A Senate committee wants the National Treasury to withhold funds for counties that have failed to clear pension arrears.
The Senate County Public Investments and Special Funds Committee wants the Kenya Revenue Authority to collect the arrears.
It also wants a multi-agency task force formed to investigate, reconcile and develop a formula for payment of the debts by the counties.
The watchdog committee has recommended tough measures to compel the counties to clear the outstanding remittances in its report tabled in the Senate.
“The National Treasury shall initiate stoppage of funds to counties which fail to cooperate with taskforce or fail to honour their debt settlement agreements, in accordance with Article 225 of the constitution and Section 96 of PFM Act 2012, ,” the report says.
The oversight committee chaired by Vihiga Senator Godfrey Osotsi produced the report after months of inquiry into the huge unremitted pension deductions by county governments.
Pension firms place the arrears at Sh80.1 billion and liabilities at Sh45.5 billion.
“A comparison between the data provided on the outstanding pension debt by the county governments and the respective pension schemes shows great discrepancies which require reconciliation,” the report reads.
Further, the committee has proposed that Treasury considers issuing a grant to counties to clear pension debt accumulated before devolution.
“However, for counties to be eligible to access the above conditional grant, the county has to produce a clearance certificate or document showing that they have been cleared by all statutory dues including tax and pension contribution that accrued in the post-devolution period,” it said.
The committee wants the task force to comprise of various national and county government agencies.
They include Treasury Cabinet Secretary, Attorney General, CEOs for Laptrust, Lapfund, CPF, NSSF, RBA, IGRTC and Controller of Budget.
Also proposed to sit in the task force is chairperson of the Council of Governors, Finance CECs chairperson and the county assemblies’ forum.
The task force, the committee said, shall establish actual pension liabilities by reconciling and harmonising amounts owed.
The team will also develop an appropriate formula and a framework for payment of pension liabilities that will enable the clearance of the outstanding pension debt by county governments.
The report of the task force shall be submitted to the Senate for adoption.
“Once the report of the taskforce is adopted by the Senate, the attorney general formulates debt settlement agreements between the county entities with outstanding pension liabilities and the pension schemes,” the report says.
“The agreements shall be formulated and signed within 90 days of adoption of the taskforce report by the senate and shall also be signed by the Controller of Budget.”
If the counties fail to settle the amounts owed to the pension funds as greed in the settlement agreements, the retirement benefits authority shall appoint KRA as a collecting agency in accordance with RBA Act.
The Treasury shall also withhold funds to such counties.
In a bid fund disbursement delays that the counties have often used to explain delayed remittance of pension deductions, the committee directed the treasury to ensure the timely release of funds in accordance with Article 219 of the Constitution.
“Where there is a delay in the transfer of funds from the Exchequer to the County Revenue Fund (CRF), any interest or penalty attributable to the delay shall be paid by the National Government,” the report says.
The committee further wants the PFM Act amended to provide statutory dues such as taxes and pension deductions as a first charge on the County Revenue Fund.