Auditor-General Nancy Gathungu.
The national government has moved to tighten controls on county finances by making it impossible to void approved transactions.
This follows revelations of widespread misuse, where accounting officers cancel payments approved by the Controller of Budget.
The latest action follows a damning report by Auditor-General Nancy Gathungu, which exposed a disturbing trend where payments meant for small suppliers with no “connections” to senior county officials are voided. The money is then diverted to politically connected contractors.
Appearing before the Senate Committee on Devolution, Central Bank of Kenya (CBK) Governor Kamau Thugge said reforms have been initiated aimed at curbing this abuse.
He explained that counties will no longer be able to cherry-pick who gets paid once the new banking systems go live.
“On voided transactions, the blame is not with the CBK. The Controller of Budget approves requisitions, but county accounting officers pay for something else,” said Mr Thugge.
Central Bank of Kenya Governor Kamau Thugge.
“That will no longer be possible. Whatever is approved by the Controller of Budget will be exactly what gets paid.”
Dr Thugge said that CBK is upgrading two critical banking systems — Temenos T24 and Granular Data Integration (GDI) — to seal loopholes that allow manipulation of payment files. The systems will ensure that requisition files are directly tied to funding, preventing tampering by rogue officers.
CBK Deputy Governor Susan Koech said that the Temenos T24 platform, which offers end-to-end banking solutions, will go live next month, while the GDI platform — which allows real-time monitoring of county transactions — will be rolled out by the end of October.
“The new systems will enhance transparency, efficiency, and eliminate discretionary interference in payments,” she said.
“We have already onboarded all banks and payment service providers.”
The changes follow the release of the Auditor-General’s report for the financial year ending June 30, 2024, which revealed that counties voided more than Sh10.9 billion worth of deals during the period under review.
The audit found that some of the voided payments were for services already delivered by small suppliers. The worst abuses occurred in the final month of the financial year, often justified by claims of “missing documents.”
The audit shows that Kisumu County voided 4,127 transactions worth Sh2.6 billion, with no supporting documents provided.
Busia County is reported to have cancelled Sh2.1 billion, with Sh772.6 million voided in June alone. And in Kajiado County, 1,922 transactions worth Sh2.28 billion were cancelled.
In all the three cases, the counties failed to notify the Controller of Budget of the voided payments or provide documentation required under Section 92(3)(c) of the Public Finance Management Act, 2012.
Wajir Senator Mohamed Abass said that the situation is very worrying. He added that corruption has been devolved.
Wajir Senator Mohamed Abass.
Other counties cited in the report are Siaya, which voided 1,500 transactions worth Sh560.6 million, Nakuru voided 570 transactions totalling Sh308 million, while Mombasa cancelled Sh921 million transactions, including Sh412.9 million meant for suppliers and statutory deductions. Nyeri cancelled 722 transactions worth Sh527.2 million and Meru voided Sh415.4 million deals.
Tharaka-Nithi cancelled 615 worth Sh293.3 million and Embu voided 716 worth Sh324.5 million.
In most of these cases, the audit found no indication that the CoB was consulted or that the funds were used for the intended purposes.
Senators condemned the practice, describing it as a “cartel-like operation” that exploits ordinary Kenyans.
“These voided transactions target small suppliers — hustlers — who did their part but have to beg to be paid,” said Nairobi Senator Edwin Sifuna.
“In Nairobi, too, there's a list of preferred contractors. If you refuse to play ball, your payment is cancelled.”
Tharaka-Nithi Senator Mwenda Gataya added: “This is scandalous. A system must be enforced so that once a payment is approved by the CoB, it cannot be reversed.”
According to the report, many affected suppliers have been left bankrupt, burdened by debts, or even driven to suicide due to non-payment. Others have shut down businesses altogether.
The government now hopes that the CBK’s new systems — which offer real-time oversight and automatic linkages between requisitions and payments — will help end the abuse and restore accountability in the disbursement of public funds.
