County governments could be required to withdraw all their funds from commercial banks within six months under a proposal by the Controller of Budget Margaret Nyakang’o, setting the stage for a fresh confrontation over the financial independence of devolved units.
Nyakang’o wants county accounts transferred to the Central Bank of Kenya (CBK), arguing that the existing banking arrangement makes it difficult for oversight institutions to track public funds held outside the national banking system.
Her position, however, has been challenged by the Commission on Revenue Allocation (CRA) and the Council of Governors (CoG), which have defended the counties' right to maintain commercial bank accounts and questioned the practicality of centralising all their banking operations at the CBK.
The disagreement played out before the Senate Finance and Budget Committee, where the three institutions presented their views on the Public Finance Management (Amendment) Bill, 2025, sponsored by the National Assembly.
The proposed legislation seeks to overhaul aspects of public financial management, including restricting county governments from operating commercial bank accounts and placing their banking activities under closer National Treasury supervision.
It also proposes changes to the Intergovernmental Budget and Economic Council and seeks to introduce a requirement for counties to secure Treasury approval before opening bank accounts.
However, the Controller of Budget, CRA and Council of Governors jointly opposed the proposal requiring counties to seek clearance from the National Treasury before opening accounts, despite their differences over whether commercial banks should continue handling county funds.
During the session, Nyakang’o backed the proposed restrictions, saying they would improve financial oversight and bring county resources under a more coordinated system.
She argued that the arrangement would strengthen the constitutional safeguards governing the management of public money under Articles 207 and 228.
“It strengthens control over county funds under Articles 207 and 228. Existing commercial bank accounts need to be at the CBK as part of the Treasury Single Account,” she said.
The Controller of Budget further raised concerns over the limited access her office and the National Treasury have to information on money held in commercial bank accounts by county governments.
She maintained that transferring the accounts to the CBK would make it easier for the relevant institutions to monitor county finances and establish the amount of public money available to each devolved unit.
But the CRA and governors rejected the argument that centralising county accounts at the CBK was the best solution, pointing to the practical difficulties of implementing such a system across all 47 counties.
Council of Governors Finance Committee chairman Fernandes Barasa said the proposal failed to take into account the constitutional purpose of devolution, which requires government functions and services to be brought closer to the people.
He argued that forcing counties to conduct all their banking through an institution that does not operate in every county would go against the principles established under the Constitution.
“One of the objects of devolution under Article 174(h) is to facilitate the decentralisation of state organs, their functions and services from the capital of Kenya,” Barasa said.
“Insisting on the opening of all bank accounts at the CBK, which does not operate in each of the counties, offends this constitutional provision,” he added.
The Senate committee, chaired by Senator Ali Roba, heard submissions from Nyakang’o, CRA chairperson Mary Chebukati, Barasa and CoG legal committee chairman Ochillo Ayacko.
Their submissions exposed differing views on how county finances should be managed, with the Controller of Budget pushing for tighter central oversight while the CRA and governors raised concerns about the impact of the proposed restrictions on devolution.