A new report by the National Treasury has revealed that 38 counties failed to allocate at least 30% of their budgets to development during the 2023/24 financial year, contravening the Public Finance Management Act of 2012. This law mandates that at least 30% of county budgets be directed toward development.
While only nine counties complied with the requirement, Marsabit led the way, dedicating 38.6% of its budget to development. Other counties that met or exceeded the threshold included Narok (34%), Homa Bay and Mandera (33.3% each), Siaya (32.6%), Trans Nzoia (31%), Kitui (30.8%), Kilifi (30.6%), and Turkana (30.6%).
The report also highlighted the bottom 10 counties with the lowest development spending. Nairobi, under Governor Johnson Sakaja, allocated just 10.3%, while other counties with low development allocations included Kisii (13.7%), Mombasa (16.2%), Kisumu (17.5%), and Taita Taveta (18.6%). Additional counties with poor performance included Kiambu (19.4%), Kakamega (20.2%), Vihiga (21.1%), Nyamira (21.4%), and Nandi (21.5%).
The findings are concerning for Governor Sakaja, who was recently ranked among the least performing governors in an Infotrak survey.
Wage overspending
In addition to development spending, the report flagged counties for exceeding the legal wage and benefits threshold. According to the Public Finance Management (County Governments) Regulations, 2015, wage expenditure should not exceed 35% of a county’s total revenue.
However, in the 2023/24 financial year, counties spent Ksh209.8 billion on wages, amounting to 47.6% of their total revenue of Ksh440.7 billion.
Only three counties—Tana River, Narok, and Kilifi—kept their wage expenditures below the legal limit, spending 34%, 32%, and 30% of their total revenue, respectively. Counties such as Machakos led in wage overspending, with 62.6%, followed by Kisii (61.1%), Nyamira (58.4%), Nairobi (58%), Embu (57.1%), and Nandi (55.7%).
Other counties spending more than 50% of their revenue on wages included Taita Taveta, Tharaka Nithi, Nyeri, Laikipia, Baringo, Lamu, Elgeyo Marakwet, Murang’a, Bomet, Kisumu, Kakamega, and Bungoma.
The Treasury has urged counties to improve their fiscal risk management. The Budget Policy Statement (BPS) highlighted serious fiscal risks, including poor revenue and expenditure performance, along with a growing backlog of pending bills that are hampering service delivery and economic growth.
County Pending Bills
As of June 30, 2024, counties had accumulated pending bills totaling Ksh181.98 billion, an increase of Ksh17.22 billion from the previous financial year’s Ksh164.76 billion. The BPS stressed that the rising stock of pending bills poses a significant threat to fiscal discipline and sustainability.
To address this challenge, the National Treasury is transitioning from cash to accrual basis accounting, a move expected to reduce pending bills over time and promote better fiscal management at the county level.
