A new Bill, the Public Finance Management (PFM) Act, 2025, is being proposed to introduce stricter penalties for state officers who misuse funds allocated for development projects. The aim is to ensure better financial accountability and prevent corruption in public spending.
The Bill, sponsored by Rongo MP Paul Abuor, mandates that state agencies establish project-specific bank accounts for each development initiative. These accounts will be dedicated solely to managing and executing the projects, promoting transparency and minimizing the risk of funds being misused. Abuor emphasized, “All funds from the Treasury will now be directed to accounts dedicated solely to the implementation of specific projects. This ensures that the funds are not misdirected or misused.”
Under the proposed legislation, accounting officers or Authority to Incur Expenditure (AIE) holders found guilty of diverting funds from these designated accounts will face significant penalties. The penalty will amount to 150% of the misused amount, recoverable as a debt owed to the government. In addition to the financial penalty, offenders may be suspended immediately and could face dismissal from public service, subject to an investigation. Abuor added, “The officer shall be liable to a term of imprisonment not exceeding five years upon conviction.”
The Bill also holds banks accountable, stipulating that any financial institution facilitating unauthorized withdrawals or transfers from project-specific accounts will face substantial financial penalties and legal action, as determined by the Central Bank of Kenya (CBK).
To strengthen financial oversight, the Bill amends Section 19 of the PFM Act, requiring the Controller of the Budget (CoB) to monitor disbursements closely. “The CoB shall ensure that the funds are disbursed to project-specific accounts and shall provide quarterly reports on compliance by ministries, state departments, SAGAs, and parastatals,” said Abuor.
Furthermore, the Bill proposes the development of a digital platform by the National Treasury to track the utilization of these accounts, providing transparency and accessibility for oversight bodies and the public. Ministries, Semi Autonomous Government Agencies (SAGAs), and parastatals will be required to submit monthly expenditure reports to the Treasury, the Auditor General, and Parliament.
