Counties face cash crunch as Treasury delays fund disbursements

Delivery of crucial services and payment of salaries would soon be a challenge as county governments stare at a cash crunch.

This follows a three-month delay in the release of funds by the National treasury.

On Monday, the Council of Governors emphasised that the delayed release of funds was worsened by reduced revenue allocation due to the withdrawal of the Finance Bill, 2024, which it warned will have significant consequences.

Fernandes Barasa, Chairperson of the CoG Committee and Governor of Kakamega, expressed concerns that relying on special financing from local banks to cover recurrent expenses is unsustainable.

He cautioned that this situation could severely impact operations throughout the counties.

“With Sh380 billion which was already approved by the National Assembly through the Supplementary Budget, this is also going to affect the shareable of the venues,” he said.

The National Treasury is yet to release Sh32 billion from the last financial year, compounding the crisis in the devolved units.

The financial strain has prompted the Council of Governors to warn of potential reductions in operations and service delivery.

“We just want to warn the counties that it is not going to be business as usual and the only remedy is to maximise on Own Source Revenue and that is what I am calling upon my colleagues,” Barasa added.

His Kericho county counterpart, Eric Mutai, added that the counties have been forced to go close to four months without having received any funds from the Treasury.

“Many times, Counties are forced to have four-month-long arrears, and this year, like previous years is no better. This is because every administration since devolution has not reached where we need to go,” he added.

By the end of May, the Treasury had withheld Sh98.3 billion meant for the counties, and in June alone, it disbursed Sh67.4 billion, more than twice the average monthly release of Sh29.5 billion from July 2023 to June 2024.

The failure to release the funds to counties at the end of the financial year contravenes the Public Finance Management (PFM) Act, 2012, which requires the Treasury to send money to counties by the 15th of every month.

"The National Treasury shall, at the beginning of every quarter, and in any event not later than the fifteenth day from the commencement of the quarter, disburse monies to county governments," the act reads in part.

Failure to send the Sh30.83 billion by the end of June 2024, saw 35 out of 47 counties fail to receive more than Sh500 million each.

This saw the counties miss 8 per cent of their budgeted equitable share funds, affecting the implementation of county programmes, with Nairobi, Nakuru, Turkana and Kakamega missing out on more than Sh1 billion each.

Among the worst affected counties in terms of funds not released by the end of June were Kiambu (Sh978 million), Kilifi (Sh968 million), Mandera (Sh930.6 million), Bungoma (Sh889 million), and Kitui (Sh866 million).