Counties stuck with billions they cannot spend

Controller of Budget Dr Margaret Nyakango

Controller of Budget Dr Margaret Nyakango when she appeared before the Public Investments and Special Funds Committee at KICC, Nairobi on July 3, 2023. 

Photo credit: File | Nation Media Group

What you need to know:

  • 13 counties received Sh16 billion during the last month or after lapse of the financial year deadline.
  • Late disbursements by Treasury has made it impossible for counties to implement programmes, impacting negatively on service delivery.

Counties are having to carry forward budgets to subsequent financial years as a cash crunch at the National Treasury continues to cause delays in releasing funds, affecting the delivery of services and projects to locals.

With Treasury spending upto 70 percent of taxes collected by the Kenya Revenue Authority (KRA) to pay the public debt, counties and the national government have been left scrambling for the remaining 30 percent, causing a biting crisis.

In the just concluded financial year, 2022/23, the Council of Governors (CoG) had to request the President for counties to be allowed 14 more days after the lapse of the June 30 deadline for the financial year to make payments that were due but had not been settled due to lack of funds, indicates the Controller of Budget (COB).

“They were given 14 days to settle the payments, part of which were requisitions and others had already been posted at the internet banking of the CBK, meaning they had uploaded them in readiness to pay but there was no cash. The CBK allowed them to clear payments that were still outstanding,” COB Margaret Nyakang’o says.

The situation got to this level after funds owed to counties for the last quarter (April, May and June 2023), were released during the last two months, extending a delay in release of funds that had been seen throughout the financial year and even in previous years.

The delays have been getting worse, with some 13 counties receiving Sh16 billion during the last month or after lapse of the financial year deadline in 2021/22.

At least four counties received more than a quarter of their budgets in June or after June in the 2021/22 FY, meaning that within the limited time they could not implement planned projects.

“Counties are greatly affected with late disbursement in terms of Budgets/projects implementation. In most cases Counties are forced to re-budget the funds disbursed towards the end of the FY in the ensuing FY through supplementary budgets or include in the main budget as unspent balances brought forward,” the CoG says.

Kitui County, for instance, received Sh2.65 billion, 27.7 percent of the entire Sh9.56 billion revenues for 2021/22 FY in June and July, shows a report by the Auditor-General, noting that the late releases meant county programmes and activities were not implemented in due time, and may have impacted negatively on service delivery to the public.

During the same year, Homa Bay County received Sh1.9 billion which was 26.3 percent of the Sh7.5 billion revenues towards the end of June and in July.

“Review of the County Revenue Fund bank statement for the month of June and August, 2022 revealed that receipts totaling to Sh791,940,658 were received near or after the closure of the financial year.

This means that 25 percent of all the County Executive’s receipts were received after the closure of the year and this could have negatively impacted on service delivery. ..,” the Auditor-General stated in the report on Lamu County.

At least 15 counties had issues of receiving funds towards the end of the financial year, and receiving or spending after the June 30, 2022 deadline as outlined in the law.

The counties include Nyandarua, Uasin Gishu, Garissa, Kwale, Tana River, Wajir, Murang’a and Trans Nzoia. Audits note that some of the counties failing to utilise funds according to plans they make at the start of the financial year blame Treasury for late disbursements.

The COB, who is mandated to authorise withdrawals from county revenue funds for spending by respective devolved units, notes that the main reason for delays has been heavy spending from the consolidated fund- where all government revenues go before they are transferred- towards settlement of the public debt.

Ideally, counties are supposed to receive funds due for each month by the 15th, but a cash crunch within government has made this almost impossible.