Senators want private firms collecting counties revenue audited

Private firms collecting revenue for counties could soon be forced to open their system for audit if a new push by senators is implemented.

The lawmakers want Auditor General Nancy Gathungu to scrutinise the external revenue collection firms contracted following concerns over the accuracy of revenue figures they declare.

The senators raised concerns about the lack of auditing of the service providers, saying the gap has opened a loophole where the companies siphon billions of shillings from counties.

Appearing before the Senate County Public Investment and Special Funds yesterday, Gathungu raised issues with how counties could be losing revenue through the firms.

The committee is chaired by Vihiga Senator Godfrey Osotsi.

Gathungu told the oversight panel that there has been a proliferation of some briefcase revenue collection firms contracted by counties.

She said as much as the law gives the National Treasury powers to prescribe revenue collection systems to be used by counties, governors have ended up contracting the companies without carrying out due diligence.

In addition, they are contracted by the county governments at different rates.

“The rates should be standardised so that the commission charged by the firms does not vary from one county to the other. The lack of standard rates is why counties are losing a lot of revenue,” she said.

Narok Senator Ledama Olekina called for amendment of the Public Finance Management Act, 2012 to give Gathungu powers to audit the revenue collection firms.

He said giving the companies a blank cheque to operate has seen counties lose revenue running into billions.

He said no one can ascertain the amounts the firms collect.

The Senate Minority Whip said there are so many loopholes when it comes to management of own source revenue in the counties and it is time to fix it.

“We are going to push for amendment of the law to give the auditor general powers to audit the systems of the revenue service providers,” Olekina said.

“This will ensure there is discipline and we are able to follow the money trail from the service provider to the county and later to the County Revenue Fund,” he added.

The senator said despite the law not allowing the service providers to deduct their commission from the revenue they collect at source, they still end up doing the same.

“We must tighten these loopholes because if we don't, then you will just be giving us figures which the firms will be laughing at,” he said.  

Migori Senator Eddy Oketch echoed similar sentiments saying amending the law to require audit will strengthen the process of revenue collection.

Last October, the Ethics and Anti-Corruption Commission flagged several counties over reports of hijacking the revenue collection system to divert funds.

Governor Johnson Sakaja’s Nairobi, Narok under Governor Patrick Ntutu, Joseph Ole Lenku's Kajiado, Machakos under Wavinya Ndeti and Kilifi under Gideon Mung’aro were singled out as major culprits.

The EACC said senior officials in the devolved units are using the revenue collection system to divert county revenue.

This is by colluding with service providers, resulting in the loss of billions of shillings.

In some counties, the commission said private service providers have total control over revenue management systems. This makes it difficult for county governments to ensure accountability.

According to EACC, senior county officials also have access to super-user rights on the automated systems, with the power to delete and edit the amount of revenue collected, leading to diversion of revenue.

Some counties also lack mechanisms to reconcile revenue management systems in cases where the county has different service providers.

“As a result, many county governments are unable to meet their revenue targets, with some performing worse in revenue collection than even the defunct local authorities. Others have stagnated at the same level despite increased revenue streams,” said EACC spokesperson Eric Ngumbi.