How to end the pending bills mess

If you asked me to name the new frontier of corruption and dodgy dealings in the public sector, I would tell you that it is in the processing and payment of pending bills at both the county and national government level.

Consider the following: Sometime back, the Treasury tasked the Office of the Auditor- General to conduct a special audit on the stock of pending bills at the county level.

The special audit revealed the following. Out of pending bills worth a total of Sh88.9 billion that were presented for special audit by the Auditor-General, Sh51 billion was found to be payable while bills amounting to Sh37.2 billion lacked sufficient documentation to support services rendered or work done and therefore were not recommended for payment.

The findings of the special audit by the Auditor-General are what formed the basis on which the government started releasing payments to county governments to allow them settle these pending claims.

As at January 8, the amount of eligible pending bills paid was Sh30.3 billion. A whopping Sh20.9 billion remains outstanding. What are pending bills and how to they arise in the first place? It is a case where a supplier provides goods and services to the government but is not paid in that specific financial year and not accommodated in subsequent budgets.

A good number of these pending bills come about as a result of abandoned projects while others are the result of disruption in expenditure programmes. In sound accounting systems, pending bills should not arise at all. Why should pending bills arise if the goods and services in question were properly budgeted for?

If you prove that the goods and services were in your budget, were procedurally procured, were received, and since the Treasury will have okayed the Exchequer to pay, why should the payments be withheld?

Is it not the height of mischief that we are being told that county governments have accumulated a whopping Sh37 billion in fake bills? Clearly, poor accounting systems in the public sector are at the heart of this perennial problem.

With vouchers and certificates kept in government offices for inordinately long periods, the temptation to generate fake claims is very high indeed.

And, it seems that with the government’s budget shrinking by the day and with opportunities for lucrative contracts drying up at a fast rate, well -connected suppliers and contractors are busy devising clever schemes to siphon billions from public coffers by sneaking in dodgy claims.

Chasing of pending bills has become a roaring business at county governments.

And it is a business with an army of agents and brokers.

Today, being a friend of a governor or a member of his kitchen cabinet can be quite lucrative.

You immediately become a card carrying member of the network of brokers and influence peddlers who make a living out of facilitating the release of payments for pending bills.

Worse, the process of verifying the authenticity of these bills is itself opaque even if it is done by the Auditor-General.

Even after a special audit has been conducted, new pending bill keep popping up.

Clearly, the long-term solution is for the government to transit from the antiquated cash-based accounting and to adopt modern double entry accrual accounting.

With a modern system, it is possible at the touch of a button to generate controls and checks, including creditors’ ledgers and accounting records, making it possible to do away with the perennial problem of pending bills.

When the government accumulates huge pending bills, the impact on the macro economy is grave.

For instance, delays in releasing payments to public sector contractors often results in big non-performing loans in the banking system.

Mounting pending bills in the public sector are a big drag on economic growth.

Pending bills decimate the SME sector. The bills are the reason why indigenous road contractors are a dying lot.