Counties struggling to raise own revenue as arrears grow, says CoB

The Controller of Budget (CoB) has revealed low performance by counties in own-source revenue collection in the first quarter of Financial Year 2025/26.

CoB Margaret Nyakang’o said in the first quarter of FY 2025/26, county governments collectively generated Sh13.94 billion in own-source revenue.

The amount represented 15 per cent of their annual target of Sh93.89 billion, but had increased by 10 per cent compared to a similar period of Financial Year 2024/25, when the county governments cumulatively received a total of Sh12.68 billion.

“Underperformance in revenue generation has led to budget shortfalls, hindering the full execution of planned activities. Six County Governments collected 10 per cent or less of their own source revenue targets, while thirty-one Counties collected between 11 and 19 per cent, and ten Counties achieved 20 per cent or more,” she said.

According to the CoB, counties that achieved the higher proportion of their local revenue collection to their respective annual revenue targets were Samburu County at 40 per cent, Garissa at 36 per cent, Narok at 35 per cent, Kitui and Mombasa at 22 per cent each, Vihiga and Baringo at 21 per cent each and Homa Bay and Lamu at 20 per cent respectively.

On the other hand, counties with the lowest proportion of their local revenue collection to their respective annual revenue targets included Uasin Gishu and Kisumu, both attaining 10 per cent, Kwale at nine per cent, Nandi at seven per cent, Siaya at six per cent and Kericho at four per cent.

“This poor performance is primarily attributed to shortfalls in ordinary OSR collections, except for Kisumu, which experienced significant revenue losses from FIF owing to the elevation of Jaramogi Oginga Odinga Teaching and Referral Hospital to Level Six, which has since been handed over to the National Government,” Nyakang’o said.

The total outstanding revenue arrears as at September 30, amounted to Sh156.23 billion, which included Sh113.90 billion in ordinary Own Source Revenue arrears, Sh7.05 billion in Facility Improvement Financing arrears, and Sh35.28 billion related to the September equitable share.

According to Nyakang’o, the situation significantly impedes liquidity, making it challenging for the counties to implement the FY2025/26 budget effectively.

“County governments should enhance revenue collection mechanisms by improving revenue administration. Counties are encouraged to explore innovative strategies to broaden the revenue base and collection of revenue arrears, which had accumulated to Sh156.23 billion as of September 30, 2025,” the CoB said.

For Nairobi, the county received Sh6.61 billion in revenue during the first quarter of FY 2025/26, the amount representing increase of 21 per cent compared to the amount received in a similar period in FY 2024/25 of Sh5.45 billion.

Nyakang’o stated that the total revenue consisted of Sh3.43 billion from the equitable share of revenue raised nationally, and OSR collection of Sh2.47 billion, with the county having a cash balance of Sh719.85 million from FY 2024/25.

The total OSR collection of Sh2.47 billion included FIF of Sh412.46 million, and Sh58.15 million from the liquor fees.

No additional allocations from the national government and development partners was received.