Asset management

ASSET MANAGEMENT

These case studies focus on the transition period before which Kenyan local governments did not have asset management systems, frameworks, and policies except some sporadic practices to manage assets daily by officers of service units. Despite legislated mandates—Public Finance Management Act 2012 (PFM 2012), Kenya Constitution 2010, Public Procurement and Asset Disposal Act 2015 (PPAD 2015), the County Governments Act (CGA 2012), and circulars—now defunct local governments failed to establish asset registers, and the accounting aspects of assets were poorly understood and disobeyed even before devolution. These local bodies failed to measure the wealth of the local government, aim for increasing it, or manage the most important assets strategically. This case study illustrates both the enormous challenges the incoming county governments faced due to the inherited situation and the remarkable progress achieved after devolution. It also demonstrates that moving forward requires strong determination, vision, finances, and reformative actions toward modern and adequate management of assets that eventually determine the level and quality of mandated services.

Asset ownership and transition to devolved government

Article 23 of the Transition to Devolved Government Act (TDG 2012) regulated the takeover of functions, assets, liabilities, and staff of the defunct local authorities in the Nakuru County jurisdiction, including Municipal Council of Nakuru and Naivasha, County Council of Nakuru, and Town Council of Molo. However, the 2013 Office of the Auditor General (OAG) report found that even though the Ministry of Local Government Circular no. MLG/1333/TY 2013 provided further instructions to outgoing entities for proper handover of assets and liabilities to the incoming county government, this was not done. The OAG audit team in July 2013 was unable to obtain supporting documents required for audit, mainly because documents were not secured and key staff from the former local bodies were transferred and were not available for the audit process. Furthermore, OAG found that the fixed-asset register was not updated, and records were made in pencil; the county government performed weak controls in maintaining an asset register (box 12.1). The main OAG findings include the following:

• It was not possible to establish cash-on-hand and bank balances because the defunct local authorities, particularly the outgoing officers of Nakuru County

Council, did not provide the incoming officers with bank statements and bank certificates to confirm bank balances for the 10 bank accounts they operated. • The bank accounts for Naivasha Municipal Council and Nakuru Municipal

Council remained in operation after 28 February 2013, violating the rules the

MLG/1333/TY Circular set to close all bank accounts by the end of February 2013. Naivasha Municipal Council operated eight bank accounts, which also continued operation after 28 February 2013, but the council did not maintain a register of the bank accounts. • The revenues collected for the Nakuru County Council were not paid to main cashiers; furthermore, receipt books issued to the revenue collectors were not available for auditing. There was no evidence of collection of cess revenues worth K Sh 5.9 million in the Naivasha Municipal Council.