The Controller of Budget (CoB) Dr Margaret Nyakang’o has revealed that Nairobi City County removed Ksh 39.8 billion from its pending bills stock, exposing gaps in supplier arrears and the possibility of fake supplies that have previously cost the county billions of shillings, as auditors continue to question the sudden reduction from Ksh 121.8 billion to Ksh 86.8 billion over the year to June, a drop of 32.7% that is yet to be fully explained.
The adjustment emerges at a time when counties and the national government are failing to pay many of their contractors on time, a situation that has repeatedly fueled cases of corruption and the misappropriation of funds meant for legitimate projects, with officials accused of using doctored invoices to bill ghost suppliers and divert public money.
Dr Nyakang’o has documented that the Ksh 39.8 billion cut by Nairobi City County drove an overall reduction in pending bills across the 47 counties from Ksh 181.9 billion in June 2024 to Ksh 176.8 billion by the end of June 2025 and she has demanded that the county provide a detailed explanation to the Auditor-General of how the supplier arrears were reconciled.
“This reduction was primarily attributable to the reconciliation of pending bills in Nairobi City County, which decreased by Ksh 39.78 billion. The county government undertook a reconciliation of its pending bills stock; however, it did not provide a detailed analysis of how it conducted the same,” Dr Nyakang’o said, calling for clarity on the sudden drop.
According to local media reports, City Hall says that the adjustments involved the removal of inflated legal fees, a disputed Ksh 300 million bank loan, and the payment of Ksh 1 billion in outstanding pensions, with Charles Kerich, the county executive committee member for finance and economic affairs, explaining that legal pending bills had been recalculated to remove unjustified charges and interest that had been applied where none was granted by the courts.
“First we assessed all legal fees pending bills and whittled down many that were unjustifiably high. And still on legal, some of the calculations had effected interest when none had been granted by the court,” Mr Kerich said.
“Further, the pending bills register had wrongly captured as a debt a dispute of over Ksh 300 million we have with National Bank, when the matter is in court. We also aligned our contingent liabilities (money owed to the national government for loans borrowed in the 80s) to be in line with the amounts acknowledged in the Transition Authority report. Not more,” he added.
Of the Ksh 39.8 billion, Nairobi directly accounted for Ksh 4 billion but it did not provide figures for the recalculated legal arrears or the adjustments to loans owed to the national government, leaving a large portion of the reconciliation opaque and raising questions about the reliability of the county’s financial reporting.
In the CoB report, the Ksh 39.8 billion cut from pending bills were recurrent expenditures.
“They must explain that to the Auditor-General. We have captured their figures as provided,” Dr Nyakang’o said.
The remaining recurrent pending bills now consist of Ksh 32.79 billion in supplier arrears, Ksh 45.3 billion in unpaid salaries and statutory deductions, and Ksh 1.47 billion in staff claims, while pending development bills increased by Ksh 2 billion following the reconciliation, illustrating the challenge of managing obligations while maintaining transparency over both recurrent and capital expenditures.
Nairobi remains the county with the largest unpaid debts at Ksh 86.77 billion, followed by Kiambu at Ksh 7.89 billion and Machakos at Ksh 6.73 billion, with all 47 counties collectively owing Ksh 176 billion to suppliers, a reality that has forced hundreds of small and medium-sized businesses into financial distress, led to defaults on loans, blacklisting by credit reference bureaus, and a rise in asset seizures among government contractors.
City Hall has previously lost millions of shillings through fake invoices and multiple payments, with investigations by the Ethics and Anti-Corruption Commission (EACC) revealing that between 2016/17 and 2021/22, senior officials approved irregular payments totaling Ksh 407.9 million to 14 unqualified suppliers who delivered no goods or services.
“Investigations revealed that between 2016/17 and 2021/22, senior county officials approved irregular payments amounting to Ksh 407,926,503.20 for no deliveries/supplies made to the county to 14 un-prequalified business entities, thereby facilitating fraudulent transfer of public funds,” the EACC said in court filings.
Dr Nyakang’o has warned that counties continue to accumulate new arrears, with Ksh 48.9 billion added between July last year and June, of which Ksh 19.78 billion accrued one to two years ago, Ksh 20.34 billion between two and three years and Ksh 85.42 billion pending for more than three years, while discrepancies remain between the amounts reported to her office and those reflected in county financial statements, pointing to persistent gaps in record-keeping and financial accountability at the devolved level.
