The National Treasury will from the end of this month start deducting statutory payments for county government employees directly at source, in a bid to end years of failure by devolved units to remit the dues.

Treasury Cabinet Secretary John Mbadi told the Senate County Public Accounts Committee that the new arrangement will use the integrated financial management system to channel deductions to bodies such as the Kenya Revenue Authority, SACCOs and pension schemes before the funds reach counties.

Mbadi said the system, which will also apply to Ministries, Departments and Agencies, is meant to enforce compliance with statutory remittances, improve accountability and stop financial malpractice.

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

The CS disclosed that county executives had requested a one-year postponement of the rollout, but he turned it down.
“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. We will start deducting all these statutory payments at source,” he stated.

He accused some counties of operating “parallel payrolls, some manual, some automated” and said there were even reports of ghost workers. Mbadi also criticised the practice of paying employees partially without remitting deductions.

“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,” he said.

Committee chair Homa Bay Senator Moses Kajwang’ likened the diversion of approved payments to fraud 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, adding: “We must stop making counties places where people go to enrich themselves. They should be spaces for public service, not self-service.”

Senators Fatuma Dullo (Isiolo) and Samson Cherargei (Nandi) voiced concern over the widespread “voiding” of payments, where approved funds are redirected to other purposes, further increasing 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 assured the committee that the Treasury had addressed this.
“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 explained.

Official reports show counties owe statutory bodies, including KRA, NSSF, SACCOs and pension schemes, more than Sh200 billion.

The Auditor General has linked these arrears to poor revenue collection, delayed Treasury disbursements, political interference, diversion of funds, payment of other pending bills, and refusal by successive county administrations to settle obligations.

The law bars accounting officers from beginning procurement without confirming sufficient funds are available in the approved budget.

A Senate report tabled in 2023 revealed that non-remittance of pension deductions has left retirees waiting months or years for their benefits.

The Controller of Budget has also noted that delays in supplementary budget approvals and weak revenue performance have worsened the problem.