Counties owe suppliers Sh176 billion in pending bills, report reveals

Controller of Budget Margaret Nyakang'o before the National Assembly's Committee on Public Debt & Privatization to deliberate on the Consolidated Funds Services for FY 2025/26 at Bunge Towers, Parliament, Nairobi. May 30th,2025. [Elvis Ogina, Standard]

A new report by the Office of the Controller of Budget exposes the wanton suffering of contractors and suppliers to county governments amid surging pending bills.

The County Governments Budget Implementation Review Report for the 2024/2025 financial year revealed that counties reported a cumulative pending bills totaling Sh176.80 billion as of 30th June 2025.

Controller of Budget Margaret Nyakang'o in the latest report notes that several County Governments did not follow their payment plans for these pending bills, resulting to the high levels of debt by counties.

Out of the total amount of bills, those totaling Sh.48.88 billion were less than one-year-old, 11 those worth Sh19.78 billion were one to two years old, others amounting to Sh20.34 billion were two to three years old, while others valued at Sh85.42 billion had been pending for over three years.

"The significant amount of bills under one year is concerning, especially since full disbursement of the Equitable Share for FY 2024/25 had been provided. Moreover, a discrepancy exists between the pending bills reported to the Controller of Budget and the trade payables shown in the unaudited fnancial statements submitted by County Executives and Assemblies," reads the report.

Nyakang'o also discloses that the high level of pending bills were inconsistent with Regulation 41(2) of the Public Finance Management (County Governments) Act of 2012  that provides that "debt service payments shall be a first charge on the County Revenue Fund, and the Accounting Officer shall ensure this is done to the extent possible so that the County government does not default on debt obligations.”

To cure this, the Controller of Budget urged County governments to avoid accumulating pending bills by refraining from making commitments at the end of the financial year, forecasting revenues realistically, and prioritizing payments for completed activities.

"County Treasuries are advised to settle outstanding debts using the first-in-first-out principle, in line with Regulation 55(1)(b) of the Public Finance Management (County Governments) Regulations 2015," she noted.

At the same time, counties have been cited over their high expenditure on compensation to employees for the period under review and contrary to regulation 25(1)(b) of the PFM (County Governments) Regulations, 2015, limits County Government expenditures on wages and benefits to 35 per cent of the County’s total revenue.

According to the report, County Governments spent Sh220.64 billion on employee compensation in the 2024/2025 financial year. This amount represents 47 per cent of their total expenditure of Sh470.23 billion and 41 per cent of the realized revenue of Sh533.11 billion. This expenditure also represents an increase from Sh209.84 billion in the previous 2023/24 financial year.  

Nyakangó further highlights that out of the 47, only eight County Governments adhered to the 35 per cent ceiling for employee compensation to actual revenue. These counties are 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).

A deeper perusal of the report also revealed that Sh10.7 billion – which represents five percent of the total expenditure on employee compensation- was processed manually and paid outside the government payroll system.

“The Controller of Budget recommends that County Governments maintain their employee compensation expenditure at sustainable levels and comply with Regulation 25(1)(b) of the Public Finance Management (County Governments) Regulations, 2015,” added the report.

“For those County Governments that did not requisition their June 2025 salaries, the Controller advises them to ensure adequate allocation for employee compensation in FY 2025/26 to cover wages for 12 months, as well as any arrears. “

Adding, “Additionally, the Controller reminds County Governments of a resolution from the Third National Wage Bill and Productivity Conference, held in April 2024, which urged public service institutions to reduce their wage bills to 35 per cent by June 2028.”