The delay in the national government’s disbursement of funds to counties and the wastefulness of meagre resources by counties are hampering service delivery, supplier payment, and employee remuneration. 

In early February, President William Ruto attributed the delay in disbursing funds to the counties to dual pressures: fulfilling Eurobond debt obligations and increasing the allocation of resources to the Ministry of Education for the roll-out of Junior Secondary Schools (JSS). 

According to the President, these financial commitments reduced the funding available for county governments. 

Senators also raised the alarm over the delay, with the Senate Devolution and Intergovernmental Relations Committee Chairperson, Senator Mohamed Abass, stating that the delays are of grave concern. 

The delay in disbursing funds to county governments can severely disrupt essential services, affect local economies, and erode public trust.

Analysts concur that it is a pressing issue that requires immediate attention from the national and county governments to ensure that governance functions run smoothly and citizens receive the services they need.  

As of September 5, 2024, no county had received its July, August, and September 2024 allocations because the County Allocation of Revenue Act was not in place. On the same day, the Council of Governors (CoG) wrote to the Senate Finance Committee, raising concerns over the delay, which it said had paralysed county operations.

CoG Chief Executive Officer Mary Mwiti said the current status has paralysed counties’ operations regarding continuity of service delivery, payment of suppliers, and remuneration of county employees. Already, several counties have not paid their employees’ August salaries, citing delays.

Additionally, the CoG’s letter to the Senate’s Finance Committee argued that even in the absence of a County Allocation of Revenue Act, the law provides room to have the Public Finance Management (PFM) Act, 2022, invoked for the Controller of Budget (CoB) to approve withdrawals of up to half of the previous year’s equitable share from the consolidated fund.   

The Office of the Controller of Budget (OCoB) is an oversight institution established under Article 228 of the Constitution of Kenya, 2010, to oversee and report on the implementation of the budgets of the national and county governments. It identifies delays and the failure of the National Treasury to disburse an equitable share of revenue to county governments as one of the major reasons why the devolved units are facing operational crises.

According to the OCoB’s latest report, “County Governments Budget Implementation Review Report for Financial Year 2023/24”, as of the end of the financial year 2023/24, county governments were yet to receive the June 2024 disbursement of KSh30.83 billion from the National Treasury.

Additionally, the national government failed to transfer the conditional grants provided in the County Government Additional Allocation Act, 2024, which included the conditional grant for the transfer of library services of KSh162.85 million, allocation for court fines of KSh108.66 million, and allocation for mineral royalties of KSh2.93 billion.  

“The failure to disburse the entire equitable share of revenue to county governments affected budget implementation and resulted in unsettled expenditure commitments. This further led to low budget absorption and pending bills,” the report states.

Besides this, the devolved units are being accused of under-performance on own-source revenue collection, low expenditure on development budget, high pending bills, high expenditure on personnel emoluments, delay in submission of financial and non-financial reports to the CoB, use of commercial bank accounts, and excessive expenditure on travelling.

Under-performance on own-source revenue collection  

During the reporting period, counties generated a total of KSh58.95 billion from their own source revenue, which was 72.8% of the annual target of KSh80.94 billion.

The counties that recorded low performance of own source revenue of the annual targets were Nyandarua (42.1%), Machakos (46.5%), Nyamira (53.8%), Bungoma (55.8%), Kajiado (56.1%), and Busia (56.9%).

“The underperformance of own-source revenue collection implies that county governments did not implement all planned activities due to budget deficits,” the report further states.

Low expenditure on the development budget

Counties spent KSh109.23 billion on development activities, representing an absorption rate of 57.5 percent of the annual development budget of KSh189.93 billion. The expenditure on development activities was 24.4 percent of total spending in the financial year 2023/24.

An analysis of expenditures on development activities shows that 38 counties did not meet the 30% threshold provided in law. These included Nairobi (10.3%), Kisii (13.7%), Mombasa (16.2%), Kisumu (17.5%), Taita-Taveta (18.6%), and Kiambu (19.4 %).

High pending bills   

As of June 30, 2024, county governments reported outstanding pending bills of KSh181.98 billion. Nairobi County reported the highest pending bills at KSh118.44 billion.

Other counties with high pending bills are Kiambu, at KSh6.49 billion; Mombasa, at KSh4.44 billion; Machakos, at KSh4.20 billion; Bungoma, at KSh3.52 billion; and Kisumu, at KSh3.15 billion.

High expenditure on personnel emoluments

Overall, county governments spent KSh208.84 billion on personnel emoluments, which accounted for 47% of the total expenditure of KSh446.76 billion and 42.6% of the realised revenue of KSh492.47 billion in the financial year 2023/24.

This expenditure increased from KSh195.09 billion incurred in the financial year 2022/23. The CoB noted that personnel expenditures by only three counties—Kilifi, Tana River, and Narok—were within the 35% ceiling.

Further analysis of the personnel emoluments showed that KSh15.89 billion was processed manually and paid outside the government payroll system.

Delay in submission of financial and non-financial reports to the CoB

County governments must prepare and submit financial and non-financial reports one month after the end of each quarter in accordance with Sections 166(4) and 168 (3) of the PFM Act, 2012.

Additionally, Section 16 of the Controller of Budget Act, 2016, requires accounting officers to cooperate with the CoB to enable the office to carry out its functions per the Constitution and any other law.

Accounting officers are also required to respond promptly to any inquiry made by the CoB and furnish the office with periodic reports as to the status of management of the budget and public funds. This is in respect to the question raised within such a period as may be prescribed by the CoB. They must also provide any other information that the Controller requires.

In line with this requirement, the CoB issued a letter to County Treasuries requesting the submission of financial reports for the period under review by July 15, 2024.

“Despite the above legal provisions, county governments did not submit the financial and financial reports within the recommended timeline, which led to a delay in finalising this County Budget Implementation Review Report,” the report states.

20 counties submitted their reports after August 1. They include Baringo, Garissa, Kakamega, Isiolo, Meru, Nandi, Turkana, Embu, Mombasa, Uasin Gishu, Nakuru, Homa Bay, Kericho, Kilifi, Tana River, Makueni, Nyeri, Kisumu, Trans Nzoia, and West Pokot.

Use of commercial bank accounts  

The OCoB noted that the county governments used commercial bank accounts to operate the established public funds and other operational accounts contrary to Regulations 82(1)(b) of the PFM (County Governments) Regulations, 2015.

The regulations require county government bank accounts to be opened and maintained at the Central Bank of Kenya (CBK). The only exemption is for imprest accounts for petty cash and revenue collection accounts.

Excessive expenditure on travelling

During the financial year, the OCoB noted excessive and wasteful expenditures by counties on travel, amounting to KSh17.6 billion, comprising KSh15.28 billion on domestic travel and KSh2.32 billion on foreign travel.

The counties that reported the highest expenditure on domestic travel were Turkana (KSh943.44 million), Nairobi (KSh861.57 million), Machakos (KSh652.76 million), West Pokot (KSh585.2 million), and Nakuru (KSh544.13 million).

The counties with the highest foreign travel expenditures were Nairobi (KSh328.33 million), Machakos (KSh148.68 million), Kitui (KSh128.4 million), Kericho (KSh105.8 million), and Nakuru (KSh102.89 million).

The CoB recommends that all 47 counties implement the recommendations per Section 130(d) and 149(3a) of the FFM Act of 2012 to enhance effective budget execution and achieve the desired budget goals.