Counties in Kenya continue to flout public finance laws by operating numerous commercial bank accounts in disregard of strict regulations, according to the latest report by Controller of Budget (CoB) Margaret Nyakang’o. The report for the first quarter of the 2024-25 financial year reveals that counties collectively operated 2,421 commercial bank accounts, up from 2,000 accounts in the same period of the previous fiscal year.
The Public Finance Management (PFM) Act, 2012, mandates that county governments must maintain their bank accounts with the Central Bank of Kenya (CBK). Exceptions are limited to imprest and revenue collection accounts. However, counties have opened multiple accounts in commercial banks, which Nyakang’o warns hampers the oversight of public expenditure and effective budget implementation.
Nakuru and Bungoma Lead in Account Numbers
Nakuru tops the list with 301 accounts, followed by Bungoma (300), and both Baringo and Kiambu (292 each). Machakos recorded a dramatic increase, jumping from 31 to 221 accounts within a year, while Kiambu registered a staggering 240-account increase from its previous 52.
Conversely, some counties reduced their account numbers. Bungoma dropped from 352 to 300, and Migori significantly reduced its accounts from 208 to 76. West Pokot cut its numbers from 24 to four, showcasing compliance in some regions.
Non-Disclosure and Delays
Counties such as Nairobi, Narok, and Nyandarua failed to disclose the number of accounts they operate. In previous reviews, Nyandarua had 86 accounts flagged for non-compliance. Laikipia also did not disclose executive-operated accounts, only reporting three under the county assembly’s management.
Late submission of financial documents further complicates oversight. All counties submitted their Appropriation Acts, Governor’s Warrants, and approved budgets past the deadline, with the last submission recorded on September 5, 2024. This delay hampers timely exchequer requisitions and budget implementation, Nyakang’o noted.
Legal Contention
Governors, through the Council of Governors (CoG) chairman Ahmed Abdullahi, defended the accounts, asserting they are lawful under specific conditions. Abdullahi cited the Facility Improvement Financing Act, 2023, which necessitates revenue retention and expenditure accounts for health facilities. He also argued that donor-funded projects require special-purpose accounts in commercial banks to meet specific operational and funding conditions.
Abdullahi maintained that operating a single account for all county activities would breach existing laws. “The numerous entities, revenue collection accounts, and special-purpose accounts justify the multiple commercial bank accounts,” he said.
Budget Implementation Challenges
Nyakang’o’s report highlighted how the proliferation of accounts complicates the tracking of public funds and undermines accountability. “County governments should ensure that bank accounts are opened and operated at the Central Bank of Kenya as the law requires,” she recommended, sparking tensions with governors.
The Controller of Budget has long warned that maintaining multiple accounts not only violates financial regulations but also weakens fiscal oversight. Governors, however, continue to argue that operational needs and legal frameworks necessitate the accounts.
Path to Compliance
Counties must strike a balance between operational needs and compliance with the law. Strengthening adherence to the PFM Act and ensuring timely submission of financial reports are critical steps toward transparency and effective financial management.
The ongoing tug-of-war between the CoB and county governments underscores the need for harmonized policies to regulate public finance management while addressing operational realities. Whether counties heed Nyakang’o’s recommendations or continue to challenge the regulations, the growing number of commercial bank accounts remains a pressing issue for Kenya’s devolved system.
