A new Bill is proposing stricter penalties for state officers who misuse funds allocated for development projects, aiming to ensure better financial accountability and prevent corruption.
The Public Finance Management (PFM) Act, 2025, mandates state agencies to create project-specific bank accounts for each development initiative. These accounts will be dedicated solely to managing and executing the specific projects, ensuring transparency and preventing misuse of funds.
The Bill, sponsored by Rongo MP Paul Abuor, also focuses on ensuring timely payments to contractors. 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 law, any accounting officers or Authority to Incur Expenditure (AIE) holders found guilty of diverting funds from these project-specific accounts will face a penalty of 150% of the misused amount. The penalty will be recoverable as a debt owed to the government. In addition to the financial fine, the officer could face immediate suspension and potential dismissal from public service, subject to an investigation.
“The officer shall be liable to a term of imprisonment not exceeding five years upon conviction,” Abuor stated during a press conference at Parliament Buildings on Monday.
New Bill Targets Banks
The Bill also holds banks accountable. Any financial institution found facilitating unauthorized withdrawals or transfers from project-specific accounts will face significant financial penalties and legal actions, as determined by the Central Bank of Kenya (CBK).
To enhance financial oversight, the proposal amends Section 19 of the PFM Act, compelling the Controller of the Budget (CoB) to closely monitor disbursements. “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,” Abuor stated.
Further, the Bill requires the National Treasury to develop a digital platform to track the utilization of project-specific accounts. This platform will be accessible to oversight bodies and the public, promoting transparency in public financial management.
In addition to these measures, the Bill mandates the Treasury, in partnership with other oversight bodies, to conduct regular training for AIE holders and accounting officers on their duties and obligations.
Ministries, Semi Autonomous Government Agencies(SAGAs), and parastatals will also be required to submit monthly expenditure reports for each project-specific account to the Treasury, the Auditor General, and Parliament.
These provisions aim to strengthen accountability and ensure that funds allocated for public projects are used effectively and responsibly.
