Shocking low absorption as counties use only 2 pc of funds in first quarter

Controller of Budget Dr. Margaret Nyakang’o. [Boniface Okendo, Standard]

The Controller of Budget, Margaret Nyakang’o, has revealed that in the first quarter of Financial Year 2025/26, the County Governments’ development expenditure amounted to Sh3.69 billion, translating to an absorption rate of 2 per cent of their aggregate annual development budget of Sh220.46 billion.

Dr Nyakang’o said this represented a decline from a 3 per cent absorption rate realised in a similar period of Financial Year 2024/25, when the County Governments’ cumulative expenditure on development activities was Sh6.71 billion against an annual development budget estimate of Sh205.33 billion.

The Controller of Budget said that Isiolo County achieved the highest absorption rate of its approved development budget at 15 per cent (on Vote-on-Account), followed by Kirinyaga County at 7 per cent, and Machakos, Mandera, Murang’a, Kitui, and Makueni Counties, each attaining 5 per cent.

“The following 20 counties reported zero absorption on development expenditure in the reporting period under review: Kericho, Tana River, Turkana, Bomet, Siaya, Trans Nzoia, Baringo, Kilifi, Kwale, Kajiado, Kisumu, Mombasa, Vihiga, Busia, West Pokot, Bungoma, Uasin Gishu, Wajir, Laikipia, and Kisii,” said Dr Nyakang’o.

She revealed that the County Governments’ recurrent expenditure during the period under review amounted to Sh51.47 billion, accounting for 13 per cent of the annual County Governments’ budget for recurrent activities, which is consistent with the absorption rate recorded in a similar period in Financial Year 2024/25, when expenditure for recurrent activities was Sh48.96 billion against aggregate recurrent budget estimates of Sh371.40 billion, with the expenditure comprising Sh43.70 billion (85 per cent) on compensation to employees and Sh7.76 billion (15 per cent) on operations and maintenance.

The Controller of Budget pointed out that the County Assemblies incurred Sh289.61 million on Members of County Assemblies’ sitting allowances against an approved annual budget allocation for MCAs’ sitting allowances of Sh2 billion, translating to 14 per cent of the approved budget, and a decline from an absorption rate of 15 per cent realised in the similar period of Financial Year 2024/25, when Sh290.23 million was incurred.

Dr Nyakang’o said that in the first quarter of Financial Year 2025/26, the County Governments reported an outstanding trade payables stock of Sh177.47 billion, comprising Sh125.67 billion for recurrent activities and Sh51.79 billion for development activities.

“The counties with significant trade payables stock included Nairobi City at Sh82.89 billion, Kilifi at Sh9.70 billion, Kiambu at Sh6.47 billion, Machakos at Sh5.80 billion, Narok at Sh5.43 billion, Bungoma at Sh4.25 billion, and Wajir at Sh3.71 billion,” said Dr Nyakang’o.

During the reporting period, the Controller of Budget identified several challenges that hindered effective budget execution, including delays in submission of County Appropriation Acts, Budget Books, and Governors’ Warrants for Financial Year 2025/26 to the Controller of Budget; delays by Parliament to enact the Governments Additional Allocations Bill 2025; delays by the National Treasury to disburse the Equitable Share of revenue raised nationally; underperformance in own-source revenue collection; increased overdependence on funding from Facility Improvement Financing; high levels of trade payables; low expenditure on development programmes; lapsing of established fund regulations; and delays in submission of financial and non-financial reports to the Controller of Budget.

The Controller of Budget recommends several actions to enhance budget implementation at the county level for the financial year 2025/26, including ensuring the timely submission of Appropriation Acts, Budget Books, and Governors’ Warrants by 1 July to facilitate prompt fund releases.

“I am also asking Parliament to expedite the enactment of the County Governments Allocation Act to ensure timely transfers from the National Government, while the National Treasury needs to adhere to a strict disbursement schedule and ensure disbursement to County Revenue Funds by the 15th of the month,” said Dr Nyakang’o.

She has advised County Governments to strengthen revenue collection efforts, reduce reliance on single revenue streams, prioritise settling trade payables, increase development expenditure, extend regulations on established funds which are lapsing or have lapsed, and comply with legal requirements for submitting financial and non-financial reports to the Controller of Budget.

The combined County Governments’ budgets for the financial year 2025/26, as approved by the County Assemblies, amounted to Sh603.72 billion, comprising Sh217.80 billion (36 per cent) allocated to development expenditure and Sh385.92 billion (64 per cent) allocated to recurrent expenditure.

The Controller of Budget said that the allocation for development expenditure conforms to Section 107(2)(b) of the Public Finance Management (PFM) Act, 2012, which mandates that at least 30 per cent of the budget be dedicated to development expenditure.