Treasury wins long-drawn war for control of county funds

The financial independence of county governments has been left in the balance after Tuesday’s signing into law of a Bill that provides for direct control of key officers of the devolved government from Nairobi.

The new law gives the Treasury the authority to compel regional governments to second certain officials to the national government where they will only be subject to the Treasury’s directives.

Also read: Experts fault the method used to share county cash

“A County Treasury shall, upon the request of the National Treasury, second to National Treasury such number of officers as may be necessary for the National Treasury to better carry out its responsibilities under this Act,” the law says, adding that the public officers seconded to the national Treasury under the above clause shall be deemed to be officers of the national Treasury and shall be subject only to its direction and control.

This means that the national Treasury can, for instance, demand that all county governments second their accountants, purchasing and budgeting officers to the national government and such officers will the cease to take any directions from the county executive, including the county Treasury.

Opponents of the provision have argued that besides setting the county executive on a collision path with the Treasury, the provision (in Section 106 of the Public Finance Act) is in violation of Article 187 of the Constitution which requires that such transfer of functions or powers can only be done by an agreement between the two levels of government.

The provision giving the national Treasury direct control of key county finance officials is seen to be particularly dangerous in its exposure of county governments to the possibility that its executive or legislature may authorise expenditure on a particular activity or project but the National Treasury stalls it through instructions to an officer who has been seconded to it. 

Unlike section 16 of the Public Finance Management Act, which provides for the secondment of national Treasury officials to county governments, the section on secondment of county officials to the national Treasury does not demand that the period of secondment be specified – meaning that the officers could remain in such a position permanently.

These sections of the new law were the bone of contention between the Treasury and  the Ministry of Local Government, stalling its passing for months.

Local Government officials had accused the Treasury of scheming with the help of the International Monetary Fund to maintain a centralised public finance plan that would deny county governments the power to exercise their freedom plan and execute own plans at the local level.

But officials at the Treasury had insisted that there is need for overall and centralised supervision and control of public finances to instil fiscal discipline at all levels of government.

President Kibaki’s signing of the Bill into law on Tuesday means that the Ministry of Local Government and civil society activists opposed to the Treasury’s schemes lost the war.

Mutakha Kangu, one of the architects of the County Government Bill 2012, described inclusion of the clause as “mischievous”.

“I do not see any other reason for including these particular clauses other than a sinister move to want to control how finances are managed in the counties,” said Prof Kangu. “This could be an attempt to infiltrate the counties under the guise that the individuals were, after all, seconded by the County Treasury itself”.

Policy and legal experts warned that a number of clauses in the new law are in breach of the Constitution.