Budget czar flags weak reporting of donor-funded projects

Controller of Budget (CoB) Margaret Nyakang’o has cited weak reporting mechanisms for development partner-funded projects under loan Appropriations-in-Aid (AIA) arrangements.

The CoB’s National Government Budget Implementation Review Report (NGBIRR) dated August 2026 shows that a review established a weak reporting mechanism, noting that under this financing modality, development partners make payments directly to contractors upon submission of Interim Payment Certificates (IPCs) by the three road agencies.

But Nyakang’o said information on the actual amounts disbursed is often not communicated to the accounting officers of the respective agencies promptly.

“This delay in obtaining expenditure information for externally financed projects limits accounting officers’ ability to accurately capture and report expenditure in their quarterly financial reports, as required under Section 83 of the Public Finance Management Act, CAP 412A,” the CoB stated.

To this end, she noted that the resulting gap constrains compliance with statutory reporting requirements and may lead to the underreporting of externally financed expenditure.

She also raised concerns that the completeness, accuracy, and reliability of budget implementation information submitted to the National Treasury and the CoB for the preparation of consolidated quarterly budget implementation reports are compromised, thus weakening national fiscal reporting and oversight of development partner-funded programmes.

Nyakang'o said National Treasury should ensure that reporting requirements for projects financed through development partner loans under the AIA arrangement are incorporated into financing agreements.

“The agreements should require development partners to submit timely reports on actual disbursements made directly to contractors and other service providers. This will facilitate timely capture of externally financed expenditure in quarterly financial reports, enhance accuracy and completeness of budget implementation information, and strengthen transparency, accountability, and oversight of development partner-funded projects,” she said.

At the same time, CoB has raised issues of failing to upload projects into the Public Investment Management Information System (PIMIS).

According to CoB, Regulation 20(10) of the Public Finance Management (Public Investment Management) Regulations, 2022 requires that, upon clearance by the National Treasury or County Treasury, project details shall be uploaded into the Project Pipeline of the Public Investment Management Information System (PIMIS) by the accounting officer.

However, Nyakang'o said she established that none of the projects implemented by the 19 agencies visited had been uploaded into the system.

“This gap is attributed to inadequate capacity building by the National Treasury and the absence of designated user roles and access rights within the system, which has constrained agencies’ ability to upload and manage project information in PIMIS,” she said.

Failure to upload project data into PIMIS, she noted, hampers effective monitoring, evaluation, and oversight of public investments throughout their implementation lifecycle and limits the National Treasury’s ability to maintain a comprehensive and reliable pipeline of public investment projects for planning and decision-making.

The assessment has also shown that inadequate budgeting for associated project costs was a recurring challenge affecting the implementation of several projects.

In some instances, she noted, project budgets did not fully cover all foreseeable costs required for successful execution, including taxes, statutory obligations, land acquisition, and utility relocation.

“This is inconsistent with the principles of comprehensive and realistic budgeting under Section 15 of the Public Finance Management Act, CAP 412A, which requires public entities to prepare budgets that accurately reflect the full cost of planned programmes and projects,” the CoB noted.

She explained that omission or underestimation of associated project costs resulted in funding gaps during implementation, delayed project execution, and increased pressure on already constrained resources, with knock-on effects on project timelines, cost overruns, and accumulation of pending obligations that could otherwise have been anticipated at the appraisal and budgeting stage.

At the same time, the assessment in the reporting period has shown delayed rollout of the Electronic Government Procurement (EGP) System in some of the agencies visited.

But Nyakang’o said continued reliance on manual and fragmented procurement processes has limited automation of procurement planning, tendering, contract management and reporting functions, thereby constraining transparency, efficiency and real-time oversight of procurement activities.

 This has contributed to delays in procurement processes, including the initiation, evaluation and award of tenders, which, in turn, has slowed the implementation of planned programmes and projects and resulted in delayed utilisation of allocated funds.

“Some agencies may not fully achieve their planned outputs within the financial year, increasing the risk of low-budget absorption and delays in service delivery. The accounting officers of national government entities should liaise with the National Treasury to expedite the rollout and operationalisation of the EGP system, including user training and technical support,” the CoB noted.

Similarly, she said Regulation 56(2)(b) and (c) of Public Finance Management (National Government) Regulations, 2015 requires accounting officers to budget for contractual obligations extending beyond one financial year, and to secure the resources necessary to meet financing requirements, before undertaking new projects.

 Contrary to this requirement, Nyakang’o noted that several national government entities continue to carry significant historical pending bills, some dating back more than 10 years.

This has pointed to persistent weaknesses in financial planning, commitment control and timely settlement of contractual obligations.

“Delays in settling certified obligations have, in some cases, attracted interest and penalties, adding to project costs and further constraining resources available for budget execution,” she said.

According to her, a notable example is the Construction of Dhogoye Bridge and Approach Roads along the Kisian–Usenge–Osieko Road, implemented by the Kenya National Highways Authority (KeNHA) at a contract sum of Sh1.99 billion.

The project commenced in June 2021 with an original completion date of December 2022, but it has been granted three extensions of time for 1,211 days (approximately 40 months), revising completion to December 2026.

As of this year in May, physical progress stood at only 60.8 per cent, despite nearly five years of implementation.

“The prolonged implementation has been compounded by delays in settling certified Interim Payment Certificates, which have resulted in Sh44.02 million in outstanding interest. This case illustrates how inadequate and untimely financing of contractual commitments creates a self-reinforcing cycle of pending bills, interest liabilities, project delays and escalating costs, ultimately reducing resources available for other planned programmes and projects,” the report states.