How counties are losing billions in own-source revenue

County governments are losing billions of shillings annually through chaotic, weak, and in some cases illegal revenue collection systems.

These revelations are contained in a fresh set of audit reports by Auditor-General Nancy Gathungu.

The reports on receivers of revenue statements for the year ended June 30, 2025, paint a picture of deliberate non-collection, under-declaration, and faulty automated systems.

Gathungu exposed systemic challenges ranging from the use of defective revenue collection devices and frequent failure of automated systems to the deliberate abandonment of automation altogether.

The latest revelations come at a time when counties have been in the limelight over their perennial failure to realise their own revenue collection targets.

In Murang’a for instance, residents paid for county services but were unable to receive confirmation receipts, making it impossible for the county to verify payments.

This followed delays by the county executive in paying a service provider responsible for bulk SMS services.

“This undermined transparency and trust in the county’s revenue collection process. In the circumstances, there is a likelihood of customer dissatisfaction and loss of confidence in the county’s payment system,” the audit report states.

The auditor further raised concerns that Murang’a County does not appear to be in full control of its automated revenue collection system.

It could not be confirmed whether the system is owned by the county, leased, or operated under a service agreement with a third party.

“In the circumstances, the control of the revenue collection system used by the county executive was doubtful,” the report notes.

The county has also failed to map key revenue streams such as parking, denying it reliable estimates of potential revenue. Without such data, the county is unable to set realistic targets or properly assess performance.

“As a result, there is inability to determine potential revenue sources, leading to underperformance in revenue collection,” the auditor says.

Murang’a also lacks updated valuation rolls, further weakening land rates collection.

In Kiambu, outdated records are costing the county heavily. The county lacks an updated land register and valuation roll for all ratable properties, triggering significant revenue losses.

The county has also failed to operationalise its revenue authority, with no evidence that the authority assessed, collected and receipted all county revenue.

As a result, Kiambu is owed Sh5.32 billion in land rates and property rent.

“During the year under review, management only recovered arrears totalling Sh188.72 million, or four per cent of the amount outstanding at the beginning of the year,” the auditor says.

In Nakuru, undercharging and weak enforcement led to revenue losses. The county charged Sh2,000 per month for parking saloon cars instead of the approved Sh2,350, resulting in lost income.

It also ignored its own approved vehicle unclamping fee of Sh1,000, charging only Sh100 instead.

The auditor further flagged Sh92.93 million in revenue that could not be accounted for. While the county declared and transferred Sh1.88 billion to the County Revenue Fund, only Sh1.789 billion was receipted.

In Trans Nzoia, the county treasury failed to recover land rates arrears amounting to Sh12.46 million for more than three years.

The auditor also flagged the failure to regularly transfer collections to the County Revenue Fund, as required by law.

The county is losing millions more due to its failure to update the valuation rolls, while massive weaknesses were identified in the revenue management system.

Some revenue streams, including agricultural cess, royalties and public health fees, are not captured in the system at all.

“There were delays in configuration and automation of revenue streams such as approval of building plans, building approval fees, house rent and land rates, hence the possibility of under-collection of revenue during the year,” the report states.

In Narok, the audit exposed possible losses in parking fees after the county declared collecting Sh17.98 million but failed to provide a register of designated parking lots within urban centres.

“In addition, the monthly motorcycle parking fee of Sh300 per motorcycle was not collected in the year under review,” the report states.

The county also recorded significant drops in several revenue streams compared to the previous year. Cess collection fell by Sh45.27 million, land rates by Sh8.49 million, single business permits by Sh6.26 million, and market fees by Sh4.49 million.

“It was not clear how the various revenue heads registered a reduction in revenue yet the county has experienced a significant rise in settlement and population,” the auditor notes.

Narok’s revenue management system also showed glaring weaknesses. Although 9,104 clients were registered, an analysis revealed 99 duplicate accounts.

Further, despite the document number being set as the client’s ID number, 121 customers used company numbers or PINs instead of national ID numbers.

The auditor also flagged massive inadequacies in the Kenya Airports Parking Services (KAPS) system. Despite its rollout, parking officers collected Sh105.24 million in cash.

“Allowing cash transactions in revenue collection exposes the county government to a heightened risk of revenue loss through theft, fraud, or misappropriation,” the report warns.

The system also captured revenue streams that are not gazetted in the County Finance Act, raising questions about legality.

In Uasin Gishu, the county failed to declare revenue collected from outdoor advertising, including road shows.

The auditor also cast doubt on the declaration of Sh43.12 million allegedly collected from the use of conference facilities at agricultural training centres, noting there was no documentation to confirm this was the only revenue generated.

The county also failed to transfer some collections to the County Revenue Fund and did not collect revenue from betting services.

Uasin Gishu has not developed specific legislation to license betting services, undermining enforcement.

Further, the county has not developed a tariffs and pricing policy to guide the charging of levies, as required under the County Governments Act, 2012.

In Kitui, the county failed to collect Sh660.13 million owed from its properties. The county has not enacted legislation to guide revenue assessment, billing, collection, and enforcement.

The audit exposed gaps in Kitui’s automated revenue system, which cannot generate invoices or demand notices. Receipts are only issued upon collection.

“These weaknesses compromise the ability to confirm total revenue collected and to verify the completeness and accuracy of amounts reported,” the auditor says.

In Tharaka Nithi, reliance on outdated valuation rolls has led to significant losses. The county has not collected Sh44.76 million in plot rent for more than three years.

In Kilifi, the auditor revealed that out of 19 revenue streams, nine failed to realise even 50 per cent of their respective budgets.

At the same time, four streams exceeded their targets by collecting more than 100 per cent.

“In the circumstances, the reliability of the budgeting model used to forecast these revenue streams could not be confirmed,” the report states.

The county’s revenue collection system was also found to be deficient, lacking key modules such as building plan approval and inspection despite these being part of the contract.

The property register was incomplete, with integration with valuation rolls not activated.

In Kisumu, the auditor highlighted loopholes in the management of advertisement revenue, failure to automate public health services fees and non-collection of late payment penalties on single business permits.

The situation is the same in Homa Bay, where the auditor flagged weaknesses in the revenue collection system.

The system lacks a backup. It has also not been fully rolled out in the automated system to ensure maximum revenue collection.

“The continued use of manual procedures not only exposed the process to errors and inconsistencies but also created opportunities for revenue leakage,” the report states.

It adds, “This inefficiency undermines the effectiveness of the county government’s revenue collection efforts and poses a significant challenge to achieving set revenue targets.

The county relies on the vendor for hosting, managing and maintaining the system.