Treasury faults counties for opening private bank accounts

Treasury has reprimanded county governments for irregularly operating accounts outside the Central Bank of Kenya (CBK). The move is likely to escalate tensions between the two over the management of public finances.

In a report released yesterday detailing cumulative fiscal transfers between central and county governments, the Treasury said county governments had more than enough money to carry out key operations, despite reports from governors to the contrary.

“As at January 18, 2017, County Governments had collectively accumulated cash balances in various CBK accounts amounting to Sh33 billion, equivalent to 11.8 per cent of their equitable share allocation in 2016/17,” the Treasury said in a notice published in local dailies and signed by Principal Secretary Kamau Thugge.

Low absorption

The PS added that the Government had allocated more than Sh1 trillion to the 47 counties since their establishment in 2013, with counties showing low absorption levels even as governors complain of delayed disbursements.

Makueni and Kitui have the largest amounts of money, with Sh2.3 billion and Sh1.7 billion unspent in CBK accounts, respectively, despite the counties being among those bearing the brunt of the current drought.

Other counties listed as having large unspent allocations include Kisumu (Sh1 billion), Embu (Sh1.4 billion), Bungoma (Sh1.4 billion) and Mandera (1.3 billion).

“Some 11 counties have unspent reserves above Sh1 billion each, while the average balance per county exceeds Sh700 million. Evidence suggests that the idle cash balances could be much higher if deposits irregularly held in commercial bank accounts are taken into account,” Dr Thugge said.

Section 109 of the Public Finance Management Act, 2012, states that county treasuries have the responsibility to operate a county revenue fund to be kept in the Central Bank of Kenya “or a bank approved by the County Executive Committee member responsible for finance”.

Counties have in the past said delayed disbursements have forced them to borrow from commercial banks to meet their obligations. Commission for Revenue Allocation (CRA) Chairman Micah Cheserem last year blamed fiscal distress in counties on these delays.

“The Government needs to release money to the counties faster and in time and the counties will absorb 100 per cent of this,” he said.

“There are some challenges with accountability and wastage in some counties, but devolution has worked wonders in counties that have seen almost zero development expenditure since independence.”