9.9 Kiambu County summary of inherited liabilities, 2013 and 2017

TABLE 9.9 Kiambu County summary of inherited liabilities, 2013 and 2017

K Sh (millions)

As of 2013, per TA report

BANK LOANS EMOLUMENTS

As of 2013, per CALC report 2017 0.0 382.4

STATUTORY DEDUCTIONS

307.7

OTHER LIABILITIES TOTAL

— 444.8

186.5 876.6

Net value, 2017 0.0 382.4 307.7 186.5

Source: Based on Kiambu CALC 2017. Note: — = not available; CALC = County Asset and Liability Committee; TA = Transition Authority. 876.6

collectibles aged by an additional four years, making collection increasingly difficult. Furthermore, as previously mentioned, the present value of the inherited current assets is much lower, and collection of the present value is still to be tested and is likely to be extremely difficult, but a collection program should be commenced.

Kiambu County inherited K Sh 877 million in face value of liabilities valued as of March 2013, verified in the Kiambu CALC report in 2017 (table 9.9); this is twice as much as the K Sh 445 million value reflected in the unaudited TA report. However, the CALC team found insufficient supporting documentation for some of these liabilities, so they can be considered disputed and require further scrutiny to ensure accurate reflection of the status of liabilities as of 2017. The CALC team did not indicate the reason (for example, accrued interest) or classification of the liabilities identified above and beyond those included in the TA list of liabilities.

Furthermore, the CALC report does not make proposals for follow-up steps toward verification of disputed liabilities and actions toward workout of inherited current assets and current liabilities. This resolution also would include establishing the current value of these liabilities with interest and penalties accrued between March 2013 and the date of the resolution proposal. Table 9.9 suggests that the CALC team only wanted to flag the fact that no resolution or workout happened on any of these inherited liabilities between 2013 and 2017, which is why the team left the face values unchanged.

Challenges Kiambu CALC faced during verification and validation of inherited assets and liabilities

The CALC teams encountered several challenges while undertaking verifications. The main reported challenges included the following:

• Time constraints in obtaining required information for the assets, particularly the value of land and the title deeds for the land, were a major hindrance.

Notice 2701 stipulated that CALC reports should have been submitted to

IGRTC by July 15, 2017. However, the Kiambu CALC commenced the work quite late (only in May), the exercise was tedious because many assets required physical verification and validation, and the geographic areas to be covered were expansive. • Inadequate information and lack of institutional memory also hampered efforts.

These would have enabled better identification and verification of the assets. • A limited number of skilled staff further hindered the asset identification process. • The lack of handover and takeover reports and lack of a report from the TA, which would have guided the field verification work, made documentation difficult.

• Logistical constraints were a concrete challenge. For example, just one vehicle was made available for the field verification, while at least three vehicles were needed. • There were limited financial resources to undertake the exercise.

LESSONS LEARNED

Kiambu County acknowledges the importance of having an asset management unit, but it is yet to establish one. Currently, the procurement team keeps and manages records of all assets purchased or disposed of since March 2013. There are plans to establish an Asset Management Directorate and develop a policy, but the transition to new leadership through the change of governor in 2017 also has delayed the process of setting up a framework and system.

The Kiambu County CALC team made tremendous efforts in verifying assets and liabilities. The identification and verification of county assets and liabilities requires further scrutiny, especially confirmation of supporting documents, to establish a reliable inventory of assets and liabilities. Even though most of the land is surveyed, there is a need to establish their respective values.

There is an urgent need to establish a reliable and up-to-date fixed asset register, which should be a relatively easy task due to well-surveyed and wellidentified land and buildings and a relatively small number of other fixed assets.

Workout of inherited liabilities is very urgent; there is a need to appoint a team to conduct detailed scrutiny of inherited liabilities and seek workout options and modalities. The county may assign a small committee with highranking officers to initiate negotiations with creditors for workout of all inherited liabilities. Some of these may require the guidance and involvement of national government entities, especially the National Assets and Liabilities Management Department in the National Treasury and IGRTC.

Collection of inherited financial assets has not yet started. There is a need to set up a team with financial and legal expertise to analyze the portfolio of inherited financial assets, structure claims by age, and estimate present value and then explore options for collection of a fair share of these collectibles, aiming for full elimination of uncollected inherited assets.

There is an urgent need to set up a small and simple unit for asset management, as well as establish an asset management system, strategy, policy, and procedures and a simple initial asset management plan that summarizes the most critical first steps toward establishing a reliable asset management system. Initial actions should focus on strategically managing the high-value assets: land, buildings, and plants.

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