Counties continue to splash billions in salaries and allowances at the expense of development, a new report has shown.
Controller of Budget Margaret Nyakang’o has in the County Governments Budget Implementation Report Review Report 2024-25 said devolved units spent Sh220.64 billion on employee compensation.
The amount, Nyakang’o said, represents 47 per cent of the counties’ total expenditure of Sh470.23 billion and 41 per cent of the realised revenue of Sh533.11 billion.
“This expenditure represents an increase from Kshs.209.84 billion in FY 2023/24,” the report said.
The Controller of Budget observed that only eight counties adhered to the 35 per cent ceiling for employee compensation to actual revenue.
These were Kilifi (24 per cent), Siaya (26 per cent), Tana River (27 per cent), Nakuru (30 per cent), Kwale (31 per cent), Nandi (33 per cent), Nyandarua (33 per cent).
“Further analysis also indicates that Kshs.10.7 billion, 5 per cent of the total expenditure on employee compensation, was processed manually and paid outside the government payroll system,” she said.
On the other hand, the report said, counties spent Sh123.76 billion on development activities, representing an absorption rate of 56.5 per cent of the annual development budget of Sh218.99 billion.
The expenditure on development constituted 26 per cent of the total spending for that financial year. The report added that analysis showed that 23 counties did not meet the 30 per cent threshold.
Nairobi county’s development expenditure was 12 per cent of total expenditure, followed by Machakos county at 16 per cent, Kisumu at 17 per cent, Kiambu and Kajiado at 18 per cent, and Nyamira at 19 per cent.
Section 107(2)(b) of the Public Finance Management (PFM) Act of 2012 provides that at least 30 per cent of county governments’ budgets should be allocated to development expenditures over the medium term.
Additionally, Regulation 25(1)(g) of the PFM (County Governments) Regulations 2015 specifies that county governments’ actual spending on development should conform to this requirement.
It is in this regard that Nyakang’o advised that counties formulate and implement strategies to increase their development budget expenditures and meet the 30 per cent threshold as required by law.
“To enhance citizens’ living standards, counties should adopt effective project planning, monitoring, and implementation mechanisms in FY 2025/26. This will help improve the absorption rate of development funds and promote overall national development,” she said.
Regulation 25(1)(b) of the PFM (County Governments) Regulations, 2015, limits county government’s expenditures on wages and benefits to 35 per cent of the County’s total revenue.
The Controller further urged counties to implement the resolution of the Third National Wage Bill and Productivity Conference in April 2024, which called on public service institutions to reduce their wage bills to 35 per cent by June 2028.
Nyakang’o further noted that the Sh141.78 billion expenditure on the health sector, Sh97.45 billion was allocated for the compensation of health sector employees.
“This amount accounts for 44 per cent of the total reported expenditure on employee compensation, which was Sh220.64 billion for the fiscal year 2024/25,” she said.
The counties with a high proportion of health sector wage bills relative to their total wage bills include Baringo county (67 per cent), Nyeri (56 per cent), Trans Nzoia (55 per cent), and Taita Taveta (54 per cent).
The report noted that while the allocation to health is beneficial for the provision of medical services, it also limits funding for other sectors.
“County governments should mobilise additional funds for the health sector in collaboration with other stakeholders, including the national government. This strategy would help alleviate the financial burden on counties and free up resources for other sectors,” it said.
The report points to a recurrent problem, which the CoB has previously flagged.
Last year, CoB reported that county governments spent close to 60 per cent of their budgets on salaries in just six months.
Some 21 county governments, for instance, at the time spent less than 10 per cent of their revenue on development over the period between July 1 and October 31, 2023.
Kisii, Nairobi, Machakos, West Pokot and Nyandarua spent the least on development at 2.9 per cent, 3.3 per cent, 3.5 per cent, 8.7 per cent and 7.0 percent respectively.
