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"id": 1378547,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1378547/?format=api",
"text_counter": 203,
"type": "speech",
"speaker_name": "Nominated, ODM",
"speaker_title": "Hon. John Mbadi",
"speaker": {
"id": 110,
"legal_name": "John Mbadi Ng'ong'o",
"slug": "john-mbadi"
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"content": "It is imperative to note that pending bills are not viewed as public debts, I mentioned that, yet there are sums owed to private individuals and they should be treated as such. The currently witnessed charade of forming task forces to verify bills will come to note if the bills continue to accrue. These are bills held by Ministries, Departments and Agencies (MDAs) and ministry officials had processed them. In addition to the measures cited above, the Committee recommends that the National Treasury should only rationalise budgets that have not been committed. When doing supplementary budgets, let us rationalise money that has not been committed. Let us not go to departments and start slashing their budgets in the middle of the year or towards the close of a financial year. At this time, they have already committed funds hence the piling of pending bills. Further, borrowing by the National Treasury to plug budget deficit should be done uniformly across the financial year in order to avoid the end-year rush of disbursements and procurements to beat the deadline. It is towards the end of the financial year that the Government borrows a lot of money and yet, they had already factored that in the Budget. In the process, most MDAs procure in June. Therefore, you cross over the year with pending bills. The seventh cross-cutting issue is accrual accounting versus cash basis of accounting. The national Government has continued to operate under the primitive and outdated cash basis of accounting that poses various challenges in maintaining financial records. Accrual accounting provides a more accurate view of an agency’s financial help, especially by factoring accounts’ receivables and payables. This will clear the long persistent matter of pending bills and allow agencies to complete programmes beyond the end of a financial year. In the current practice, agencies see a rush to expend funds at the end of a financial year. This will invariably need the National Treasury to make realistic budgetary projections as has already been observed above. The Committee recommends that the National Treasury expedite the full roll-out of the accrual basis of accounting by 30th June 2024. With the cash basis of accounting that we have today, even the pending bills are not in the body of the financial statements. They are in some notes because they do not form part of our accounts. That kind of accounting is distorting the financial health of our nation. If we were to treat Kenya as a company or a going entity, we would be under-reporting the exact or true financial health position of our country. The eighth cross-cutting issue is the interest and commitment fees charged on undrawn loans. The Committee observed certain instances where loans have been negotiated, signed, and committed, and it is the implementing agency which is yet to draw down. In some cases, you find that the loan has been negotiated, a contract has been signed, commitments made and yet, even the land where the project is supposed to be implemented, has not been procured or acquired. This is more prevalent with cases of dam construction in this country. I do not want to repeat the issue of Arror and Kimwarer because everybody knows about it. In these instances, interest accrued pronto while the responsible persons have not even obtained the utility of the programmes. This amounts to wasteful expenditure. Funds cited as commitment fees for the year under review amounted to Ksh2,063,104,537 from 20 loan agreements worth Ksh379,943,389,070 that had no draw-downs. Related to these were various donor-funded projects with undrawn balances that the implementing agencies had no capacity to absorb and, hence, forgone development funds. Worse still, the Government enters into contracts that prescribe punitive interest rates for delayed payments; some, incredibly, three per cent above the Central Bank of Kenya (CBK) base lending rate. Sometimes, I wonder whether the Office of the Attorney-General is involved when we are negotiating or signing contracts. Some of the contracts are signed with punitive interest rates, some as crazy as three per cent above CBK rates! By practice, we do not pay The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor"
}