The Controller of Budget (CoB) will have real-time access to bank accounts of all public institutions under new regulations aimed at curbing overdraws from the public purses.
The Controller of Budget Regulations 2021 seeks to compel the National Treasury and Central Bank of Kenya to give the CoB real-time access to monitor cash movements into and out of the accounts.
The newly gazetted regulations, if approved by Parliament, will give the budget controller sharper eyes on cash outflows from the Consolidated Fund, Equalisation Fund, County Revenue Fund and any other public accounts to ensure that accounting officers do not breach set ceilings in the use of public funds.
Currently, the CoB does not have access to the accounts, a loophole that has opened an avenue for questionable use of the funds at the two levels of government.
“The National Treasury and a County Treasury shall give authority to the Central Bank of Kenya to grant the Controller of Budget real-time viewer rights of the national exchequer Account, a county exchequer account and an account for any other public fund,” the regulations read in part.
CoB Margaret Nyakang'o says that counties are manipulating legal loopholes to have ‘private arrangements’ with banks for loans, accumulating interest that has left them in financial distress.
This is the first time that the CoB will control in real-time how the national and county governments authorise payments for salaries, services and goods.
Currently, the CoB — the public office mandated to oversee the expenditure of public funds — only monitors the public accounts through the quarterly reports provided by the institutions.
“The purpose of the access would be to confirm balances in real-time to avoid lags between requisitions and approvals, where there is a risk of overdrawing accounts,” CoB Margaret Nyakang'o told the Business Daily.
The Consolidated Fund holds money raised and received by the national government and is used to pay salaries and service debt.
CoB’s approval for withdrawal of funds shall be valid for seven days. The Controller of Budget will also be required to inform public institutions in cases of a rejected request within seven days.
Requests for cash withdrawals to the CoB must also include the balance held in the account, up-to-date statements and a copy of the approved work plan for the year.
The State uses money from the Equalisation Fund to provide basic services like the provision of water and health facilities while County Revenue Funds hold cash that the devolved units raise from taxes and levies.
The regulations will tighten CoB’s oversight role on institutions at the national and county governments amid growing concerns about the misuse of public funds.
Public institutions are under the law required to submit reports on their expenditure to the CoB every three months.
The CoB also receives requests from the institutions for all expenditures and has the power to approve or decline the applications.
Public institutions, especially the 47 devolved units and public universities have been flagged by the CoB for numerous breaches of their spending.
Counties and the public universities are currently bogged by huge expenditures on salaries and allowances in breach of the set ceilings that have in turn hurt their abilities to honour statutory deductions and settle pending bills.
There have been growing concerns about overdrawing of funds, especially in the counties as the financially distressed entities turn to banks for short-term funding.
A majority of the poorly managed parastatals reporting losses or deficits in their budgets have, over the years, turned to commercial loans on the strength that they will be bailed out by taxpayers, in addition to using assets such as land as security.
Counties, for example, are allowed short-term overdrafts of up to one month that must, however, be liquidated to avoid accruing interest and financially distressing the devolved units.
“Counties have private arrangements with commercial banks to finance them outside the financially regulated systems, a good number of the counties are now in distress though they cannot publicly say so,” said Ms Nyakang'o.
