The Council of Governors (CoG) has urged Parliament to amend the Public Finance Management Act to allow the counties access to conditional allocations worth Sh75.7 billion as soon as the County Government Additional Allocation Bill, 2026, is enacted.
Section 191A of the Public Finance Management (PFM) Act, 2012 (introduced via the 2022 amendments), requires the National Treasury and County Governments to enter into Intergovernmental Agreements for the transfer of conditional additional allocations.
The amount is separate from the “equitable share” of national revenue and consists of conditional grants and loans from development partners, with sections 191A-191E mandating that no conditional grant can be transferred to a county without a signed intergovernmental agreement, which must be approved by the Controller of Budget (COB).
While presenting a Memorandum to the Senate Finance and Budget committee in a session chaired by Vice Chairperson Tabitha Mutinda, CoG Finance Committee Chairperson Fernandes Barasa said that once the County Government Additional Allocation Bill (CGAA) is passed and assented to, the funds should be disbursed immediately.
“The signing of the Intergovernmental Agreements is not aligned with the Budget Cycle and will interfere with the budget making and execution process, adding that the reason is that the Agreements are to be signed after Parliament has passed the conditional allocations through the
annual CGAAA,” said Barasa.
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Barasa said that the Council of Governors was requesting a permanent resolution of the recurring matter by introducing a consequential amendment to the PFM Act to repeal Sections 191A to E to enable Counties to access the conditional allocations as soon as the Bill is enacted
The Kakamega Governor told the Senate Finance Committee that the Council of Governors' goal is to have the repeal of the section to streamline the flow of funds to counties without unnecessary administrative delays.
He said that County governments have been signing Intergovernmental Participation/Partnership Agreements (IPAs) with various National Government Ministries, Departments and Agencies (MDAs) pursuant to Article 189 of the Constitution for implementation of Conditional grants advanced to them.
“The requirement for the Intergovernmental Agreements for Transfer of the Conditional Agreements signed with the National Treasury under Section 191A (1) of the PFM Act is unnecessary and duplicates efforts,” said Barasa.
The County Government Additional Allocation Bill is prepared pursuant to Article 190 (1), which provides that “Parliament shall by legislation ensure that county governments have adequate support to enable them to perform their functions.
The County Governments Additional Allocations Bill, 2026, proposes allocating Sh75.7 billion in conditional grants and loans to counties for the 2026/2027 financial year, an amount which includes funds from the national government and development partners for infrastructure, health, and specialised projects.
The Bill aims to provide additional resources to help counties fulfil functions like health, agriculture, infrastructure and earmark funds for specific projects, such as Sh523 million for completing county headquarters in Isiolo, Lamu, Nyandarua, Tana River and Tharaka Nithi.
Conditional Allocation to each County Government from the National Government’s revenue for the financial year 2026/27 shall comprise conditional allocation for the Community Health Promoters (CHP), construction of County Headquarters and County Aggregations and Industrial Parks (CAIPs).
In addition, conditional allocation of 0.5 per cent of the Housing Levy Fund to the County Rural and Urban Affordable Housing Committees and allocation for transitioning Universal Health Coverage (UHC) workers’ salaries to permanent and pensionable terms.
The devolved units will also receive conditional allocations financed from proceeds of loans and grants from development partners, including the French Development Agency (AfD) for the Kenya Informal Settlement Improvement Project Phase II and from the International Development Association (IDA) for building Resilient and Responsive Health Systems (BREHS).
The devolved units will also receive a further Sh21billion financed from proceeds from German Financial Cooperation (KfW) for Co-Financing of Financing Locally-Led Climate Action Program (FLLOCA), County Climate Resilience Investment Grant and another Sh6 billion from IDA for Co-Financing of Locally-Led Climate Action (CCRIG).
The allocation to Counties will, however, be done based on the County’s rural population, rural area and county multidimensional poverty, a proxy for climate risks and vulnerability.
In addition, the devolved units will also receive Sh16.7billion financed from proceeds from IDA for the Kenya Urban Support Project (KUSP)- Urban Development Grant (UDG) and another Sh21.7billion for the Kenya Devolution Support Program II at a flat rate of Sh37.5 million, subject to achievement of all applicable results.
On the conditional grant for the construction of five County Headquarters, including Isiolo, Lamu, Nyandarua, Tana River and Tharaka Nithi, the National Treasury Cabinet Secretary John Mbadi committed to disburse the Sh449 million allocated in the current financial year, with the balance Sh523 million to be allocated in the 2026/27 financial year.