COB: 42 Counties record development absorption rates below 75pc

The Controller of Budget Margaret Nyakango, has revealed that County governments recorded low absorption of development expenditure of Shs.126.69billion (25.51 per cent of total expenditure) in the Financial year 2025/26.

Dr Nyakang’o in her latest County Governments Budget Implementation review report pointed out that only four counties exceeded 75 percent on development with Meru at 79.04 percent, Mandera at 80 percent, Wajir at 83.03 percent, and Kilifi at 84.52 percent.

The Controller of Budget stated that the development expenditure of Sh126.69 billion represented 54.21 per cent of the approved development budget of Sh233.69 billion with  42 counties recording development absorption rates below 75 percent.

“I have directed that County treasuries should also monitor the monthly absorption of the development budget and take immediate corrective action through lawful supplementary budgets when bottlenecks occur,” said Dr Nyakang’o.

She recommended that County governments should prioritise development projects in Financial Year 2026/27 by implementing strategies such as preparing procurement plans promptly at the start of the financial year, ring-fencing resources to settle development trade payables, implementing ongoing projects, and aligning cash-flow plans with work plans.

The County governments spent Sh235.96 billion on compensation of employees in the financial 2025/26, representing 39.54 per cent of the total reported revenues in FY 2025/26 of Sh596.78 billion, exceeding the 35 per cent statutory threshold and indicating non-compliance with fiscal responsibility requirements.

The high wage bill constrains resources available for development and service delivery, given that compensation of employees is a recurrent expenditure and should be prioritised before discretionary development spending.

The Controller of Budget revealed that the County governments with the highest wage bill-to-revenue ratios in FY 2025/26 included; Homa Bay (56.21 percent), Nyeri (52.14 percent) and Taita-Taveta (49.23 percent).

“County governments should implement payroll containment measures to reduce the wage bill to within the 35 percent threshold provided for by Section 107(2) of the PFM ACT Cap 412A by 30 June 2028, as resolved in the Wage Bill and Productivity Conference of April 2024,” said Dr Nyakang’o.

She recommended that the Counties should conduct payroll audits, control recruitment, rationalise staff, enforce approved establishment limits and migrate manual payroll data to the approved human resource information systems.

The Controller of Budget further directed that all personnel planning should be linked to the wage bill ceiling and available revenues before approving new hires or salary-related commitments.

The report revealed that County governments had reported outstanding trade payables of Sh172.53 billion as of 30 June 2026 (excluding Nandi County, which had not reported on its trade payables as of 30 June 2026), comprising Sh 126.40 billion for recurrent activities and Sh 46.15 billion for development activities.

“The highest reported balances were in Nairobi City at Sh 86.90 billion, Kilifi at Sh 8.15 billion, Kiambu at Sh5.80 billion and Machakos at Sh 4.49 billion,” said Dr Nyakang’o.

The County Governments that reported the highest increase in trade payables between 30 June 2025 and 30 June 2026 include Elgeyo Marakwet (with a spike in trade payables by 1,264.60 per cent from Sh17.49 million as of 30 June, 2025 to Sh238.71 million as of 30 June, 2026).

 Other Counties with increased trade payables include: Baringo County (82.38 per cent), Nyeri County (56.27 per cent) Mandera County (53.01 per cent) Nyandarua County (50.91 per cent) and Nakuru County (34.96 per cent).

Of the outstanding stock of payables as of 30 June 2026, Sh46.69 billion (27.16 per cent) was aged less than one year; Sh 30.67 billion, or 17.84 per cent, was aged between one and two years; and Sh 22.88 billion, or 13.31 per cent, was aged between two and three years, and Sh 71.64 billion or 41.67 per cent were aged above three years.

“The trade payables as of 30 June 2026 comprised Sh 58.82 billion (34.15 per cent) for salaries and statutory deductions, Sh 67.27 billion (39.05 per cent) for other recurrent payables and Sh 46.15 billion (26.80 per cent) for development payables,” said Dr Nyakang’o.

The Controller of Budget revealed that the high stock of trade payables including salary and statutory deductions, will reduce fiscal space in Financial year 2026/27 and increase the risk that current budgets will finance prior-year obligations rather than current service delivery priorities.

The cumulative Own Source Revenue (OSR) collections across 20 counties were below 75 per cent of the approved targets, indicating unrealised revenue performance. In aggregate, the County governments generated Kshs.97.55 billion in own-source revenue, which was 89.99 per cent of the annual target of Sh108.40 billion in Financial Year 2025/26.

 The Controller of Budget pointed out that weak own-source revenue performance constrained implementation of approved programmes and increased dependence on transfers from the National Government.

“County governments should develop realistic and evidence-based Own Source Revenue targets that are achievable; this will enhance budget credibility and minimise funding shortfalls,” said Dr Nyakang’o.

Revenue arrears remained high in Financial year 2025/26, reducing the liquidity available for budget Implementation as of 30 June 2026, total reported revenue arrears stood at Sh113.29 billion, including Sh 100.38 billion from ordinary own-source revenue and Sh11.20 billion from Facility Improvement Financing.

The County governments  with the highest revenue receivables included Nairobi City County, Nakuru and Mombasa, with revenue arrears of Sh59.09 billion, Sh16.84 billion, and Sh13.68 billion respectively with high receivables indicating weaknesses in revenue collection enforcement.

She recommended that County governments should develop and implement revenue arrears recovery plans for the current financial year and perform monthly reconciliations of receivables registers, and assign accountable officers to collect revenue from each major revenue stream.

“The County treasuries should consistently report opening balances, additions, collections, waivers, and closing balances to strengthen oversight and improve liquidity planning,” said Dr Nyakang’o.