Counties divert additional funds from National Treasury to salaries, limiting services
Between July and December 2024, counties spent Sh103.2 billion out of Sh184.8 billion to pay workers.
Counties are increasingly using additional funds from the Treasury to pay salaries instead of financing crucial public services.
The Controller of Budget (CoB) has exposed that the 47 counties used Sh208.8 billion out of the Sh446.7 billion total expenditure on personnel emoluments.
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This accounted for 46.7 per cent of counties' total expenditure, breaching the legal requirement that limits wage spending to a maximum of 35 per cent of total expenditure.
According to the CoB, the situation worsened over the first half of the 2024/25 financial year.
Between July and December 2024, counties spent Sh103.2 billion out of Sh184.8 billion to pay workers — translating to 55.8 per cent of total expenditure, once again in violation of the law.
The Parliamentary Budget Office (PBO) has warned that the continued unchecked rise in salaries paid by counties, despite their limited resources, poses a significant fiscal risk.
According to the PBO, counties have been manipulating budget allocations by initially setting aside more than 30 per cent of their budgets for development projects to gain approval, only to later divert the funds toward salaries and other recurrent expenditures.
This comes at a time when county governments continue to accumulate pending bills.
"A large part of the annual increase in equitable share and other revenues to counties goes to defray recurrent expenditures such as salaries and wages, leaving very limited fiscal room for development spending," the PBO said in its report on the 2025 Budget Policy Statement (BPS).
Over the five years leading to June 2024, the equitable share of revenues from the Treasury to counties increased from Sh314 billion to Sh354.6 billion. However, during the same period, county governments' wage bill surged from Sh163.4 billion to Sh215 billion.
Critical services affected
The rapid increase in salaries — almost three times the rate at which counties' allocations grew — has significantly curtailed spending on critical services such as healthcare, agriculture, and infrastructure, which the national government funds are intended to support.
"The government does not provide a framework for how it intends to address this challenge, which continues to rise," the PBO said, calling for urgent policy interventions to curb the trend.
The PBO has advised the government to implement a policy that compels counties to direct additional funds toward service provision instead of prioritising salaries.
"The government should also develop policies to tighten up the employment uncertainties in county governments," the PBO added.
The continued breach of spending caps has raised questions about financial discipline at the county level and the effectiveness of existing oversight mechanisms.
If left unaddressed, PBO said the fiscal indiscipline could undermine the purpose of devolved funds, leaving county residents with deteriorating services despite the annual increase in allocations from the national government.
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