Budget controller flags Sh5.7bn salaries paid outside payroll

Written by Inka FM on 23 June 2023

The Controller of Budget (COB) has flagged expenditures of Sh5.66 billion on salary payments outside approved payroll systems in the first nine months to March.

The findings of a review of salary expenditures by ministries, departments and agencies in nine months to March 2023 raise questions about the commitment by the government to instil transparency in its wage bill expenditures.

Challenges associated with manual payroll administration has in the past seen billions of shillings in taxpayer funds spent on ghost workers annually.

“A review of recurrent expenditure shows that Sh399.96 billion was spent on compensation to employees, representing 40.3 percent of the gross recurrent expenditures by MDAs. Further analysis revealed that Sh363.66 billion was processed through the Integrated Personnel and Payroll Database and other approved payroll management systems. Sh5.66 billion was paid outside the prescribed payroll management system,” the COB observed.

The payment of salaries by the State agencies outside the payroll system coincided with liquidity pressures in government which saw delays in paying salaries to some civil servants in March this year.

The wage bill for the national government in the third quarter of the 2022-2023 fiscal year to March burst the budget by nearly Sh16.55 billion.

This signalled the expenditure pressure that came about from new appointments by President William Ruto’s administration. The new government, for instance, increased the number of State departments to 51 from the previous 44 and appointed 50 chief administrative secretaries.

An executive order issued by the President in January this year on the organisation of the government increased the number of State departments, government agencies and other State offices.

Under the Office of the President, for instance, additional offices were created, including those of the Council of Economic Advisors, Women Rights Advisor and Fiscal Affairs and Budget Policy. While the COB could not immediately segregate MDAs that paid salaries outside the approved payroll system, the office said it could list agencies with the anomaly at the end of the current fiscal year.

“In the annual national government budget implementation review report, we will annex MDAs with payments outside the prescribed payroll system and reasons thereof,” Controller of Budget Dr Margaret Nyakang’o told the Business Daily in an interview.

MDAs are required to process salaries via approved payroll systems, including the integrated personnel payroll database (IPPD) which was designed in the 1996/97 fiscal year.

The system was introduced to address the challenges of manual payroll administration which had been described as cumbersome, causing salary delays, inaccuracy in determining staffing levels and poor accountability of funds.

The system’s main objective is to maintain accurate and consistent personnel data in public service.

“Before the inception of IPPD, it was difficult to establish personnel issues regarding government employees like recruitment, training, postings, transfers, seniority lists, promotions and retirement. Moreover, timely determination of salary issues, enforcing statutory deductions, processing of the request for loans, advances and ensuring their recovery was challenging,” the then Ministry of State for Public Service noted in a report. During the latest review period, expenditure on salaries by MDAs rose by 8.5 percent to hit Sh399.935 billion from Sh368.506 billion at the same time last year.

The State Department of Public Service, the Ministry of Defence, the Independent Electoral and Boundaries Commission, the Office of the Registrar of Political Parties and the Director of Public Prosecutions recorded the steepest climb in spending on wages.

However, according to the COB, the classification of employer contributions to the National Health Insurance Fund (NHIF) and the National Social Security Fund (NSSF) as part of the compensation to employees led to the more than 10-fold rise in wages under the State Department of Public Service from Sh499.75 million in the previous nine-month review to Sh6 billion.

Higher expenditures on salaries by the IEBC coincided with the staging of the August 2022 General Election, which required the electoral agency to increase its human resource personnel.

Salaries and allowances to constitutional offices which are part of the Consolidated Fund Services meanwhile stood at Sh2.6 billion in the period as the Commission of Revenue Allocation (CRA) and National Gender and Equality Commission (NGEC) exceeded their budgetary allocation on wages.