State plans major audit shakeup to stem graft, wastage of funds

President William Ruto has endorsed sweeping legal reforms granting hundreds of internal auditors across Kenya’s public service immunity from dismissal or harassment, in a high-stakes bid to crush systemic corruption that bleeds the nation of an estimated two-thirds of a trillion shillings annually. 

The radical overhaul, contained in draft amendment regulations and a bill reviewed by The Standard, transforms the lowly internal auditor from a management lackey into a state-sanctioned watchdog with explicit whistleblower protections.

The move is widely seen as a direct response to the failure of Parliament to act on external audit reports. 

“No internal auditor shall be dismissed, demoted, suspended, harassed, discriminated against, intimidated, or experience any other form of retaliation,” declares the Public Finance Management (National Government) (Amendment) Regulations, 2026, a legal shield without precedent in Kenya’s public finance history. 

Parliamentary committee

The move follows devastating revelations from Auditor-General Nancy Gathungu in late 2025 that Parliament had debated just two of 63 performance audit reports submitted since 2012, a dereliction she branded “sleeping on the job.”  With implementation of parliamentary committee recommendations lagging at 21 per cent, the reforms empower an army of internal auditors as a first line of defence. 

“The accounting officer shall be responsible for the implementation of the recommendations of the head of internal audit,” reads the proposed amendment to the Public Finance Management Act, mandating responses to audit findings within 14 days. 

The reforms codify a “Zero Fault Audit Status” directive issued by Chief of Staff Felix Koskei in February 2025, which ordered accounting officers to surcharge officers responsible for any loss of public resources. 

Under the new framework, every national and county government entity must establish an internal audit function, backed by a dedicated budget line and anchored by a powerful Internal Auditor-General Office within the National Treasury.  The office will consolidate quarterly assurance reports from all entities and prepare annual compliance reports for the Cabinet Secretary, creating a real-time surveillance network over public spending. 

Audit committees, long perceived as toothless talking shops, will now comprise at least two members from recognised professional bodies, with chairpersons required to hold first degrees and demonstrate expertise in risk management and public sector finance. 

The Internal Auditor-General will evaluate audit committee performance annually, a provision insiders say will end the era of politically connected deadweight occupying oversight roles. 

“The head of the internal audit function shall be designated as an Authority to Incur Expenditure holder in respect of the approved internal audit and audit committee budget,” the regulations stipulate, giving auditors direct control over their own resources. 

Every entity must also establish a Risk Management Committee chaired by the accounting officer, meeting at least quarterly to oversee “strategic, operational, financial, compliance and emerging risks.” 

The committees will be accountable directly to Cabinet Secretaries or entity heads, not to middle management, a structural elevation designed to bypass bureaucratic sabotage. 

The reforms answer repeated demands from the International Monetary Fund (IMF), which has linked governance weaknesses to delays in disbursing funds under Kenya’s financial support programme. 

IMF Deputy Managing Director Nigel Clarke, after meeting Ruto and Treasury Cabinet Secretary John Mbadi in December 2025, explicitly called for strengthened “anti-corruption frameworks” and transparency. 

Ruto, who came to power promising to slay the corruption dragon, has struggled to convince sceptics. Ethics and Anti-Corruption Commission data previously indicated Kenya loses Sh666 billion annually, a third of the national budget, to theft and waste. 

Human Rights Watch has framed the haemorrhage of public funds as a human rights crisis, diverting resources from healthcare, education and infrastructure. 

“These are not mere technical amendments,” a senior Treasury official told Standard on condition of anonymity. “This is structural surgery on a patient that has been bleeding out for decades.” The regulations, signed by Mbadi, await formal gazetting. The parallel bill is expected before Parliament, where the same lawmakers who have ignored audit reports will have to vote for their own oversight.