Treasury CS Mbadi reveals Sh42 billion lying idle in county revenue accounts

Some counties have more than Sh42 billion lying unused in their accounts despite some devolved units struggling with a cash crunch, National Treasury Cabinet Secretary John Mbadi has revealed.

Speaking before the Senate on Wednesday, Mbadi acknowledged that the County Revenue Fund (CRF) is currently holding Sh42.38 billion in county funds that have not been absorbed.

He said the unutilised funds include Sh3 billion earmarked for recurrent expenditure and Sh969 million for development purposes.

“As we speak, there is Sh42.38 billion which has not been absorbed by counties, sitting in the CRF. This money should be used to pay salaries and fund development,” Mbadi said.

He further emphasised the need for efficient fund absorption, noting that idle balances do not benefit the economy.

“The last thing you would want is to see large balances sitting in idle accounts. It adds no value to the economy and slows down economic growth,” he said.

Mbadi urged county governors to address their issues with the Controller of Budget to ensure the billions in their CRF accounts are utilized.

“You should press counties to resolve their matters with the Controller of Budget so that we do not have such huge amounts lying idle,” he told the senators.

The revelation comes as Mbadi announced that the National Treasury released Sh31.8 billion last week for July 2024 as part of counties' shareable revenue allocation. Additionally, in July, the Treasury disbursed Sh30.8 billion for the June allocation of the 2023/2024 financial year.

Governors had recently warned of a potential shutdown of county operations due to delayed disbursements. In response, Mbadi explained that while delays had occurred, the Treasury had already disbursed Sh31.8 billion for July despite the legislative hold-up.

"We released Sh31.8 billion last week for July, although parliament has delayed in passing the necessary laws," he said.

The delays stem from legal challenges, including the failure to pass the County Allocation of Revenue Act and the Division of Revenue Act for the 2024/2025 financial year. These legislative hurdles arose after President William Ruto withdrew the Finance Bill 2024 amid opposition from Generation Z protestors.

Mbadi disclosed that the Attorney-General, Dorcas Oduor, had advised releasing 50 per cent of the county funds based on last year's allocation of Sh385 billion.

The ongoing legislative process, including mediation over the Division of Revenue Bill, 2024, has caused disagreements between the Senate, the President, and the National Assembly. The latter reduced county allocation from Sh400 billion to Sh380 billion.

As of now, parliament is yet to consider the County Allocation of Revenue Bill, 2024, which determines how much each of the 47 counties receives. However, Mbadi assured senators that the Treasury aims to release funds for August this month.

“We haven’t paid for August or September yet, but we are working to make another payment this month. We are about a month behind schedule, but I hope to catch up by the end of the year,” Mbadi said.

He explained that the Treasury had sought legal advice to ensure the release of funds.

“We cleared the last fiscal year’s balance of Sh30.8 billion in July and paid Sh31.8 billion for July. My goal is to clear the deficit before the year ends to avoid any outstanding payments to counties,” he added.

The Public Finance Management Act allows the Controller of Budget to approve withdrawals from the Consolidated Fund based on the last approved County Allocation of Revenue Act, even without the current year's legislation in place.