NAIROBI, Kenya — Accounting officers who fail to implement recommendations adopted by Parliament or county assemblies following reports by the Auditor-General and Controller of Budget could face penalties under amendments to Kenya’s public finance laws.
The changes are contained in the Public Finance Management (Amendment) (No. 4) Bill, 2024, which President William Ruto assented to on Tuesday.
The amendments are aimed at strengthening accountability, transparency and prudent management of public resources, particularly within government institutions and devolved units.
One of the key changes targets accounting officers who fail to act on resolutions adopted by Parliament or county assemblies following scrutiny of reports from oversight institutions.
Under the existing Public Finance Management Act, failure to implement such resolutions is not specifically listed as an offence.
The new provisions seek to close that accountability gap by making non-compliance subject to penalties.
Accounting officers face greater accountability
Parliament and county assemblies play a central role in scrutinising reports produced by the Auditor-General and the Controller of Budget.
The reports can identify irregular expenditure, weaknesses in financial controls, delays in implementation and other concerns involving the management of public funds.
Once lawmakers adopt recommendations or resolutions arising from the reports, accounting officers are expected to take corrective action.
The amendments strengthen the consequences for officers who fail to implement those resolutions.
The move is intended to ensure that audit findings do not remain unresolved after being debated and adopted by legislative oversight bodies.
It also gives greater weight to recommendations arising from public financial oversight processes.
Financial statements to be submitted earlier
The amendments also shorten the period within which public entities must submit their financial statements after the end of a financial year.
The reporting period will be reduced from three months to two months.
The shorter deadline is expected to give the Office of the Auditor-General additional time to examine financial records and prepare audit reports.
Earlier submission could also enable oversight institutions and legislative bodies to identify financial management problems sooner and demand corrective action before they become more entrenched.
The change forms part of a broader effort to strengthen the public finance reporting cycle.
Treasury given power to suspend transfers
The legislation also introduces tougher measures against public entities that repeatedly fail to remit statutory deductions.
The amendments seek to classify the failure or persistent delay in remitting employees’ statutory deductions as a persistent material breach.
The deductions covered include:
- Income taxes;
- Pension contributions;
- Social health insurance contributions; and
- Cooperative society deductions.
Where a state organ or public entity commits such a breach, the National Treasury would have the authority to suspend transfers to the affected institution, subject to the requirements of the amended law.
The provision is intended to discourage public institutions from withholding deductions that have already been made from employees’ salaries.
Counties to report outstanding deductions
County governments will also face additional reporting obligations under the amendments.
Counties will be required to submit quarterly information to the Controller of Budget and National Treasury detailing the status of statutory deductions and any outstanding amounts.
The reporting requirement is expected to improve visibility over unpaid deductions and allow the national government and oversight institutions to identify persistent problems earlier.
It could also provide a more systematic way of tracking whether counties are remitting money deducted from employees’ salaries within the required timelines.
Strengthening public finance oversight
The amendments come against the backdrop of longstanding concerns over the management of public resources and the implementation of audit recommendations.
Auditor-General reports frequently identify financial management weaknesses across national and county governments, while the Controller of Budget monitors the use and release of public funds.
However, identifying problems through oversight reports does not necessarily guarantee that corrective measures will be implemented.
By attaching consequences to failure to act on legislative resolutions, the amendments seek to strengthen the link between audit findings, legislative oversight and corrective action.
The changes also place greater emphasis on timely financial reporting, allowing oversight institutions to begin reviewing public accounts earlier.
Focus on devolved governments
The amendments are particularly significant for county governments, which manage substantial public resources but have faced recurring challenges involving payroll costs, statutory deductions and financial reporting.
The requirement for quarterly reporting on outstanding statutory deductions is expected to give both the Controller of Budget and National Treasury a clearer picture of counties facing persistent payment difficulties.
