Passing the buck: Who is to blame for county cash transfer delays?

National Treasury CS CPA John Mbadi when he appeared before the National Assembly Finance and National Planning Committee at Bunge Tower on November 14, 2024. [Boniface Okendo, Standard]

Questions are lingering as to why counties are experiencing delays in Exchequer disbursements, amid a myriad of accusations being traded between the National Treasury, Council of Governors, and Controller of Budget.

National Treasury Cabinet Secretary John Mbadi has absolved his office of any delays and even provided a breakdown of how much money has been released to the counties since the beginning of the 2024/25 financial year.

The CS stated that as of November 18, 2024, when Sh30.83 billion was released, the National Treasury owes counties no debt regarding disbursements.

“We have no arrears. We have transferred all the money that we should have given to the counties in full for July, August, September, and October,” he said.

One of the reasons given by Mbadi for the month-long delay in disbursement is the pending Division of Revenue Allocation Bill, with governors and the Senate having differing views.

The lack of this legal framework prompted Mbadi to seek the views of the Attorney General, who advised that counties could receive up to 50 per cent of their allocation from the previous financial year, ending in June 2024. This amounts to half of Sh385 billion, or Sh192.5 billion.

It is from this provision that the National Treasury has been disbursing monthly allocations to counties. On September 24, Sh32.76 billion was released as payment for July, and on October 17, Sh30.8 billion was released as payment for August. Two disbursements of Sh32.76 billion and Sh30.83 billion were made this November.

The Controller of Budget’s office has since come under scrutiny by both the National Treasury and governors for delays in the disbursements.

This is not the first time that Mbadi has blamed the Office of the Controller of Budget.

During a meeting with governors in Naivasha in October, he absolved his office from blame, stating that most of the delays in disbursements are due to bureaucratic inefficiencies within Margaret Nyakang’o’s office — the Controller of Budget.

He described this as a form of rent-seeking behaviour that should be stopped.

“We should have a system that clearly transfers money to counties. We don’t need governors or County Executive Committee Members coming here (to Nairobi) all the time. What are they doing that they can’t resolve over phone calls or e-mails?” he posed.

Kakamega Governor Fernandes Barasa, who is also the chairperson of the Council of Governors’ Finance and Economic Planning Committee, has also raised concerns about the Controller of Budget’s office, making similar allegations.

At a function in his county, Barasa said that once money leaves the National Treasury and is transferred to the respective County Revenue Fund accounts held at the Central Bank of Kenya, it takes a minimum of two weeks to reach all 47 devolved units.

“It is because we have a lot of bureaucracy and inefficiencies in the office of the Controller of Budget,” he said.

Kakamega Governor Fernandes Barasa, who is also the chairperson of the Council of Governors’ Finance and Economic Planning Committee, has also raised concerns about the Controller of Budget’s office.

He added that the September disbursement was released last week by the National Treasury and is yet to reach the designated accounts.

The law dictates that any public funds disbursed to counties must go through the County Revenue Fund. The Public Finance Management Act, 2012, mandates that the County Treasury create and maintain a County Revenue Fund. This should be done for each county, with the County Revenue Fund held either at the Central Bank of Kenya or another approved bank.

“The County Treasury for each county government shall ensure that all money raised or received by or on behalf of the county government is paid into the County Revenue Fund,” reads Section 109(2) of the Act.

This means that when the National Treasury releases funds, as Mbadi revealed, the money first goes into the respective County Revenue Fund (also known as the County Exchequer Account), where the Controller of Budget is mandated by law to authorise the withdrawal of the funds with the appropriate documentation.

Mbadi stated that as of November 14, 2024, there was Sh49.13 billion yet to be withdrawn by the counties. This included Sh32.8 billion that had been released as part of the September disbursement.

“This is because of issues between counties and the Controller of Budget. That is not a problem with the National Treasury,” Mbadi said.

The Council of Governors has not yet made public the number of counties currently facing cash flow problems or the reasons for this, considering that the National Treasury has already released the funds.’’

The Public Finance Management Act states that the County Treasury must obtain the written approval of the Controller of Budget before withdrawing money from the County Revenue Fund. This approval can only be granted in accordance with an Act of the county assembly or county legislation that appropriates money for a public purpose, or under the Public Finance Management Act, as outlined in Sections 134 and 135.

These sections detail the exceptional circumstances under which counties can withdraw money from the County Revenue Fund when the appropriate laws have not been passed or in emergencies that necessitate such spending.

“The approval of the Controller of Budget to withdraw money from the County Revenue Fund, together with written instructions from the County Treasury requesting the withdrawal, is sufficient authority for the approved bank where the County Exchequer Account is held to pay amounts from this account in accordance with the approval and instructions,” the Public Finance Management Act states.

The Council of Governors has not yet made public the number of counties currently facing cash flow problems or the reasons for this, considering that the National Treasury has already released the funds as indicated by Mbadi.

The Standard was informed by the office of the Controller of Budget that once this information is made available, a response can be issued.