7.1 Kajiado County audit report excerpts, 2013

September 2013, the following MLG/1333 directives were disobeyed in Kajiado (see also box 7.1):

• The fixed assets register for audit verification was not updated. It contained neither the assets taken over from the defunct local authority nor new assets acquired during the period under review. • The fixed asset register provided for audit did not have asset values.

Consultancies suggest that such asset registers did not exist at all, so auditors may have seen fragments of asset lists instead of a register. • The defunct local authority had 54 parcels of land that had no ownership documents. The source of information about the land sizes and values was unclear. • Under biological assets, 26 cattle were accounted, despite being subsequently disposed of from the demonstration farm. • Several buildings were refurbished for use by the governor and his deputy as residences, as well as an office block for the county public services board.

However, the main risk was that over K Sh 45 million was used for refurbishments without establishing the ownership status of those buildings, and without their being formally transferred to the county.

BOX 7.1

Kajiado County audit report excerpts, 2013

5.1 Failure to hand over by the County Council to the Kajiado County Government Ministry of Local Government Circular Ref. no. MLG/1333/TY/52 of 18 February 2013 directed the Clerks as the Chief Executive Officers of the Local Authorities to ensure there is proper handing over to the incoming County Government. As part of the handing over, [outgoing] Clerks were expected to ensure that statements of Assets and Liabilities were prepared by 28 February 2013. However, handing over of resources to the new County Government by the former Olkejuado County Council was to be done with the coordination of the Transition Authority. No reason was provided why the handing over was not done contrary to the above circular. Therefore, it is not possible to determine the amount of assets and liabilities taken over by the County Government of Kajiado.

Recommendation A handing over report should be prepared by the Transition Authority so that what was transferred from the defunct Local Authority to the County Government can be determined and properly accounted for.

5.2 Bank Accounts (a) Closure of Bank Accounts The Transition Authority issued letters reference no. TA/7/5/ (20) dated 12 February 2013 (TA 2013b) and MOF/IFMIS/41 dated 7 March 2013 (TA 2013a), which instructed all local authorities to freeze all their bank accounts except for the receiving bank account. However, the defunct Olkejuado County Council did not close its bank accounts by 28 February 2013 but continued operating them up to 26 August 2013. The date of accounts closure and amounts transferred from three (3) accounts held by defunct local authority to County Revenue Collection Account was not provided.

Recommendation Explanation on failure to adhere to requirements of the directive by Transitional Authority and details on

continued

Box 7.1, continued

closure and transfer of money on three (3) accounts should be provided.

5.3 Debtors Section 149 (2) (b) of the Public Finance Management Act, 2012 requires that an accounting officer shall, in respect of the entity concerned ensure that the entity keeps financial and accounting records that comply with the Act. The statement of assets and liabilities by the defunct Olkejuado County Council showed that debtors amounted to K Sh 319,886,135. However, no analysis [or] schedule was provided to show the composition of the above figure and also the age of the debts.

Recommendation The County Government should provide a proper debtor analysis [or] schedule to indicate the composition of the debtors.

5.4 Creditors [and/or] Suppliers and Other Liabilities Balances Section 149 (2) (b) of the Public Finance Management Act, 2012 requires that an accounting officer shall, in respect of the entity concerned, ensure that the entity keeps financial and accounting records that comply with the Act. The statement of assets and liabilities by the defunct Olkejuado County Council showed that creditors amounted to K Sh 238,254,956. However, the council did not maintain creditors ledgers.

Recommendation The County Government should ensure that proper creditors’ ledgers are maintained to enable production of reliable creditors schedule and balances.

5.5 Motor Vehicles, Office Equipment, and Other Assets Section 149(2) (b) of the Public Finance Management Act, 2012 requires that an accounting officer shall, in respect of the entity concerned, ensure that the entity keeps financial and accounting records that Comply with the Act. The respective County Government entity should have adequate systems and processes in place including an asset register that is current and accurate. Ownership documents for 169 parcels of land out of 171 belonging to the defunct Olkejuado County Council were not made available for audit verification. Further, ownership documents to authenticate that the assets listed existed and were properly owned by the council were not provided.

Recommendation The County Government should initiate the process of obtaining title deeds to secure the properties within its jurisdiction in order to safeguard the County assets.

Source: OAG 2013.

Informal takeover and use of assets

The county government, without formal takeover, accounts, and valuation, from its inauguration started to use and develop assets, especially those that formed the basis of local services to ensure uninterrupted provision of services. This was a very pragmatic and important approach. Other assets unrelated to services (for example, land) remained unaccounted, some unattended, and therefore, many may be lost or encroached. The OAG (2014) report further recommended that the Kajiado County government should coordinate with the TA on the asset and liability takeover. However, the county government apparently was not in a position to commence takeover in a unilateral action. Furthermore, the TA did not coordinate or guide counties for formal takeover of assets and liabilities; the TA rather aimed to list, verify, validate, and valuate assets before handover.

Kajiado county has been using and developing most of the inherited assets since March 2013. Despite the unresolved issues just discussed and the lack of handover and takeover, the county government has taken a pragmatic approach in using and developing the assets. The Kenya Constitution 2010 and the Urban Areas and Cities Act 2011 (UAC 2011) assign local service functions to counties and assets that can be assumed to be possessed and managed under the respective county departments (such as the Asset Management Directorate in NCC, explained in chapter 6).

Under this governance framework, the Kajiado County government has created four companies to provide water in the different regions of the county: (1) Notresh Water and Sewerage Company is co-owned by Makueni and Machakos counties and serves the south region of Kajiado County; (2) Oldonyorok Water Sewerage Company (WSC) serves the Namanga region; (3) Olkejuado WSC serves the Central region; and (4) Ololeisa WSC serves the northern region. For solid waste management, the county has taken over dumpsites in the towns of Kitengela, Loitokitok, and Manga, while Kiserian, Ngong, and Rongai share a dumpsite in Ngong. Each town has a lorry that transports garbage to the dumpsite. Table 7.3 summarizes specific service provision arrangements.

Asset takeover by the power of law, 2017

Gazette Notice no. 858 (Notice 858, 2017) transferred the assets and liabilities of the defunct local governments by the power of the law on January 27, 2017, and set a framework for validation, verification, and valuation of the assets by the counties via County Asset and Liability Committees (CALCs) under guidance and control by the Intergovernmental Relations Technical Committee (IGRTC). Notice no. 2701 (Notice 2701, 2017) of March 24, 2017, reconfirms and revokes the Notice 858 rules that the unaudited inventories of assets and liabilities developed by the TA, which closed in March 2016, serve as a basis and reference for the verification, validation, and valuation of the assets under CALC’s management. The results presented below are from the Kajiado CALC report 2017 and cross-checked with the IGRTC summary report (IGRTC 2018).

According to IGRTC and TA files, handed over to counties in 2017, Kajiado County inherited assets worth K Sh 200 million and liabilities worth K Sh 310 million from the Olkejuado County Council and the Kajiado Town Council in fiscal 2013/14 (measured by TA as a 2013 estimated value—a quite symbolic number in 2017). Due to poor recordkeeping, the auditor general was unable to establish the true verified value of the inherited assets and liabilities of Kajiado County as of the end of 2013. Therefore, proper recordkeeping of assets and liabilities remained a key recommendation (box 7.1). The estimated values of inherited assets reflect largely the value of current assets as of 2013, since the TA did not estimate the value of the most valuable fixed assets such as land, buildings, and infrastructure networks. Of these, the most problematic element is the value of land because of presumed high volume, but also because this value has substantially appreciated between 2013 and 2017. Thus, the verification and valuation of land has remained among the most urgent tasks the county faces even to date.

Progress by the end of 2019

Given the numerous reports from OAG on lack of proper handover of assets and liabilities from the defunct local authorities, Kajiado County government