Cabinet Secretary for The National Treasury and Economic Planning John Mbadi before the Senate Finance and Budget committee at the County Hall, Nairobi on September 16, 2024.
Counties have more than Sh42 billion lying idle in their accounts despite some of the devolved units on the brink of a biting cash crunch, National Treasury Cabinet Secretary John Mbadi has revealed.
The minister told senators that the County Revenue Fund (CRF) account is holding up to Sh42.38 billion in county funds yet to be taken up by the devolved units.
The development comes as the CS said the National Treasury last week released Sh31.8 billion to counties as shareable revenue allocation for July, 2024.
He added that in July, the Treasury had also disbursed Sh30.8 billion being June allocation for the financial year ending June 30, 2024.
Addressing the Senate on Wednesday, CS Mbadi explained that the “idle” amount consists of some Sh3 billion budgeted for recurrent expenditure and Sh969 million under development vote.
“As we speak, there is Sh42.38 billion which has not been absorbed or taken by counties sitting at the CRF. The money is there in the account. Once the money is transferred to the CRF account, it should go to counties to pay for salaries and also go into development expenditure,” said Mr Mbadi.
“We need to have a smooth absorption because the last thing you would want to see are balances accumulating in idle accounts as it adds no value to the economy and slows down economic growth,” he added.
He appealed to the county bosses to sort out issues with the Controller of Budget in order to ensure the billions do not continue lying idle in the account.
“As people charged with overseeing counties, you should put pressure on counties to sort out their issues with the Controller of Budget so that we don’t have huge balances sitting at the CRF account,” the CS told the senators.
Interestingly, the governors had warned of a shutdown of county governments due to a cash crunch occasioned by delays in releasing funds to the devolved units, threatening their operations.
Addressing the issue of delayed disbursements to counties, Mr Mbadi disclosed that the Treasury last week disbursed Sh31.8 billion to the devolved units for July, despite delays by parliament to pass enabling laws.
The move, he stated, followed an advisory by the Attorney-General Dorcas Oduor to allow for the release of 50 percent of funds due to counties based on last financial year’s allocation of Sh385 billion.
He explained that the problems encountered at the beginning of the fiscal year in release of the funds were legal in nature which he had to seek for legal opinion of the AG.
The CS said the delays are as a result of county allocation of revenue act as well as division of revenue act for the financial year ending June, 2025 not being enacted following the withdrawal of the controversial Finance Bill 2024 by President William Ruto amid a push back by Gen Zs.
Currently, parliament is considering the Division of Revenue Bill, 2024 which was sent back to parliament by President William Ruto following the withdrawal of the Finance Bill, 2024.
The proposed law splits between the national and county governments, revenues generated nationally.
The Bill is set for mediation after the Senate differed with the President and the National Assembly that slashed county allocation to Sh380 billion from Sh400 billion.
However, parliament is yet to consider the County Allocation of Revenue Bill, 2024 – which splits among the 47 counties funds allocated to the devolved units in the Division of Revenue Act.
In his presentation, Mbadi told the lawmakers that the Treasury would release funds for August this month even as the Ministry works to streamline the releases.
“We haven’t paid [released funds for] August, and now September allocation. I would guarantee that we are making arrangements to make another payment this month. We seem to have a deficit of not less than one month. We will try to catch up. Before the end of this year, we should catch up,” the CS said.
“We sought advice from the AG who agreed to the disbursement. We cleared the last fiscal year balance of Sh30.8 billion in July. Last week, we also paid Sh31.8 billion to counties for July,” CS Mbadi said.
“We haven’t paid August and September allocations but we are making plans to pay at least one more month before the end of this month. My aim is to ensure we cover the deficit and catch up before the end of the year so that we don’t have any outstanding amount due to counties,” he added.
Public Finance regulations allow the CoB to approve the withdrawal of funds from the Consolidated Fund based on the last County Allocation of Revenue Act approved by Parliament, even without the approval of the enabling legislation by Parliament.
Section 134 of the Public Finance Management Act (Regulations), 2012 provides that if the County Allocation of Revenue Bill submitted to Parliament for a financial year has not been approved by Parliament.
