Senators now want Auditor General Nancy Gathungu to audit external revenue collection firms that counties have contracted to support their efforts to raise own-source revenues.
Senators on the Committee on County Public Investment and Special Funds raised concerns that counties had not accurately disclosed the revenues.
At a meeting with Gathungu, senators claimed failure to audit the revenue service providers had opened a loophole for the firms to siphon billions of shillings from devolved units.
The Public Finance Management Act, 2012 needs to be amended to give Gathungu the powers to audit the firms, said Narok’s Ledama ole Kina (pictured).
‘Billions lost’
By not auditing the companies, he argued, counties has lost billions as the Auditor General has no powers to audit what they collect to ascertain that whatever they declare as money collected is indeed the case.
Said Kina: “We are going to push for amendment of the law to give the Auditor General powers to audit the systems of the revenue service providers. This will ensure there is discipline and we are able to follow the money trail from the service provider to the county and later to the County Revenue Fund.”
He added that though the law does not allow the service providers to deduct their commission from the revenue they collect at the source, they still end up doing that.
Contract commissions
Auditing the firms will strengthen the process of revenue collection in county governments, said Eddy Oketch (Migori).
Firms signed agreements with counties allowing them to retain a certain percentage of the revenue they collect and trying to reverse that could lead to a long legal battle, warned Tom Ojienda (Kisumu).
Their comments came after Gathungu lamented that counties continued to lose revenues through contracts with the service firms.
Gathungu told the committee, chaired by Godfrey Osotsi (Vihiga) that since the advent of the devolution there has been a proliferation of briefcase revenue collection firms that took advantage of the system of government to siphon billions of shillings from counties.
She said: “My advice is that we have to go back to the PFM Act to ask the Treasury to intervene to stop this.”
No due diligence
Although the law gives the National Treasury powers to prescribe revenue collection systems to be used by counties, Gathungu said, governors still contract service companies without carrying out due diligence, and the firms are contracted by county governments at different rates.
She said: “The rates should be standardised so that the commission charged by the firms does not vary from one county to the other. The lack of standard rates is why counties are losing a lot of revenue.”
The new push by senators come after the Ethics and Anti-Corruption Commission (EACC) in October last year raised concerns that several counties were using the collection system to divert revenue.
Among the counties she named were Nairobi, Narok, Kajiado, Machakos and Kilifi.
The EACC claimed the counties were colluding with service providers to divert money, resulting in losses of billions of shillings.
