Treasury’s cash release sparks spending crisis

County governments are facing yet another end-of-year spending crisis after the National Treasury moved to release more than Sh68 billion less than a week before the close of the 2025-26 financial year.

The Treasury on Tuesday released Sh35.27 billion to counties for May.

Treasury Cabinet Secretary John Mbadi assured senators that the June allocation amounting to Sh33.20 billion would also be disbursed before the financial year ends on June 30.

The move means county governments could receive more than Sh68 billion within seven days, forcing them to rush expenditure plans before the Integrated Financial Management Information System is shut down at the end of the financial year.

“We will try from the National Treasury to make sure we do not close the year with any pending funding to the counties,” Mbadi told the Senate last week.

The late disbursement has reignited concerns over the Treasury’s long-standing practice of releasing county funds towards the tail end of the fiscal year, leaving devolved units with little time to utilise the money effectively.

Once the financial year closes, counties will be unable to spend the funds through IFMIS, meaning any unutilised cash will have to be carried forward into the next financial year.

The situation is expected to disrupt budget planning, alter development priorities, and potentially lead to a buildup of pending bills and stalled projects.

 The latest development mirrors a pattern that has repeatedly put county governments under pressure despite legal provisions requiring the timely release of funds.

Section 17 of the Public Finance Management (PFM) Act, 2012, requires the National Treasury to transfer counties’ equitable share of revenue by the 15^th day of every month.

However, county governments have consistently complained that the law is rarely adhered to.

Senators raised the issue during Mbadi’s appearance before the House last week, questioning why counties continue to receive funds when only a few days remain before the books are closed.

Kitui Senator Enoch Wambua warned that last-minute disbursements expose counties to audit risks and make prudent financial management difficult.

“When the National Treasury releases funds to counties towards the end of a financial year to finance activities of a financial year that is coming to an end in four days, that automatically leads to audit queries for county governments,” Wambua said.

He challenged the Treasury to explain how it schedules exchequer releases to ensure county governments receive funds in time to implement approved budgets and account for expenditure properly.

In response, Mbadi defended the Treasury, attributing the delays largely to poor revenue performance at the national level.

“If revenue has not performed, where will the government get money to disburse?” he posed.

The Treasury boss argued that the current administration had made significant improvements compared to previous years when counties frequently went for months without receiving their allocations.

 “I am sure counties will appreciate that previously, it used to be worse. Nowadays, we do not have many press conferences from the Council of Governors addressing the issue of delayed exchequer releases,” Mbadi said.

He noted that the government closed the 2024-25 financial year without any outstanding county disbursements, although the final release was made on June 29.

Mbadi further argued that counties do not necessarily wait for exchequer releases to begin implementing projects, saying many procurement processes are undertaken in advance.

“Counties do not wait for the exchequer to initiate transactions. By the time a financial year comes to a close, they have already procured. When they get money, they make payments. Therefore, we just have payments waiting for funds,” he said.

The CS added that delayed funding is not unique to counties, revealing that several national government ministries and agencies are also grappling with cash shortages.

“As I speak, I have a number of ministries, departments and agencies with requisitions awaiting exchequer releases. One of them is the Ministry of Interior and National Administration. We will support them the same way we support counties,” he said.

Despite the Treasury’s assurances, historical records paint a picture of persistent delays in county funding.

In the 2023-24 financial year, the Treasury failed to release about Sh30 billion owed to counties, citing cash flow constraints.

A year earlier, counties received more than Sh60 billion at the very end of the financial year, making it difficult to absorb the funds before the books closed.

 For the 2021-22 financial year, approximately Sh30 billion was not disbursed until August, nearly two months after the start of the subsequent financial year.

The situation was even worse in the 2020-21 financial year when the Treasury had released only Sh123 billion out of the Sh316.5 billion allocated to counties by the end of the financial year.

The amount included arrears carried over from the previous year, leaving counties struggling to fund essential services and development projects.

Critics argue that while the Treasury often cites cash flow challenges and competing national obligations, the recurring delays undermine devolution and hinder service delivery at the county level.

Governors have repeatedly accused the National Treasury of favouring the national government in cash releases, arguing that counties are frequently forced to operate under severe financial strain while waiting for funds legally owed to them.