County governments failed to explain how Sh131.2 billion was spent in the last financial year, citing errors and gaps in their records, according to the 2025 Devolution Budget Watch.
The report by the Parliamentary Budget Office (PBO) highlights ongoing weaknesses in financial management across devolved units, with billions of taxpayers’ shillings lacking proper documentation.
Key issues include unsupported spending, illegal reallocations, unexplained bank balances, and voided transactions. Counties lost Sh5.4 billion on payments without adequate proof.
A further Sh2.2 billion was transferred to other projects in breach of the Public Finance Management Act, 2012, while Sh13.2 billion in county accounts could not be verified. Cases of voided transactions were widespread, totaling Sh110.5 billion under scrutiny.
“Auditor General reports portray worrying trends of non-compliance by county governments with legal provisions governing the use and management of public funds,” the report states.
The findings also point to violations in areas including fiscal responsibility, development spending, salaries and benefits, ethnic representation, and human resources rules.
Most counties exceeded the legal wage bill limit of 35 percent of total revenue under the Public Finance Management (County Governments) Regulations, 2015.
During the 2023/24 financial year, only Turkana, Narok, Kilifi, and Tana River stayed within the limit. Kisii County recorded the highest overspend at 68 percent of revenue, followed by Taita Taveta at 66 percent.
The report provides a detailed review of how counties implemented budgets for FY 2025/26, looking at fiscal conditions, sector investments, and delivery of services. It notes the growing economic role of counties in contributing to national GDP.
The PBO, which advises lawmakers on fiscal matters, assessed county finances to give parliament, county assemblies, and citizens tools for monitoring public funds.
Counties face operational challenges including delayed fund releases, slow adoption of electronic procurement, unclear bursary management, and continued wage pressures in the health sector.
By highlighting budget execution, sector trends, and emerging risks, the report aims to strengthen oversight, enhance financial discipline, and support effective devolution.
