Controller of Budget Margaret Nyakang’o. FILE PHOTO | JEFF ANGOTE | NMG


Puzzle of counties running 1,400 illegal bank accounts

County governments are operating more than 1,400 accounts in Kenyan commercial banks, in breach of the law that requires them to hold their cash at the Central Bank of Kenya (CBK).

The Controller of Budget has raised alarm over the oversight that has seen counties like Bungoma run 321 accounts, Migori 208 accounts and Kwale 165 accounts at commercial banks.

The law requires that county government accounts be maintained at the CBK for operational activities, for better visibility of how the money moves. Limited exceptions are given in circumstances where counties need to hold cash at commercial banks for petty cash operations or revenue collection.

Controller of Budget Margaret Nyakang’o, however, said in a report that in the six months ending December, 44 county governments operated 1,439 accounts at commercial banks, raising eyebrows about the accountability of public funds held in the privately run institutions.

“Regulations 82(1)(b) of the PFM (County Governments) Regulations, 2015 requires county government bank accounts to be opened and maintained at the Central Bank of Kenya. The only exemption is for imprest bank accounts for petty cash and revenue collection accounts,” Dr Nyakang’o said.

She expressed concerns that counties were using commercial bank accounts to run operational accounts, which ought to be maintained at the CBK.

“The OCoB [Office of the Controller of Budget] notes that the county governments use commercial bank accounts to operate the established public funds and other operational accounts contrary to Regulations 82(1)(b) of the PFM (County Governments) Regulations, 2015,” Dr Nyakang’o said.

“The Controller of Budget advises the county executive committee members responsible for finance to follow up and ensure compliance with the law by maintaining bank accounts at the Central Bank of Kenya for accountable spending.”

The law requires public entities to hold their cash at the CBK where there is visibility. In the national government, the shift towards a Treasury single account has been ongoing since last year, with ministries and State departments asked to close most of their accounts at commercial banks.

An analysis shows that three counties, Bungoma, Migori and Kwale, cumulatively operate 694 accounts, nearly half of the accounts the other counties maintain at commercial banks. The Controller of Budget observed that Migori “operated a total of 208 accounts comprising 207 for the County Executive and one for the County Assembly with commercial banks.”

Other counties operating many accounts at commercial banks are Nyandarua (88), Kiambu (52), Embu and Murang’a (37 each), Tana River (33), Kisumu and West Pokot (29 each), and Narok (27). Kericho, which had a total of 22 accounts at commercial banks, operated accounts for operational activities such as running municipal boards, health emergency and others with similar names.

“The commercial bank accounts are for: Kericho County Executive Staff Mortgage Loan, Kericho County Executive Staff Mortgage Loan, Kericho County Executive Staff Mortgage Loan, Kericho County Bursary Fund, Kericho County Bursary Fun, Kericho County Executive Staff Car Loan, Kericho County Agricultural Development Fund, Kericho County Alcoholic Drinks Fund, Kericho County Emergency Fund, Kericho County Emergency Fund Retention and Kericho County Agricultural Sector Development Support Program,” the report shows.

Other accounts operated by the county at commercial banks are the Kericho County Climate Smart Agriculture Project Account, Kericho County Enterprise Fund –Main and Kericho County Donation Account.

Among the 29 accounts Kisumu operate at commercial banks are “17 commercial bank accounts are held for donor projects, eight for county operations and four for contingencies and funds.”

The Controller of Budget said information on commercial bank accounts operated by the Nairobi City County was not provided. She has in the past pushed to have full and real-time visibility of accounts held by counties, starting in 2022 when she asked that the CBK give her real-time access to accounts of the 47 counties.

At the time, Dr Nyakang’o said lack of real-time access to counties’ accounts at the CBK left a loophole that counties were exploiting to lodge fictitious claims and make discriminatory payments to contractors.

Counties were, however, opposed to the proposal, with Council of Governors (CoG) chairperson Ann Waiguru saying that such access would be “unacceptable and without due regard to procedures.”