EXECUTIVE SUMMARY

The following Executive summary is a highly summarized report of the Taskforce assignment. It should be read as an abridged version of the main report.

Background

respond to the following Terms of Reference:

  1. Review of the existing financial and other internal control systems, processes and procedures of budget management and IFMIS operation;
  2. Audit of Own Source Revenue collection and utilisation, integrity and efficiency of the County Government activities and supply chains, imprest account, retention accounts, pending bills, project management committee funds, payroll and staff establishment;
  3. Assess and recommend reforms on governance structures and systems for the purposes of enhancement of efficient and accountable service delivery;
  4. Advise the county on sector-based growth and development;
  5. Advise on automation of county operations and E-governance.

Relevant Constitutional and Regulations underpinning the Report

The provisions of Chapter 12 of the Constitution are given effect by the Public Finance Management Act, 2012, the Public Finance Management Act (Regulations) 2015, the Public Procurement and Asset Disposal Act of 2015 and its regulations, the Controller of Budget Act 2016, and the Commission on Revenue Allocation Act, 2011. The PFMA Act, 2012 provides for the principles of public finance management, establishing systems and structures to ensure openness, accountability, public participation, equitable sharing of revenue and the tax burden, prudent and responsible use of public resources, responsible financial management and clear fiscal reporting.

The review of the financial management systems in Siaya County against the legislative and regulatory provisions revealed system weaknesses, gaps, breaches of controls, lapses and irregularities as outlined below:

Planning and Budgeting

The process of budget making as regulated is largely adhered to by Siaya County. However, challenges occasioned by a poor working relationship between the Executive and the Assembly have sometimes led to the Assembly taking an inordinately long time to pass the budgets. The County has been in breach of deadlines as provided in the regulations and leading to disruption of County operations.

While the principle of budgeting is that the executive prepares and presents its budget proposals to the Assembly, the law allows the Assembly to propose adjustments to the Executive’s budget proposals within the 1% limit set in the PMFA Regulations 2015. However, the review revealed a practice in which the Assembly discusses the budget and amends it without reference to the Executive. The Assembly in making the changes to the budget proposals does so in a manner that overhauls it. It appears that the Assembly has usurped the Executive’s role in the budget making process. This can be considered as a material breach of the principle of separation of powers and compromises the oversight function of the Assembly.

Section 53(7) of the Public Procurement and Asset Disposal Act (PPADA), 2015 requires that multi-year procurement plans shall be prepared in a format set out in the regulation and shall be consistent with the Medium Term Budget Expenditure Frameworks for project that go beyond one year. The budgeting for multi-year projects by CGS is weak. There is no common understanding and interpretation of what constitutes a multi-year project as provided in the law. Projects that are implementable within a year are caused to stretch over several financial years because of inadequate budget provision within the specific year without provision in outer years to ensure completion. This has increased the number of incomplete and stalled projects and loss of impact for the expenditure made as detailed in Annex1.

Over the last three financial years (FY 2019/20, 2020/21 and 2021/22) CGS operated a financial deficit for the amount of approximately KSh. 1.125 billion for each year respectively. In each subsequent year, the County has attempted to plug the deficit through the reduction or elimination of allocations to some projects or the reduction of allocation for recurrent expenditure in order to balance the budget. However, these reductions inevitably lead to the creation of pending bills and therefore exacerbating the cycle of financial deficit. The existence of a financial deficit, became evident upon the enforcement of payment of pending bills as a first charge by the Controller of Budget. This requirement caused the payment of pending bills outside budget provisions.

The Supply Chain Management Secretariat to support the Director of Supply Chain Management in performing functions of the office has not been established. The responsibility of the director is immense considering the sheer number of projects for which professional opinion is required. An independent professional opinion requires thorough review of tender documents. Currently, the Director depends on trust as the respective departmental procurement offices prepare the opinion for his signature which creates a window for fraud. In addition, the directorate does not have the technical capacity to upload procurement plans into IFMIS due to lack of training. This is done by external technical experts. Read More