PSs Face Fines as Awards Against State Hit Sh150B

Principal Secretaries and Chief Executives of Government-owned entities will be punished for breach of legal agreements as the State seeks to reverse mounting court awards against it, which have crossed Sh150 billion.

Attorney-General Justin Muturi says he is considering recommending new laws to have “reckless” government accounting officers shoulder the costs of unlawful decisions.

This comes after State ministries, departments and agencies revealed that awards against contract breaches, unlawful dismissals, human rights violations, and other legal disputes are increasingly becoming a major driver of pending bills.

The Treasury is struggling to settle the court awards in an economy where payment of debts and civil servants’ salaries are gobbling nearly all taxes.

Analysis of the budget reports presented to the Treasury ahead of expenditure allocation for the year starting July indicate penalties of Sh108.32 billion against ministries and State-owned firms.

Mr. Muturi, however, says the amount is in excess of Sh150 billion.

“Greater vigilance is required to control the escalation,” the AG told the Business Daily via text. “Going forward, I may be forced to recommend that State officers who are shown to be reckless in decision-making assume personal liability in certain instances.”

The bills have continued to mount despite the Office of the Attorney-General in 2020 advising principal secretaries and chief executives of government agencies to carefully negotiate and vet contracts before signing to minimise lawsuits.

The fines are a result of the determination of historical legal disputes by courts and international adjudicators, some of which have been active for more than two decades.

President William Ruto had during campaigns pledged to equip the AG’s office to “safeguard the public interest in court, legislating, negotiating international agreements and signing of contracts.”

“By doing so, the government will avoid needless litigation and costly fines,” Dr. Ruto wrote in his manifesto.

The government’s chief legal advisor acknowledged that his office was working on an elaborate plan to deal with the mounting bills, but refused to divulge details of the strategy.

“I am addressing the issue using various strategies which I am not at liberty to discuss here,” said Mr. Muturi. “I believe that the government as a whole is obligated to protect public resources while contracting third parties, be they local or international.”

The analysis indicated the value of the court awards showed signs of easing in the year ended June, falling a marginal 3.28 percent from Sh111.99 billion in the same period a year earlier.

The awards rose from Sh101.2 billion for the year ended June 2020.

The reports show the government has struggled to pay the awardees.

A measly 2.67 percent of the Sh108.32 billion, which had accumulated at the end of last June had been settled, an equivalent of nearly Sh2.9 billion.

Unlawful decisions by officers have become a major liability to the exchequer, with the awards now a key driver of pending bills for the national and county governments.

The Budget and Appropriation Committee of the National Assembly in 2021 estimated potential compensation for ongoing litigation in local and international courts at about Sh1.2 trillion from Sh809 billion in 2019.

The analysis shows the Health ministry accounts for over half of the cumulative court awards largely due to historical determinations which have not been honoured.

Mr. Muturi’s plan largely mirrors the approach adopted y his predecessor Paul Kihara, who had in 2020 proposed that State officers making unlawful decisions be penalised to mitigate the rising burden on taxpayers.