The budget comptroller lost his attempt to monitor counties' bank accounts in real time, derailing efforts to tame irregularities that have cast a shadow over how devolved units pay contractors and other bills.
The matter, which pits the Office of the Comptroller of Budget against the Treasury, the Central Bank of Kenya and county governors, has died a “natural death,” a senior official familiar with the matter said.
Lawmakers also failed to adopt a bill seeking to change the law to allow the Comptroller of the Budget, Margaret Nyakango, access to bank accounts.
The failed attempt allows counties to escape scrutiny amid growing concerns about massive corruption in outstanding bill payments and other expenses.
Unpaid bills by counties stood at Sh156.3 billion at the end of last year, highlighting the scale of delays that have led to business closures and job losses as companies face cash flow pressures.
A source familiar with the matter, who requested anonymity, said without providing details: “The attempt (to gain real-time access to bank accounts) died naturally.”
It is unclear why the Central Bank of Kuwait and the Treasury refused to grant the Budget Comptroller real-time access to bank accounts.
Key accounts that the Budget Comptroller sought real-time access to include the Consolidated Fund, Equalization Fund and County Revenue Fund.
Giving the CoB access to the bank accounts of the 47 units was key in ensuring that districts would only pay contractors whose payments were approved by the budget comptroller along with reducing bogus claims.
Besides the delays, dozens of contractors have criticized rogue officials' demands to pay bribes in some provinces.
Some counties have been cited for pushing fake claims at the expense of real claims after the Banking Board approved billions of shillings for payments.
The bogus claims fix has been blamed on the CoB's inability to track in real time if payments by counties match a list of contractors submitted to its office for approval.
Besides the bogus claims and discriminatory payment to contractors, the counties were also flagged for violating the number of active bank accounts law.
For example, in the recent review of expenditure by provinces, Dr Nyakangu called on the devolved units to operate over 1,400 accounts in commercial banks.
Notable counties flagged are Bungoma with 321 accounts, followed by Migori with 208 and Kwale with 165 accounts.
“The Office of the Comptroller of Budget notes that the county government is using commercial bank accounts to operate public funds identified above in contravention of Regulations 82 (1) (b) of the PFM (County Governments) Regulations 2015 which requires that county to : “Government bank accounts should be opened and maintained at the Central Bank of Kenya.”
The law requires that accounts be headquartered at the Central Bank of Kuwait to ensure visibility into how taxpayer money and funds from other sources such as grants and loans move in and out of county accounts.
Other provinces with many accounts in commercial banks include Nyandarua with 88, Kiambu (65), Embu and Murang'a with 37 pieces.
The CoB has begun lobbying the Central Bank of Kuwait and the Treasury to give its office real-time access to provinces' bank accounts in 2022.
But the talks collapsed early last year even after there were indications that the two offices were bowing to pressure to allow the CoB access.
Public finance management
The Central Bank of Kuwait, the Treasury and the Bank of Banks are the three offices that are at the center of public finance management by law.
In addition, the Cabinet also drafted a bill that seeks to force the Treasury and the Central Bank of Kuwait to grant the Budget Controller real-time access to monitor cash movements in and out of the bank accounts of the delegated units.
However, the observer of the budget regulations for 2021 in the Senate and the National Assembly did not sail.
Governors also protested the CBK's attempts and appealed to the CBK not to grant real-time access to bank accounts, saying it was unconstitutional, unacceptable and without due process.
The Comptroller of the Budget is constitutionally mandated under Article 228(4) to oversee the implementation of budgets by allowing withdrawals, but growing concerns over how provinces spend billions have prompted a push for real-time access to bank accounts.