Pending bills totalling Sh108.13 billion were not settled but instead were carried forward to the 2021/2022 financial years, a new report says.

The report by Auditor General Nancy Gathungu states that the pending bills balance comprises Sh72.3 billion and Sh35.82 billion reported in 42 ministries, department and agencies (MDAs) and four donor funded projects respectively.

She said the pending bills have continued to put pressure on the scarce resources with some bills attracting penalties thereby putting more strain on the available resources.

The failure to settle the bills comes despite the National Treasury circulars requiring that payment of the pending bills form the first charge on the budget and section 74(4) of the Public Finance Management Act 202012 which states that an accounting officer engages in proper conduct in relation to a national government entity.

“The failure to settle bills in the year to which they relate is mainly attributed to inadequate budgets as a result of starting new projects or activities before completion of projects and activities,” said Gathungu.

Unpaid commitments

The closing balance of pending bills on a previous year is not taken into consideration during the formulation of the budget for the subsequent year. 

According to the report this means that the subsequent year’s budget is unlikely to be sufficient to settle unpaid commitments relating to operations of the previous year and at the same time fund programmes for a current year. 

“It is also an indication of accounting officers committing funds which are not available,” it adds. In the report tabled in the National assembly last week, Gathungu regretted that the failure to settle the bills would make suppliers of goods and service to public entities face unwarranted financial charges from their financiers as they supply goods and service on credit to the government without proper arrangements or agreements with the government.

 She also regretted that this has an effect of withholding circulation of cash in the economy and affected the smooth operations of suppliers and micro, small and medium enterprises (MSMEs).

Further, she noted that the move affects revenue collection due from Value Added Tax (VAT) and withholding tax.

“All these factors viewed holistically call for the executive to put in place strict measures to minimise the occurrence of pending bills,” said Gathungu.

Among the entities with over Sh1 billion reported unpaid bills as at June 30 last year include Ministry of Health with Sh41.2billion, State department for Crop Development and Agricultural Research Sh10.8billion, Executive Office of the President Sh5.3 billion, State department for Regional and Northern Corridor Development Sh2.4 billion, Independent Electoral and Boundaries Commission Sh2.3 billion, State department for Interior Sh1.98 billion as well as Judiciary Sh1.7billion.

Public works

Others with huge bills include state department for Broadcasting and Telecommunications Sh873.2 million, State department for Public Works Sh830 .4 million, Ministry of Environment and Forestry Sh754.3 million, National Lands Commission Sh588.9 million, State department for Devolution Sh385.8 million, Parliamentary Joint Services Sh357 million, State Department for Livestock Sh341.5 million,  and Ministry of Foreign Affairs Sh264.9 million among others.