Counties spent 43 per cent of their revenues in 2020/2021 on wages, operations and other personal emoluments, making it another year they breached the set ceiling.
The latest data shows that they used Sh190 billion on salaries and other related expenditures against a revenue base of Sh440 billion.
The expenditure translates to an average of 43.2 per cent of total revenue which is in breach of the 35 per cent threshold set in the Public Finance Management Act regulations passed by Parliament in 2012.
The 2022 Budget Review and Outlook Paper (BROP) shows that only eleven counties were able to comply with the threshold rule during the period under review.
They included Makueni, Migori, Samburu, Uasin Gishu and Kilifi counties.
Others were Turkana, Nakuru, Kwale, Isiolo, Mandera and Tana River.
“The Public Finance Management (County Government) Regulations, 2015 requires that expenditure on wages and benefits for public officers shall not exceed 35 per cent of the total revenues,” says the report.
In the same period, data published by the Controller of Budget (CoB) Margaret Nyakang’o showed that county governments fell short of the target in the collection of their own source revenue by Sh24.5 billion only managing to generate Sh35.9 or 59.4 per cent against a projection of Sh60.4 billion.
The 2022 BROP has however flagged the targeted figures terming them unrealistic.
“The county governments are projecting unrealistic figures which need to be rectified. The National Treasury needs to ensure counties have the capacity to project realistic targets as well as guidance on revenue collection,” states the report.
The persistent failure by the devolved units to tame their recurrent budgets has continued to hurt development spending and settlement of pending bills in an economy that heavily relies on government expenditure for growth.
As at June 2020, the Office of the Auditor General (OAG) reported total bills owed by counties to be Sh152.6 billion comprising Sh45.5 billion described as eligible (payable) and Sh107 billion labelled ineligible.
By June this year, county executives had only managed to settle Sh18 billion of the eligible bills and Sh1.6 billion of the ineligible ones pointing to a hard-hitting struggle to clear the backlogs.
Accumulation of pending bills has contributed to the compounding of cash-flow hitches for businesses—especially Small and Medium Enterprises (SMEs)—forcing some of them out of operation.
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“The ultimate consequences of pending bills are businesses shutting down, jobs are lost, purchasing power shrinks, lenders suffer increases in non-performing loans, poverty increases and inequality widens, leading to dwindling of individual and national savings,” explains Lisa Kimathi, a senior research associate at Standard Investment Bank (SIB).
The CoB named Busia, Garissa, Kilifi, Kisumu, Nairobi City and Machakos on the list of the poorest spenders of development billions.
Others were Mombasa, Narok, Nyandarua, Taita Taveta, Turkana and Vihiga all of which recorded an absorption rate of below 40 per cent.
Only the three counties of Mandera, Kakamega and Marsabit absorbed above 70 per cent of the development funds at 74 per cent, 73.4 per cent and 70.8 per cent respectively.