Treasury Targets Counties' 'Secret Accounts' in Major Finance Reform Push

The National Treasury is extending its cash management reforms to county governments. This follows the recent rollout of the Treasury Single Account framework for national ministries, departments and agencies.

Cabinet Secretary John Mbadi said the move targets unauthorised bank accounts operated by counties. Auditor-General Nancy Gathungu and the Controller of Budget have repeatedly flagged these accounts.

Authorities have identified more than 5,476 such accounts. Officials fear they serve as conduits for siphoning public funds meant for development projects and service delivery.

Mbadi announced the extension of the Treasury Single Account to counties in the 2026/27 financial year. It forms part of a broader public finance management reform agenda.

Automation of county exchequer requisition processes will come first. Counties will then progressively migrate to the TSA regime.

The government will operationalise a granular data integration system in collaboration with the Central Bank of Kenya. This aims to deliver real-time visibility of counties' cash and liquidity positions.

At the national level, the TSA model has improved efficiency. It links invoices directly to approved obligations and ensures funds are released only against verified needs.

The reforms have reduced overdraft financing costs from the Central Bank of Kenya by 61 percent in the current financial year. This delivers measurable savings and greater transparency.

County governments currently hold funds in numerous unmonitored commercial bank accounts. The TSA will aggregate balances and consider available cash before any overdrafts.

A February 15, 2026 circular from Treasury Principal Secretary Dr Chris Kiptoo directed submission of all bank account details. The process updates records across public entities.

Section 119(2) of the Public Finance Management Act requires each County Treasury to establish a Treasury Single Account. Payments to and from county entities must flow through it.

Auditor-General Gathungu previously told parliament that some counties operate over 200 secret accounts. She described dormant accounts suddenly receiving and losing funds without trace.

These practices bypass public finance laws and limit expenditure tracking. The reforms seek to eliminate such irregularities and strengthen accountability.

The changes align with Section 28 of the Public Finance Management Act. They modernise public cash management and reduce unnecessary interest costs on government borrowing.

Commercial banks holding county deposits may see reduced interest income. The hybrid TSA model allows some entities to retain commercial accounts while core operations shift to the Central Bank.

The push comes amid ongoing scrutiny of county spending on infrastructure and development. Better cash visibility could improve funding flows for roads, hospitals and other projects.