Treasury tightens grip on counties statutory deductions

The National Treasury is set to implement an integrated financial system that will deduct statutory payments for county government employees at source to curb irregular payments.

Treasury Cabinet Secretary John Mbadi told the Senate County Public Accounts Committee on Thursday that the dual-function system—combining approvals and payments—will be operational by the end of this month.

The move comes amid mounting concerns over illegal and irregular payments in counties, as well as failure to remit deductions to statutory bodies like the Kenya Revenue Authority, Saccos and pension schemes.

“We will start deducting all these statutory payments at source,” Mbadi said.

“If you give me my salary, it should be paid in full. What counties have been doing is paying only part of the salary and failing to remit statutory deductions. That must stop.”

The CS was responding to concerns from senators over widespread financial mismanagement at the county level, including cases where counties requisition funds to pay a specific individual or supplier but divert the money elsewhere.

Committee chair Moses Kajwang’ decried the practice as unacceptable, likening it to fraudulent practices in the insurance sector.

“In insurance, if a claim is approved, you cannot pay another claimant. But that is what is happening in county governments. It is completely unacceptable,” he said.

“We must stop making counties places where people enrich themselves. They should be spaces for public service, not self-service.”

Senators Samson Cherargei (Nandi) and Fatuma Dullo (Isiolo) said redirecting approved payments is rampant and has led to massive pending bills.

“Some counties don’t even submit their expenditure reports. I wonder whether the new system will be able to capture such cases,” Cherargei said.

Mbadi said Treasury is taking the concerns seriously.

“This is a twin system of approval and payment, meaning whatever is approved is what gets paid. This will prevent voiding—where you requisition to pay X but end up paying Y,” he said.

Reports from oversight agencies have indicated that counties owe more than Sh200 billion to statutory bodies, including KRA, NSSF, Saccos and pension schemes.

The failure to remit deductions has raised concerns about the welfare of county employees, particularly in retirement.

“These people who approve and pay for things that haven’t been authorised are deliberately violating financial procedures. It’s a blatant abuse,” Mbadi said.

He said he had rejected a request by county executives to postpone the rollout of the system for at least a year, insisting that implementation must proceed without delay.

“I was told they need a year to prepare, but I refused. We must implement it now. The biggest culprits in financial malpractice are county executives," the CS said.

We have cases of parallel payrolls—some manual, some automated—and we’re even hearing of ghost workers,” the CS said.

The system, once rolled out, is expected to enhance accountability, enforce compliance with statutory remittances and curb the financial indiscipline that continues to plague many county governments.

INSTANT ANALYSIS

A report by the Senate County Public Accounts Committee shows that the devolved units are not remitting statutory deductions to various entities, including retirement schemes such as Lapfund and Laptrust, loan repayment to Saccos, insurance policy deductions and the County Pension Fund. The committee observed that no remittances of employees’ deductions on time leads to nugatory expenditure on the part of the county executive in the form of penalties and interest.