8.8 Kakamega County summary of inherited liabilities, 2013 and 2017

TABLE 8.8 Kakamega County summary of inherited liabilities, 2013 and 2017

K Sh (millions)

BANK LOANS EMOLUMENTS

As of 2013, per TA report As of 2017, per CALC report 0.0

0.0

Net value as of 2017 after settlements 0.0 18.6

18.6

2.8

Source: Kakamega CALC 2017. Note: CALC = County Asset and Liability Committee; TA = Transition Authority. STATUTORY DEDUCTIONS

OTHER LIABILITIES TOTAL

99.0 1,311.0 1,428.6

99.0 2,953.2 3,070.8

64.5 2,953.2 3,020.5

Lack of specification or comments on the enormous other liabilities suggests that the team either had run out of time or lacked the professional capacity to verify these claims in any manner. Worth noting, however, is that the same team increased the volume of other overdue liabilities by a huge amount of K Sh 1.6 billion against TA estimates without making any comment on the claimants’ names or statuses. Thus, the validity of this additional K Sh 1.6 billion needs verification. The team has implicitly approved validity by including this huge additional amount in the CALC list. Another important issue about the status of other liabilities is why and how the commercial creditors have remained silent and failed to take the cases to court. Hidden settlements and maybe land transactions or other compensation could be left to uncover.

There could be one more reason of such increase of identified liabilities, namely that debt repayments budgeted in 2013/14 for K Sh 1.7 billion might have happened before devolution or immediately after devolution (between March and June 2014), but the TA team did not perceive them or link them to inherited liabilities. Or the TA team noticed such settlements and reduced the volume of other liabilities accordingly (to K Sh 1.4 billion). Another reason could be that the CALC team misinterpreted these liabilities based on missing records and failed to find evidence of repayment of K Sh 1.6 billion liabilities. The amount seems to coincide with the difference estimated by TA and CALC on inherited liabilities vis-à-vis other creditors. The CALC or the Finance Department of Kakamega County should scrutinize the other liabilities closely because of their extremely large volume; workout of these liabilities requires specific information on creditors and proof of claims.

CALC teams verified the bulk of due emoluments and questioned or deemed unverified approximately K Sh 3 million unpaid emoluments, and then the county paid out all the verified emoluments (K Sh 15.8 million) to former staff of Kakamega, Mumias, and Mumias Butere councils. The CALC team did not question unpaid statutory deductions (K Sh 99 million), except a symbolic amount to National Social Security Fund, and then the county paid about a third of dues (K Sh 34.6 million), largely tax arrears, to Kenya Revenue Authority.

Challenges Kakamega CALC faced during verification and validation of inherited assets and liabilities in 2017

The CALC teams noted several challenges while undertaking asset verification and validation work. The main reported challenges include the following:

• Notice no. 2701 of March 24, 2017, required the respective CALCs to submit their reports by July 15, 2017, but the Kakamega CALC commenced the work

quite late in May. The verification work was tedious because the huge number of assets required physical verification and validation and the geographic area to be covered was expansive. • A lack of handover and takeover reports, the closure of defunct local authorities, and the closure of TA left CALC without guidance for undertaking the validation. • Logistical constraints related to covering the vast county given limited time and shortage of transport or vehicles was another drawback. Only one vehicle was available for CALC teams, while at least three vehicles were needed. • The county executive committee approved a budget of K Sh 9.8 million to facilitate the mandate of the committee. However, funds to cover both the logistical and living needs of the committee members were not released on time, forcing the committee to adjourn for weeks. Further, the funds were not consistent with the required workload and labor. • There was a lot of hostility from some members of the community. Some may have encroached public county land. Pushback came especially from Elungito,

Mautuma Scheme through Mukhuyu, Matunda, Nzoia Scheme, and Serekeya

Scheme to Msalaba Yellow.

LESSONS LEARNED

Kakamega County acknowledges the importance of having an asset management unit within the Finance Department. The Finance Department has hired a consulting firm for asset tagging. This exercise is built on the CALC report. The county is in the process of updating the valuation roll, likely to take place in phases starting from urban areas and moving toward rural areas. The valuation roll will provide a reliable base for property taxation and in the meantime will provide Kakamega with a reliable inventory of county land assets and their corresponding market values. Kakamega County also plans to set up an Asset Management Directorate under the Finance Department soon. Asset management is getting on track in Kakamega County.

Through the Finance Department, Kakamega County can take several steps to effectively manage its assets. First, it could appoint an asset management team or set up an Asset Management Directorate, which should build close coordination with other sectors or departments in order to have an effective asset management framework. Then the development of an asset management policy, strategy, and annual plan is imperative to improve asset management and use assets strategically.

The verification of inherited assets and liabilities shows partial success, and the CALC is no longer functional. Thus, an asset management department should take the lead to complete asset takeover. This also should include protecting the interests of Kakamega County in taking over assets from national government entities, as national government programs will commence in coming years.

The total inherited current liabilities are almost four times greater than the total inherited current assets, which might have much lower present value than the reported K Sh 580 million estimated as of March 2013. The county has no financial capacities to work out the inherited liabilities and certainly requires guidance and support from the National Treasury (through its National Assets and Liabilities Management Department) and IGRTC for pragmatic workout.

The county will require collection of inherited current assets, largely uncollected taxes and fees, mostly from CILOR, and increased OSR. It also might need a bridge loan to work out all verified inherited liabilities in the medium term and stop fast accumulation of inherited liabilities by penalties or other charges. But the first and most important step should be verification and valuation of all land, especially the land parcels not related to key services, which can be sold to generate money for increasing key investments and settling inherited liabilities. The current land prices suggest that selling a small number of parcels can finance workout of inherited liabilities.

Kakamega County inherited a large volume of land (the total number of plots is twice as large as the number of plots Nairobi City County owns). One of the most urgent actions should be for the county to start a robust program to streamline management of land assets, work out disputed cases on encroached land, set market value for surplus land (land that does not serve specific services), and start using its land portfolio strategically to accelerate development and reduce inherited and new liabilities.

REFERENCES

CBK (Central Bank of Kenya). 2020. Inflation rates 2013-2019, https://www.centralbank.go.ke /inflation-rates/. CGA. 2012. County Governments Act No. 17 of 2012. http://www.parliament.go.ke/sites/default /files/2017-05/CountyGovernmentsAct_No17of2012_1.pdf. CRAB. 2015. County Revenue Allocation Bill 2015–2017. http://kenyalaw.org/kl/fileadmin /pdfdownloads/bills/2017 /CountyAllocationofRevenueBill_2017.pdf. Farvacque-Vitkovic, C., and M. Kopanyi. 2019. Better Cities Better World: A Handbook on Local

Government Self-Assessments. Washington, DC: World Bank. https://openknowledge .worldbank.org/handle/10986/32120. IGRTC (Intergovernmental Relations Technical Committee). 2017. “Unaudited IGRTC Current

Assets and Liability List as at 27 March 2013.” Intergovernmental Relations Technical

Committee from files of Transition Authority. Nairobi: IGRTC. IGRTC (Intergovernmental Relations Technical Committee). 2018. Report on the Identification,

Verification, Validation, and Transfer of Assets and Liabilities of the Defunct Local Authorities as at 27th March 2013. Nairobi: IGRTC. https://igrtc.go.ke/download/consolidated-report-on -assets-and-liabilities-of-the-defunct-local-authorities-2018/. Kakamega CALC (County Asset and Liability Committee). 2017. Kakamega CALC Report.

Kakamega County CALC. Kakamega County. 2018a. County Integrated Development Plan (CIDP) 2018–2022. Kakamega,

Kenya: County Government of Kakamega. https://kakamega.go.ke/download/kakamega -county-urban-institutional-development-strategy-2018-2022/. Kakamega County. 2018b. “Kakamega County Budget Review and Outlook Paper (CBROP) 2018.” Kakamega, Kenya: County Government of Kakamega. https://kakamega.go.ke /download/kakamega-county-budget-and-review-paper-cbrop-2018/. Kenya Constitution. 2010. http://kenyalaw.org/kl/index.php?id=398. KNBS (Kenya National Bureau of Statistics). 2018. Basic Report on Well Being in Kenya (based on Household Budget Survey 2015/16). Nairobi: KNBS. https://www.knbs.or.ke/download /basic-report-well-kenya-based-201516-kenya-integrated-household-budget-survey -kihbs/#. KNBS (Kenya National Bureau of Statistics). 2019. “Kenya Population and Housing Census.”

Nairobi: KNBS. https://housingfinanceafrica.org/documents/2019-kenya-population-and -housing-census-reports/.

Ministry of Local Government (MLG) Circular, ref. no. MLG/1333/TY/ (52) of February 18, 2013.

Notice 858. 2017. Gazette Notice no. 858, January 8, 2017: Intergovernmental Relations Act no. 2 of 2012. https://gazettes.africa/gazettes/ke-government-gazette-dated-2017-01-27-no-13. Notice 2701. 2017. Gazette Notice no. 2701, March 24, 2017: Intergovernmental Relations Act no. 2 of 2012. https://gazettes.africa/archive/ke/2017/ke-government-gazette-dated-2017-03 -24-no-37.pdf. OAG (Office of the Auditor General). 2013–19 (annually). Report of the Auditor General on

Financial Statement of Counties. Nairobi: OAG. http://www.oagkenya.go.ke/index.php /reports/cat_view/2-reports/11-county-governments/203-county-government-reports. OCB (Office of the Controller of Budget). 2014–18 (annually). Annual County Government

Budget Implementation Review Report. Nairobi: https://cob.go.ke/reports/consolidated -county-budget-implementation-review-reports/. PFM. 2012. Public Finance Management Act, no. 18 of 2012. https://www.pcf.go.ke/index .php/public-financial-management-act. PPAD. 2015. Public Procurement and Asset Disposal Act, no. 33 of 2015, December 18, 2015. http://kenyalaw.org:8181/exist/kenyalex/actview.xql?actid =No.%2033%20of%202015. TDG. 2012. Transition to Devolved Government Act, no. 1 of 2012, enacted March 9, 2012. http:// www.parliament.go.ke/sites/default/files/2017-05/TransitiontoDevolvedGovernment

ActNo1of2012.pdf. UAC. 2011. Urban Areas and Cities Act, no. 13 of 2011. http://www.parliament.go.ke/sites /default/files/2017-05/UrbanAreasandCitiesAct_No13of2011.pdf. UAC. 2019. Urban Areas and Cities (Amendment) Act 2019. http://kenyalaw.org/kl/fileadmin /pdfdownloads/AmendmentActs/2019/Urban AreasandCities_Amendment_Act_2019.pdf. World Bank. 2018. Kenya Economic Update. 17th ed., April 2018. Washington, DC: World Bank. https://documents.worldbank.org/en/publication/documents-reports/documentdetail /327691523276540220/kenya-economic-update-policy-options-to-advance-the-big -4-unleashing-kenya-s-private-sector-to-drive-inclusive-growth-and-accelerate-poverty -reduction.

9

Kiambu County

INTRODUCTION

Kiambu County is in the central region of Kenya and borders Kajiado, Machakos, Murang’a, Nairobi, Nakuru, and Nyandarua counties. It covers approximately 2,544 square kilometers. The county has 10 administrative units (subcounties): Gatundu North, Gatundu South, Githunguri, Kiambu, Kikuyu, Lari, Limuru, Ruiru, Thika East, and Thika West. There are 12 political units (constituencies): Gatundu North, Gatundu South, Githunguri, Juja, Kabete, Kiambaa, Kiambu, Kikuyu, Lari, Limuru, Ruiru, and Thika Town (map 9.1). Unlike other counties, the political units do not match the administrative units; hence, there are 12 constituencies and 60 electoral wards with 60 elected members of the County Assembly.

Kiambu County had a population of 2.4 million and average population density of 952 people per square kilometer in 2019 (KNBS 2019). A review of population density by urban areas shows that Kabete constituency has the highest population density, with 2,534 people per square kilometer followed by Kiambaa constituency, which has 2,153 per square kilometer. These two constituencies are close to Nairobi City, which explains their high density. Kiambu County has a population dependency ratio of 59 percent as compared to the 78.3 percent national average; of a total population of 1,795,999 people, 666,446 were ages 0–14 or over 65 years in 2014 (KNBS 2018).

Out of its total land area of 2,544 square kilometers, 1,878 are arable (KNBS 2018). The main crops are maize and beans. A total of 11,323 hectares of land are under irrigation to produce fruits and vegetables (the top three products are kale, cabbage, and spinach). In the fishing sector, there are 1,379 ponds. The industrial sector is much more developed than the agriculture sector; there are 237 factories; of these, 152 are cottage factories that produce animal feeds (30), coffee (13), tea (13), milk (11), and other products. Most of the factories (113) are in Thika subcounty, followed by Limuru with 18.

There were 9,781 business licenses issued in 2017, the majority of which (6,230) were for trade activities (World Bank 2018). Kiambu County has 374 registered