Auditor General wants closure of illegal bank accounts operated by counties

Auditor General Nancy Gathungu when she appeared before the Senate County Public Investment and Special Funds Committee at Bunge Tower in Nairobi on September 4, 2024. [Boniface Okendo, Standard]

Counties operating illegal accounts in commercial banks could soon be forced to shut them down.

Auditor General Nancy Gathungu yesterday told the Senate Committee on County Public Investment and Special Funds that county governments operating numerous commercial bank accounts contributes to financial mismanagement and waste of taxpayer funds.

"We should minimise bank accounts and have one or two revenue and expenditure accounts but we do not need 300," she said.

Ms Gathungu told the Senate Committee that county administrators lose track of money deposited in some accounts and in some instances, the accounts remain dormant for long periods of time and record suspicious transactions.

The Public Finance Management Act, 2012 mandates all counties to open and maintain bank accounts at the Central Bank of Kenya, CBK, with the exception of imprest accounts for petty cash.

An audit report earlier this year, however, revealed that several counties have opened hundreds of accounts in commercial banks in the last financial year.

Some of the counties with the highest number of bank accounts include Bungoma, Migori and Machakos that were found to have 321, 208 and 245 bank accounts respectively.

In Machakos County, 170 bank accounts were not supported by bank statements, cashbooks and certificates of bank balances.

"The law gives counties a blank check on how many funds they can establish and soon we'll have funds that are running operations of departments in counties, so you have an agriculture fund alongside the department of agriculture," she explained.

According to Gathungu, the duplication of funds at the national and county levels leads to inefficiencies and a higher cost to Kenyan taxpayers.

"For instance counties now have established bursaries and are giving bursaries to secondary schools but secondary education is a national government function so this creates a problem," she explained.

Gathungu further said that the high stock of pending bills held by counties was largely due to fiscal indiscipline and not delayed from exchequer funds.

"It is an excuse that pending bills arise because of delayed disbursement," she said. "If this is the case then when the counties get their full disbursement in a subsequent financial year, they should be able to clear those pending bills."

"There should be a correlation between the pending bills at the end of the financial year and the outstanding exchequer releases from the National Treasury," she said. "If pending bills are more than the exchequer releases then the problem is fiscal indiscipline."

Gathungu also highlighted cases where the Controller of Budget approves a payment to a supplier but the payment is blocked or settled partially.

"Pending bills now should be part of public debt and I have communicated this to the National Assembly as well," she explained.

"We have borrowed loans, overdrafts, and now we are borrowing in kind from our suppliers and our employees when we fail to remit statutory deductions."

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