distinguish between errors and fraud.
Errors may be due to negligence or innocence from those tasked with preparing the accounts. Fraud is the intention to gain from manipulating the accounts. Errors may be out of omission or commission.
Fraud arises from misstatements arising from fraudulent financial reporting or due to misappropriation of funds. Fraud can also present itself in the form of falsification or alteration of financial records.
Accounting errors are not necessarily a sign of theft. Audit and budget implementation documents report about them extensively. Fraud, in itself, is a sign of something sinister that may signify theft.
Exaggerated media reports
Hence, an article headline screaming “massive theft” or “looting’ in the counties, most times, lacks the evidence to back it. That is why the media must be extra careful on how they report budget findings. This will enable the public to address the findings appropriately on the basis of facts.
It is false to indicate that the counties are always on a looting spree. Therefore, most claims about “massive looting” are just exaggerated and/or misreported claims by the media.
Yet again, this does not mean that there is no theft happening in the counties. Rather, it is important for the media to know when there is poor forecasting, budget indiscipline, poor accounting, error and fraud in county expenditure to avoid giving the public false information.