County governments could be required to justify every shilling they expect to raise from local sources under proposed legal changes seeking to curb exaggerated revenue projections that have repeatedly left devolved units struggling to finance their budgets.
The proposed Public Finance Management (Amendment) Bill, 2026, sponsored by Kiambu Senator Karungo Thang’wa, seeks to introduce a 15 per cent limit on how much counties can project in own-source revenue (OSR) above their last audited collections.
If passed, the legislation would make it difficult for county administrations to present highly ambitious revenue estimates that are not supported by their previous collection records.
The proposal is currently under consideration by the Senate Finance and Budget Committee and seeks to amend several provisions of the Public Finance Management Act to strengthen controls over county budgeting and spending.
Under the proposed changes to Section 107(2), counties would only be allowed to estimate own-source revenue at a maximum of 15 per cent above the last reported and audited amount.
“The Bill proposes to amend the Act to provide that the projected OSR be included in the budget estimates of a county government for a financial year shall not exceed the last reported and audited own source revenue of that county government by more than 15 per cent,” the Bill states.
The proposed ceiling is intended to address a budgeting practice that has seen counties set revenue expectations far beyond their actual collection capacity, creating funding gaps when the money fails to materialise.
Figures from the last financial year show that counties raised Sh96.08 billion in own-source revenue, falling short of their combined target of Sh106.08 billion.
The shortfall is also reflected in the County Governments Budget Implementation Review Report for 2025-26, which found that 20 counties collected less than 75 per cent of their approved revenue targets.
“Weak own-source revenue performance constrained implementation of approved programmes and increased dependence on transfers from the National Government,” the report states.
Apart from restricting the amount counties can project, the Bill proposes to give county assemblies greater responsibility in ensuring revenue estimates are realistic before approving annual budgets.
It seeks to amend Section 131 of the Act to require county assemblies to confirm that the projected own-source revenue complies with the 15 per cent limit when examining budget proposals from county executives.
The provision would strengthen the role of MCAs in questioning and reviewing revenue estimates, reducing the likelihood of counties approving budgets based on collections they may struggle to achieve.
The legislation also addresses how county governments should handle revenue collected above their approved projections.
Through proposed amendments to Section 135, counties would be required to prepare supplementary budgets and present them to their assemblies whenever actual own-source revenue exceeds the amount approved in the annual estimates.
“The Bill proposes to amend section 135 of the Act is by inserting a new subsection to provide that where the own source revenue collected by a county government exceeds the projected revenue within the budget estimates for that financial year,
“….. the county government shall submit a supplementary budget to the county assembly to appropriate for the additional revenue.”
The requirement would ensure that additional collections are formally incorporated into county spending plans before they can be allocated to other programmes or activities.
County administrations would therefore have to obtain approval from their respective assemblies instead of independently deciding how to spend revenue collected beyond the original budget projections.
The proposed amendments come as counties continue to grapple with challenges in raising sufficient local revenue to support their budgets, with poor performance increasing their dependence on transfers from the national government.
By setting a ceiling on projections, strengthening assembly oversight and introducing approval requirements for additional collections, the Bill seeks to bring greater accountability and discipline to the management of county finances.