Controller of Budget Margaret Nyakang'o / HANDOUT
Cash-strapped counties are owed over Sh113.29 billion, even as the devolved units struggle to pay suppliers, contractors and other creditors.
A new report by Controller of Budget Margaret Nyakang’o reveals the stark irony of counties that are unable to settle their debts but are themselves owed billions of shillings in unpaid revenue.
The County Governments Budget Implementation Review Report for the period ended June 30, 2026 shows that arrears stood at Sh111.62 billion at the beginning of the 2025-26 fiscal year but had risen to Sh113.29 billion by June 30, 2026.
Of the latest figure, Sh100.38 billion was ordinary own-source revenue owed to counties, Sh11.20 billion was owed to health facilities, while Sh1.70 billion was in grants.
The counties are also struggling with stalled projects, largely due to inadequate funding.
“Revenue arrears remained high in the 2025-26 financial year, reducing the liquidity available for budget implementation,” Nyakang'o said in the report.
The ordinary own-source revenue includes money owed to counties through land rates, parking fees, business permits, cess and other local charges.
In hospitals, patients are increasingly failing or unable to pay for medical services rendered to them, denying the facilities the much-needed revenue.
Counties also benefit from grants advanced by the government and other development partners, but some of these agencies are not remitting the cash, plunging the counties into a financial quagmire.
“This overall situation regarding receivables underscores persistent challenges in revenue mobilisation, which constrain liquidity for service delivery in the devolved units,” the report says.
Many county governments have invested heavily in automation of revenues in a bid to boost collections.
However, huge uncollected revenues now put into question the effectiveness of the systems and whether the devolved units are getting value for money.
Currently, county governments reported outstanding pending bills of Sh172.53 billion.
“County governments are required to prioritise the settlement of all eligible trade payables in the budget as a first charge for the fiscal year 2026-27,” the report says.
According to the report, Nairobi has the highest amount of uncollected revenue, with Sh59.09 billion owed to the county as at June 30, accounting for more than half of the total debt.
But Nairobi was also the biggest debtor, with trade payables of Sh86.90 billion — equivalent to about half of all county pending bills.
This means Nairobi alone owed suppliers and contractors nearly Sh27.81 billion more than the entire amount of revenue it was owed.
Nakuru followed Nairobi in revenue arrears with Sh16.84 billion, including Sh12.57 billion in ordinary own-source revenue and Sh4.27 billion owed to health facilities.
Mombasa had Sh13.68 billion in arrears, comprising Sh11.82 billion in ordinary own-source revenue and Sh1.86 billion in Facility Improvement Financing.
Kiambu was fourth with Sh5.63 billion, while Kakamega had Sh1.67 billion.
Other counties with significant uncollected revenues include Kitui, which is owed Sh2.24 billion, Kisii with Sh1.37 billion, Laikipia Sh1.38 billion and Nyeri Sh1.18 billion.
Bomet has Sh1.20 billion in outstanding revenue, while Makueni is owed Sh954.40 million.
Meru has Sh830.93 million in arrears, followed by Nandi at Sh684.43 million and Kajiado at Sh644.88 million.
Busia has Sh1.78 billion, Migori has Sh466.77 million, while Garissa has Sh429.03 million in uncollected revenues.
“County governments should develop and implement revenue arrears recovery plans for the 2026-27 financial year,” the report states.
Nyakang’o advised the counties to also perform monthly reconciliations of the revenue registers and assign accountable officers to collect revenue from each major revenue stream.
“The county treasuries should consistently report opening balances, additions, collections, waivers, and closing balances to strengthen oversight and improve liquidity planning,” she said in the report.
In a clear demonstration of the inefficiencies in the collection of revenue in the devolved units, the report shows that the counties collected less than what they were owed.
During the 2025-26 financial year, the 47 counties collected Sh96.08 billion in own-source revenue against a target of Sh106.45 billion.
This is compared with more than Sh113 billion that was owed to them by the end of the financial year.
While Nairobi, Nakuru, Mombasa and Kiambu accounted for the largest shares, several counties had little or no revenue arrears.
Embu, Kwale, Kilifi, Kirinyaga, Machakos, Mandera, Narok, Nyamira, Taita-Taveta, Tana River, Turkana and Uasin Gishu reported no revenue arrears as at June 30, 2026.
On the other hand, some counties recorded increases in their receivables during the year.
Busia’s arrears rose from Sh946.95 million at the beginning of the financial year to Sh1.78 billion by June 30, 2026.
Nakuru’s arrears increased from Sh12.20 billion to Sh16.84 billion, while Kitui’s rose from Sh1.58 billion to Sh2.24 billion.
Kisii’s arrears increased from Sh948.34 million to Sh1.37 billion, while Nandi’s rose sharply from Sh91.50 million to Sh684.43 million.
The report shows that not all counties saw their arrears rise.
Mombasa’s receivables fell from Sh16.13 billion to Sh13.68 billion, while Kakamega reduced its arrears from Sh2.37 billion to Sh1.67 billion.
Marsabit also reduced its arrears from Sh221.36 million to Sh126.43 million.
Despite these reductions, Nyakang’o warned that the overall level of outstanding revenue remained a threat to counties’ ability to fund services.
