Economy
Penalties for illegal State actions breach Sh126bn
Friday January 26 2024
Attorney General Justin Muturi. FILE PHOTO | DENNIS ONSONGO | NMG
Penalties and fines arising from contract breaches, unlawful dismissals, human rights violations and other legal disputes committed by government officials increased nearly Sh18 billion in William Ruto’s first year in office, further burdening taxpayers.
Historical court awards against State ministries, departments and agencies climbed to an estimated Sh126.20 billion last financial year ended June 2023, analysis of sector budget reports indicate.
The value represents a jump of 16.50 percent over an estimated Sh108.32 billion the year before, signalling the growing cost of unlawful decisions made by public officers. Some of the awards represent cases determined three decades ago.
The bills, disclosed through sector expenditure proposals presented to the Treasury ahead of budgetary allocation for the financial year starting July, present a major strain on the country’s already fragile financial position. The reports show the government has paid Sh11.39 billion of the awards, representing 9.03 percent of the outstanding arrears.
The penalties against illegal actions by the State continue to mount despite Attorney-General Justin Muturi’s warning last year that accounting officers may in future be sanctioned for breaching agreements with contractors and employees.
Accounting officers in public sectors are largely principal secretaries in ministries and chief executives of parastatals.
The 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, for instance, estimated potential compensation for ongoing litigation in local and international courts at about Sh1.2 trillion from Sh809 billion in 2019.
“Greater vigilance is required to control the escalation. I am addressing the issue using various strategies which I am not at liberty to discuss,” Mr Muturi told the Business Daily in January 2023, adding that the awards were in excess of Sh150 billion at the time.
“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. I believe that the government as a whole is obligated to protect public resources while contracting third parties, be they local or international.”
Reached for comment on the latest development, the government’s chief legal adviser referred this publication to Charles Mutinda, head of the General Civil Law and Claims Section at the State Law Office.
Mr Mutinda said growth in court awards against government ministries and departments—where the AG’s office is directly involved—are on a downward trend.
He hinted the higher value than a year earlier, as presented in the sector budget proposals, could include decisions against semi-autonomous State-owned enterprises, which are governed by independent boards.
Records at the AG’s office show that historical decisions against the government, which involve monetary awards amounted to Sh93.3 billion last October, the top legal counsel said, without providing the numbers for the previous year.
Read: PSs face fines as awards against State hit Sh150 billion
“We only deal with mainstream government, that is, ministries and departments,” Mr Mutinda told the Business Daily.
“However, we have a few State corporations that request our assistance and where there are awards against them, we capture the same.”
The data from the AG’s office shows that the Sh93.3 billion was awarded in 510 historical cases where the court decisions went against the State.
However, two cases account for more than 90 percent of the claims.
These are Sh53.6 billion awarded to Equip Agencies against the Ministry of Health and Sh33.35 billion to Nguruman Ltd against the Attorney-General over the invasion of more than 200 acres of land in Kajiado, according to Mr Mutinda.
The award to Equip Agencies has rocketed from Sh1.86 billion in 1999 when it was first given.
The State has appealed both determinations. For instance, the hearing of the appeal against Equip Agencies is set for January 30, this year.
“We have enhanced advisory, especially on contract implementation to avert claims and we also continue to strengthen the (AG’s) office through additional human resource capacity, funding and decentralization,” Mr Mutinda said.
“The corporations, on the other hand, are required to inform the AG of any major litigation they are facing for information and guidance.”
The analysis of the reports presented to the Treasury shows the Health sector has the largest share of court awards (Sh40.95 billion—a figure which smaller than that provided by the AG’s office), followed Energy, Infrastructure and ICT sector (Sh36.81 billion), while Agriculture’s claims were estimated at Sh26 billion.
The concern over mounting claims and the need for accounting officers to take “personal responsibility” to ease the rising burden on taxpayers started taking shape during the reign of predecessor AG Paul Kihara back in 2020.
Also read: Judiciary revenues up 10pc to Sh2.6bn as fines, fees rise
“The tendency with government officials to have a ‘Laissez-faire’ attitude in making unlawful decisions should be strongly discouraged and such officers penalised accordingly,” Mr Kihara wrote in a publication by the State Law Office in 2020.
“This reduces the mentality amongst government officials that an offence so committed it is the government, which is the defendant and not the officer as a person.”
Kenya in 2020 engaged about 700 lawyers from the State Law Office to battle a huge backlog of cases in local and international courts.
→ (email protected)
