The proposed amendment to the law to restrict county governments from opening accounts in commercial banks is a prudent move and one that has been long overdue.
The change in the Public Finance Management (PFM) law will require counties to open and operate accounts either at the Central Bank of Kenya or in government-controlled lenders. As National Assembly Majority Leader Aden Duale said, a new dispensation will “cure the mischief where county governments operate mysterious accounts in several banks”.
If the law is passed, the public will expect that it will foster accountability and transparency in the management of finances. This has been sorely lacking in many counties. Past reports by the Auditor-General have pointed to irregular and unsupported expenditure by counties. Much of the money that cannot be accounted for was deposited in accounts that were shrouded in secrecy, often in private banks. The new law should reduce the risk of public funds deposited in commercial banks being lost.
There is also the possibility of collusion between bank and county officials that could create room for loss of funds meant for development or other critical functions. In the long run, ensuring that counties operate their accounts at CBK as required, will ease monitoring of spending, check excessive borrowing and prevent corruption.
The proposed law should addresses these gaps by setting out conditions that counties must fulfil to open and operate bank accounts, including having prior written approval by the County Treasury for “deposit, custody or withdrawal of public monies.”