The Central Bank of Kenya (CBK) has agreed to offer the Controller of Budget (CoB) real-time access to county bank accounts, ending an embarrassing fight between the two key institutions at the centre of public finance management.
Controller of Budget (CoB) Margaret Nyakang’o told Business Daily that the banking regulator has developed a payment platform that will next month give her office real-time access to the accounts.
The CBK turned down the requests from the CoB to access accounts of the 47 counties real-time, a blockade that hampered efforts to track expenditures by the agency charged with authorising withdrawal of public funds.
Not having real-time access creates a loophole that counties have been accused of exploiting in making discriminatory payments and lodging fictitious claims.
Additionally, the counties have been accused of taking advantage of this loophole to strike private arrangements with banks for loans that have accumulated interest and added to their financial woes.
“The CBK came back to us with a system that now links us (CoB and CBK) and Treasury in real time and where once I approve payments online they are locked and cannot be changed. It will not be possible to alter the requisitions,” Ms Nyakang’o said.
“Now counties will not be able to play around with suppliers and contractors as it has been happening all along.”
She had threatened to escalate the fight with the CBK to the Senate.
Counties have been flagged for manipulating payment requests approved by the CoB and failing to pay suppliers or contractors who do not give kick-backs to speed up release of their cash.
CoB, the public office mandated with overseeing the expenditure of public funds, only monitors the use of funds by the national and county governments through quarterly reports.
Counties and the national government are under the law required to submit reports on their expenditure to the CoB every three months.
Expenditure at both levels of government must be approved by the CoB highlighting the critical role of the office in the management of public funds.
But the counties have manipulated these gaps to make some payments that the CoB says are discriminatory or fictitious.
Complaints from suppliers who have not been paid even after the CoB approves payment of their claims have been rising, prompting the push to track the bank accounts of the counties real-time in a bid to stem the mischief.
Pending bills owed to suppliers jumped 59.3 percent to Sh153.02 billion in the year ended June from Sh96 billion a year earlier highlighting the increasing cash-flow woes facing the private sector.
“We are approving requisitions from the counties but then there is mischief at the payment. We cannot tell who has been paid until someone comes back and complains but when we check the requisition that contractor was number one, yet he or she has not been paid,” said Ms Nyakang’o.
The CoB published the Controller of Budget Regulations, 2021 that if approved by the newly elected Senators will for the first time allow monitoring of cash outflows from the accounts of counties. The Senate of the 12th Parliament rejected the regulations, but the CoB says they will resubmit them.
The regulations, if approved, will improve CoB’s tracking of cash outflows from the Consolidated Fund, Equalisation Fund, County Revenue Fund and other public funds to ensure the set ceilings are not breached.
The Consolidated Fund holds money from the national government and is used to pay salaries and service debt. Money from the Equalisation Fund is used to provide basic services like water and health while the county revenue funds hold cash that the devolved units raise through taxes and levies.