MPs push for CoB powers to punish errant state agencies

Lawmakers have started a bid to significantly strengthen the Office of the Controller of Budget by granting it enforcement powers to sanction government entities that violate public finance laws.

The Constitutional Implementation Oversight Committee proposes amending the law to grant CoB the authority to directly deal with agencies that fail to comply with budget rules.

MPs want the National Treasury to implement a system that would see the CoB’s office linked to the Central Bank of Kenya for authorisation of payments.

The proposed system would link the CoB’s requisition platform directly with the Central Bank of Kenya, allowing the office to track funds from approval to final expenditure.

MPs have also recommended that the affordable Housing Levy be brought under the purview of the CoB.

A significant accountability gap was highlighted concerning the levy as per the report.

The CoB clarified that the levy, which collects an estimated Sh63 billion annually, falls outside its oversight purview due to its classification as a ‘levy’ rather than a budgeted fund.

MPs thus want the Public Finance Management (Amendment) Bill, 2024, expanded to bring all such special funds and levies under the CoB's scrutiny.

COB has been highlighting the pending bills crisis, rampant wasteful expenditure and the operation of hundreds of unauthorised bank accounts by county governments, but requires the action of other agencies for a resolution.

The CIOC, currently chaired by Suba South MP Caroli Omondi, says the situation must not be allowed to continue, hence the renewed push for reforms.

The committee says its review established that Controller of Budget Margaret Nyakang’o currently operates with a critically weakened mandate.

While her office approves withdrawals and raises objections to irregular requests, preventing illegal expenditure, it lacks any legal mechanism to compel compliance or punish offenders.

“COB’s oversight mandate is severely undermined by legislative limitations and lack of enforcement mechanisms,” MPs said, noting that the office can identify irregularities but cannot ensure its recommendations are implemented.

Nyakang’o informed the committee of alarming fiscal indiscipline, including 47 foreign trips by county executives costing Sh284 million, while medical suppliers went unpaid.

She also highlighted the procurement of luxury vehicles by 23 national ministries despite accumulating pending bills.

Her office identified 187 unauthorised bank accounts operated by 31 county governments in violation of Public Finance Management regulations.

“The controller noted the absence of legal mechanisms to compel compliance or sanction violations,” the report states.

The COB further cited renovation expenditures exceeding Sh1.2 billion in 12 counties with unpaid medical suppliers.

The committee wants the National Assembly to urgently amend the Controller of Budget Act to grant the CoB enforcement powers to ensure its recommendations are acted upon.

The changes would also be aimed at removing current restrictions that bar the office from reporting on economic developments and fiscal forecasts.

CIOC further wants laws to be enhanced to introduce explicit sanctions for violations of public finance management regulations by state agencies.

The legislative empowerment is aimed at transforming the CoB from an advisory body into an institution with the authority to hold the executive accountable.

The CIOC's Second Report on the Status of Implementation of the Constitution further documents the findings from engagements with three key fiscal oversight bodies - CoB, the Commission on Revenue Allocation (CRA) and the Auditor General.

For the Auditor General, MPs recommended speedy passage of the Public Audit (Amendment) Bill, 2024, to guarantee OAG financial and operational autonomy.

“Despite constitutional guarantees, the office operates with diminished autonomy, evidenced by underfunding and lower institutional independence rankings,” the committee said.

MPs, in the report due for consideration this afternoon, want Treasury to consider funding OAG to the tune of 0.5 per cent of national revenue, from the current 0.2 per cent.

The committee also called for enhanced funding and enforcement powers for the Commission on Revenue Allocation to ensure county governments comply with fiscal responsibility requirements. 

INSTANT ANALYSIS

The push to arm the CoB is part of a broader set of recommendations to strengthen the country’s fiscal oversight framework. If the recommendations are enacted, they stand to bolster the country’s public financial management systems, equipping oversight institutions with the legal tools needed to combat fiscal indiscipline and protect public funds. The current committee leadership thus needs to prioritise the calls by the oversight agencies for autonomy.