Treasury has rejected Sh200 billion worth of pending bills claims against the national government, saying the amount was fictitious.
Treasury Cabinet Secretary John Mbadi said the amount was flagged following preliminary findings by a committee formed to establish veracity of the claims.
Pending bills by the national government currently stand at Sh664.7 billion from claims made by 114,376 contractors. Nearly 30 percent of these claims will not be paid on suspicion that they are made up.
“From the indication I gather that it could be in the region of Sh400 billion plus billion, meaning that Sh200 billion could have been fictitious. But we are waiting for the final report to be submitted by the committee,” Mr Mbadi said in a briefing to the Senate on Wednesday.
The revelations lift the lid on collusions between contractors and rogue government officials to make a kill at the expense of genuine contractors who are forced to endure a cash crunch caused by prolonged delays in getting paid.
Accumulation of the pending bills hit the liquidity of the private sector, hurting its efforts to pay salaries on time, forcing firms to scale down employee numbers before leading to the closure of some businesses.
Besides national governments, counties and their entities hold unpaid claims valued at Sh181.98 billion as of June this year. Mr Mbadi did not disclose the chunk of this amount which has been flagged as fictitious.
The stock of pending bills has steadily risen over the years despite numerous circulars and directives by the National Treasury requiring entities at the national and county governments to prioritise settling the arrears.
Besides circulars and threats to reject the budget proposals of agencies that fail to pay pending bills, the National Treasury is betting on migration to an accrual accounting system from the current cash basis.
The accrual accounting method makes it mandatory for State bodies to capture payments and expenses when earned or incurred, or when a transaction occurs. With the cash basis of accounting, revenue or expenses are recorded during the period in which actual cash is received or paid, a feature that has contributed to the build-up in pending bills.
The National Treasury reckons that migrating to accrual accounting will require pending bills at each reporting period to be recognised in the balance sheet. This will in turn prompt subsequent tracking of payments against the bills by the accounting officers on long-outstanding claims.
The pending bills verification committee was formed in November last year and tasked it with cleaning the list of the unpaid bills that have accrued between 2005 and 2022.
Priority in paying the verified claims will be given to older claims over the new ones and bills that attract interest and penalties.
