Treasury CS John Mbadi faults parastatals for prioritising profits over public service

The National Treasury has raised alarm over the growing trend of state agencies drifting from their original roles by focusing on profit-making ventures instead of serving the public.

Treasury Cabinet Secretary John Mbadi, speaking before the Senate Standing Committee on Devolution and Intergovernmental Relations, criticised parastatals for using public funds to invest in government securities rather than delivering on their service mandates.

Mbadi said several agencies are treating government funds as a source of returns, a move he described as a misuse of public resources.

He cited the Unclaimed Financial Assets Authority (UFAA) as a prime example, accusing the agency of prioritising investment in treasury bonds instead of reconnecting Kenyans with their unclaimed assets.

“It is disturbing to see state corporations that are supposed to deliver services opting to divert resources to treasury bonds. That is not their job. We must restore focus to their actual mandates,” Mbadi told the committee.

He responded to a question from Kisii Senator Richard Onyonka on the state of parastatal reforms, stating that urgent changes are needed at UFAA. He expressed concern that the agency has veered off its purpose.

“The purpose of UFAA is not to hoard wealth in the Treasury bonds but to reconnect unclaimed assets with rightful owners. People are living in poverty while their parents’ savings sit idle in accounts they don’t know exist,” he said.

Mbadi disclosed that the government is currently recruiting a new CEO for UFAA, who will lead the reform process aimed at realigning the agency with its original mission.

“Once the new leadership is in place, we must restructure the agency to ensure it delivers on its mandate. This should not be another fund-accumulation body,” said the CS.

He revealed that at least 18 government agencies are being reviewed for possible dissolution, merger or transfer to counties. The restructuring is part of ongoing efforts to improve efficiency in public service delivery.

“Some of these institutions are liabilities. They duplicate roles, have bloated staff, and have deviated from their original purpose. We are restructuring them—some will be dissolved, others merged, and those with devolved functions transferred to county governments,” Mbadi told the committee chaired by Wajir Senator Mohamed Abbas.

He said agencies in the water and irrigation sectors were especially problematic due to overlapping functions that cause waste and inefficiencies.

“You find one agency in charge of water harvesting and another for irrigation. Why are they not working together? Why not consolidate them?” asked the CS.

The committee also raised concerns about the legal and operational confusion surrounding the 18 parastatals whose functions have been devolved without a proper transfer of resources.

“Where are we with the parastatal reforms? Are we making any progress?” asked Marsabit Senator Mohamed Chute.

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In response, Mbadi said the government was awaiting a detailed costing process before allocating resources to counties for the devolved functions, likely beginning in the 2026/27 financial year.

“The Intergovernmental Relations Technical Committee (IGRTC) is handling the transition. We have identified which functions to devolve, but the funding will only come after a proper costing exercise is complete,” said Mbadi.

“We feel they should not operate. But we still look at how best to, if some are going to discharge their functions at the counties.”