Shocker for suppliers as Ouko team declares Sh270bn bills ineligible

Thousands of businesses have been dealt a devastating blow after the National Treasury’s pending bills verification committee declared nearly half of the Sh665 billion pending bills ineligible for payment.  

The move could throw many businesses into financial turmoil; many already are suffering from late payment.

Treasury Principal Secretary Chris Kiptoo said that many of the bills are irregular and therefore would not be paid.

The PS said the verification team headed by former Auditor General Edward Ouko has cleared only Sh230 billion as “legitimate and payable”.

Among the approved bills are Sh80 billion for infrastructure projects, some of which are already being paid, while the rest are for supplies to government agencies.

The remaining Sh270 billion, deemed irregular or unsupported, leaves suppliers scrambling to defend their invoices or absorb huge losses.

“If the audit team declares a bill unpayable, the burden of proof shifts to the claimant,” Kiptoo told the National Assembly Finance Committee, emphasising the Treasury’s hard-line stance intended to curb fraud.

The team, the PS disclosed, has reviewed 75 per cent of the pending bills accumulated by national Executive, Parliament, the Judiciary, commissions, state corporations and counties. 

The approved and rejected payments would be made public once the review is complete, the PS said.

Treasury has pledged to swiftly settle the Sh230 billion, some by June and others after the current budget process.

But in what could dash the hopes of the already-strained suppliers, the government said it would not pay any bill that is not backed by proper documentation.

While the Treasury’s hard-line stance aims to root out fraud, the collateral damage is immense.

Many suppliers who submitted documents, only to have them lost or dismissed as disorganised, now face financial ruin, with legal battles looming as a last resort.

The amount of both approved and ineligible bills could increase since Ouko’s team, at the time of its creation, was reviewing bills amounting to Sh665 billion, both current and historical (from June 2005 to June 2022).

Behind some figures are stories of despair, as some suppliers’ have seen their assets auctioned by financial institutions.

Some suicide cases have been reported among suppliers who have fallen into depression.

The suppliers warn that payment delays have already shuttered their businesses and destroyed livelihoods.

A supplier who has been queuing for ages at the National Youth Service said they hope the Ouko team has thoroughly vetted the bills.

She called the audit a “double-edged sword” that can either restore their livelihoods or sink some of them deeper into the mire.

“Even the ‘verified’ bills face delays,” the supplier, who sought anonymity, said, “I represent a group that has sent supplies to NYS; their families are starving, yet we have learnt some debts have been approved.”

Besides missing out on payments, those with ineligible bills could be subjected to investigations for possible graft.

Part of the Ouko team’s mandate was to identify cases where there may have been corrupt, fraudulent and false claims.

Senator Richard Onyonka earlier said the probes would be necessary, re-asserting that a good number of pending bills are fake.

“Pending bills are the biggest scam,” the MP said.

What’s worse is that even as the review concludes, the debts are continuing to pile up at ministries where space for spending is tight.

A new report by Auditor General Nancy Gathungu has red-flagged bills totalling Sh194 billion, which remained unpaid as of November 2024.

“Failure to settle the bills has an effect of withholding circulation of cash in the economy and affects the smooth operations of suppliers and MSMEs,” the Auditor General said.

At the time of the review, President William Ruto’s office was amongst state entities that held the biggest bills at Sh14 billion – largely dating from his predecessor, President Uhuru Kenyatta’s Nairobi Metropolitan Services projects.

The Ministry of Defence had the highest debt for 2024 at Sh22.9 billion, which increased by Sh13 billion compared with the 2023 amount.

Bills of Sh22.6 billion had been submitted to the National Treasury, representing an increase of Sh15 billion in less than a year.

The Agriculture department was at fourth place with Sh13.6 billion in unpaid bills,

The National Police Service owed suppliers and contractors Sh9.9 billion during the audit period, while Sh5.2 billion was owed by the Correctional Services Department.

Records show a significant drop in the Medical Services department’s pending bills from Sh41 billion to Sh4.9 billion.

The Teachers Service Commission is yet to pay about Sh3.3 billion.

Gathungu warned that failure to pay the debts within timelines affects revenue collection due from Value Added Tax and Withholding Tax.

“All these factors viewed holistically call for the Executive to put in place measures to deter the escalation of pending bills and to enforce discipline in public sector entities,” she said.

Budget experts say pending bills put pressure on scarce resources, with some attracting penalties and interest, putting more strain on available resources.