The Treasury must study counties

County governments have raised the alarm saying their operations may stall because the Office of the Controller of Budget is delaying approval of funds already released by the Treasury.

I have seen correspondents from a caucus of county executive committee members (CECs) in charge of finance in counties where they estimate that a whopping Sh58 billion released by the Treasury for the month of February is sitting idle in the CRF accounts at the Central Bank of Kenya.

"KRA is sending demand letters to counties for money which we are willing to pay but getting approvals from the OCOB is becoming a tall order," lamented the CECs.

It is understood that part of the explanation is that the COB is becoming stricter after it discovered that counties were abusing the exchequer approval processes by spending monies imprudently, effecting re-allocations without justifications and reasons the exchequer approval was made in the first place.

The county governments explain the circumstances differently. This week, a CEC in charge of finance in one county said the COB had recently adopted a rule decreeing that all exchequer requisitions by counties must be personally signed by the Budget Controller herself.

Question: What if she is sick?

In the process of checking the veracity of the claim by the CEC, I came across an internal memo dated January 19, 2024, signed by the Controller of Budget, Dr Margaret Nyakang'o, stating as follows: "All exchequer requisitions for the national and county governments, manual or electronic, will henceforth be signed by the Controller of Budget. Secondly, ‘the Controller of Budget will likewise sign all out bound-letters’.

Ms Nyakang’o is a fiercely independent public-spirited State official with a reputation of a high sense of integrity and a stickler for due process. I am prepared to give her the benefit of the doubt that in introducing these drastic rules she must have been motivated by altruistic reasons. Maybe she found that the system had been infiltrated by a rent-seeking elite.

I don't want to go into the claims and counterclaims. What we need to address are the broader public policy issues that the brewing tensions between the COB and county governments have brought to the fore.

We must accept that public finance architecture that came with the 2010 Constitution needs to be revisited in terms of fitness for purpose.

The big issue here is the parlous state of public finance management within county governments.

We decided to throw billions at these units without putting in place working accountability systems and processes.

We just throw billions at the counties without considering the capacity to absorb the money or the efficacy of internal control systems.

We also made a big mistake when we came up with the idea of giving Parliament, the Judiciary and the county governments power and control over their own finances and budget.

I think that in the rush to dismantle what we described at that time as the imperial powers of the National Treasury in accordance with the 2010 Constitution, we whittled down the critical role that the National Treasury ought to continue playing in controlling expenditure of all monies from the taxpayer.

I am inspired by some of the things and reforms that the National Treasury is promising to implement and which will cover everybody who spends taxpayer funds.

Separation of powers

The other day, the Treasury announced that it was going to buy a new ERP system for county governments. They have also announced that all exchequer issues are to be automated in a system that forces county government to use money in line with approvals by the Controller of Budget.

All entities run on taxpayer funds will operate within the Treasury Single Account. The Treasury is also shifting everybody to accrual accounting from this July.

I am a supporter of the principle of separation of powers, but we should not allow county governments, Parliament and the Judiciary to exert unbearable burdens on the taxpayer through excessive hiring.

The National Treasury must be brought back to the centre.

The writer is a former managing editor of The EastAfrican.