Billions of shillings held in government funds and collected through various levies could come under the watch of the Controller of Budget if Parliament approves proposed changes to financial laws.
The National Assembly Committee on Constitutional Implementation Oversight has called for amendments to the Public Finance Management (PFM) Act to give the Controller of Budget Dr Margaret Nyakang'o authority to report on and independently monitor funds and levies operated by the national and county governments.
The committee says the current legal framework has left a large amount of public money outside the direct reach of the Controller of Budget, with 75 funds and levies at the national level and several others at the county level operating as potential blind spots.
Among the funds that could be brought under the new oversight arrangement is the National Infrastructure Fund (NIF), which has accumulated Sh104 billion from the sale of Kenya Pipeline Company (KPC) shares.
The Affordable Housing Levy is also among the major pools of money affected by the oversight gap. About Sh65 billion has been collected from deductions made from Kenyans' earnings to finance low-cost housing, but the Controller of Budget does not currently have direct oversight over how the money is used.
The concerns are contained in a report on the status of implementation of the Constitution tabled before the House.
In the report, Nyakang'o is quoted warning that the legal gap "prevents any independent oversight" of billions held in funds and levies, "severely undermining" her supervisory role over public finances.
"The Controller of Budget clarified that all funds and levies fall outside her oversight mandate due to their classification as funds and levies rather than budgeted funds," the report states.
The committee is also calling for amendments to the Controller of Budget Act to strengthen the office's powers.
The proposed changes would give the Controller of Budget enforcement powers, require implementation of recommendations made by the office, remove restrictions on economic reporting and provide sanctions for violations.
Dr Nyakang'o recently spoke about the limits facing her office, which, together with the Auditor-General, is one of the two constitutional independent offices responsible for oversight of public finances.
She said standalone statutory and special funds are not covered by the legal framework that gives her office the ability to directly monitor or follow their expenditure because they operate outside the Consolidated Fund.
"Anything called a fund or a levy, we will not see it. They are not part of the Consolidated Fund," Dr Nyakang'o said.
"My oversight powers are directly tied to withdrawals from the Consolidated Fund."
The oversight concerns are not limited to national government funds.
Auditor-General Nancy Gathungu has separately raised questions over the management of more than Sh30 billion held in county public funds, warning Parliament that the money could have been misappropriated.
Gathungu's concerns centre on the fact that the county funds operate outside the Integrated Financial Management Information System (IFMIS), a system that has helped increase visibility of government financial transactions.
The PFM Act allows county public funds to be created after approval by the County Executive Committee and the County Assembly.
However, the Auditor-General cautioned that keeping such funds outside IFMIS could expose them to greater risks of fraud and corruption because transactions may not be adequately captured.
"County funds operate outside IFMIS and, therefore, payments made by these funds may not be properly recorded as the management information system used to record business transactions is mainly manual," Gathungu warns.
Dr Nyakang'o has named the Social Health Insurance Fund (SHIF), Affordable Housing Levy Fund, Hustler Fund, National Infrastructure Fund (NIF) and Sovereign Wealth Fund among the major government funds and levies that remain outside her office's ability to trace after collection.
She has described them as blind spots in public financial management and questioned why funds worth billions of shillings can operate without strict systems for real-time reporting.
She also questioned the absence of mechanisms that would allow expenditure to be scrutinised before funds are released and spent.
The Primary Healthcare Fund was cited as an example of the challenge.
Dr Nyakang'o said money under the fund is approved and released through lump-sum transfers, after which it moves from the Central Bank of Kenya to individual county or departmental accounts held in commercial banks.
Once the funds reach those accounts, she said, her office cannot track how they are spent or establish whether the money remains available for national projects.
The proposed amendments would seek to close this gap by extending the Controller of Budget's oversight to funds and levies that currently fall outside the Consolidated Fund and are therefore beyond the office's direct monitoring.