Article Index


County Finance



 Prudent. Proper. Accountable.




Part of County Revenue will come from the National government as part of fiscal devolution, while some will be raised from local sources through taxation, services, levies, permits, rents, service-charge, and rates, etc. Counties will also be able to borrow externally under certain conditions.


The county government will prepare and present its budget in a standardised format, with the assistance of the SRC, the Controller of Budget and the National Government. This budget must also muster the support and approval of the local County Assembly.


Counties will manage own finances but under strict regulation and procedures under the law governing appropriation of funds; and even then, no withdrawal will be permitted unless authorised by the independent office of the Controller of Budget, who shall report to Parliament every 4 months. Thereafter, yearly audits by the Auditor-General (also an independent office), will be made public, and scrutinised by Parliament and respective County Assemblies.





County Finance under the New Constitution is meant to replace the inefficient and wasteful Constituency Development Fund CDF, (as well as the Economic Stimulus Program ESP, Local Authority Transfer Fund, LATF; Kazi kwa Vijana, KKV, and other similar programs), which basically have little to show in terms of sustained success, efficiency and management.

Although the CDF and its sister funds, were well intentioned, "....... they should be abolished and (their) functions integrated with the County Governments. The reasons for this are, firstly, that devolution achieves the aims of CDF, secondly, CDF duplicates the functions of county governments ........" (Nyamori, 2013).

As we have seen at the top of this discussion, Kenya's decentralisation under the Constitution of Kenya 2010, gives the people of the regions a direct say on how they want to be governed by allowing them to originate and determine their development policies and priorities, thereby granting every one of the 47 Counties shared fiscal responsibility with the National government. Chapter 12 - Public Finance, Part 1 Principals and Framework of Public Finance, Article 201, excerpts:

201 (b) .......(ii) revenue raised nationally shall be shared equitably among national and county governments; ........

A County's share of this revenue will be placed in a Revenue Fund. Part 2 - Other Public Funds:

207. (1) There shall be established a Revenue Fund for each county government, into which shall be paid all money raised or received by or on behalf of the county government ........

Simply put, this Fund is to the County what the Consolidated Fund is to the Country.

As our devolution matures, some of the money into a County may be kept in other supplementary funds created by law:

(4) An Act of Parliament may— (b) provide for the establishment of other funds by counties ........

Indeed, a motion to create a Graduates Enterprise Fund was raised in the Senate in June 2013 to create an interest-free revolving fund for unemployed graduates in all the 47 Counties.

Kenya's devolution is intended to be inclusive and, specifically, see to it that there is no more marginalisation of any group(s) at the National level, and further still, ensure the participation and representation of minorities living in any sub-national region. This same principal applies on the administration of public funds belonging to the Counties (i.e the Revenue Fund):

201. The following principles shall guide all aspects of public finance in the Republic— (b) the public finance system shall promote an equitable society, and in particular— (iii) expenditure shall promote the equitable development of the country, including by making special provision for marginalised groups and areas;

In fact, proponents of the CDF Act, cite Article 201 (and others), to push the argument that the Fund mitigates against potential marginalisation of citizens at the grassroots.




Sources to the Revenue Fund


Money into a County's Revenue Fund will be raised from two main sources: through local taxation and service charge, and (as noted above in the introduction), from its share of the National Revenue as part of devolved funds. In the first case, the County government will be able to raise own revenues directly through ordinary taxation and through taxation for unique services that it offers . Part 3— Revenue-Raising Powers and the Public Debt, Article 209, excerpts:

209. (3) A county may impose— (a) property rates; (b) entertainment taxes; and (c) any other tax that it is authorised to impose by an Act of Parliament.
(4) The national and county governments may impose charges for the services they provide.

Much of this revenue stream was, previously, raised by local town and municipal councils, whose existence expired once County governments were formed to take over their functions after the March 2013 elections.

The very fact of Kenya's diversity is expected to pose an immediate challenge to the harmonisation of varying taxation regimes across the 47 Counties. National legislation is therefore expected to guide and set a fair and workable national taxation framework applicable across the Counties in keeping with national good:

209. (3) A county may impose— (c) any other tax that it is authorised to impose by an Act of Parliament.
(5) The taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.

The second source of County Finance is the share of devolved funds that every County is entitled to. The Constitution provides that at least 15% of National Revenue be allocated to the 47 Counties. Chapter 12 - Public Finance:

203. (2) For every financial year, the equitable share of the revenue raised nationally that is allocated to county governments shall be not less than fifteen per cent of all revenue collected by the national government.

The people's representatives (i.e, the National Assembly), will each year, legislate the actual percentage via the Division of Revenue Bill . Chapter 8 - The Legislature, Part 1 - Establishment and Role of Parliament:

95. (4) The National Assembly–– (a) determines the allocation of national revenue between the levels of government ........

218. (1) At least two months before the end of each financial year, there shall be introduced in Parliament–– (a) a Division of Revenue Bill, which shall divide revenue raised by the national government among the national and county levels of government ........

In other words, the National Assembly (NA) will determine how much of National Revenue is set aside for the Counties and how much is left with the National Government.

The Division of Revenue Bill, 2013 was passed in May. In the Bill, the Assembly proposed 25.5% of audited (2010/2011) national revenue, and an additional 7.2% from donor funding - (Conditional Allocations to County Governments - Allocations to finance county expenses relating to donor funded development programmes and regional referral hospitals as well as additional allocations to hold harmless the county governments are included as conditional allocations to county governments.) Division of Revenue Bill, May 2013)).

In the next stage, the representatives of the Counties (the Senators) would then be expected to legislate the criteria for the sharing of the portion that is set aside to be shared among all the 47 Counties:

96. (3) The Senate determines the allocation of national revenue among counties ........

218. (1) At least two months before the end of each financial year, there shall be introduced in Parliament–– (b) a County Allocation of Revenue Bill, which shall divide among the counties the revenue allocated to the county level of government ........

It is important to mention here for accuracy and clarity that in the long-term, the New Constitution actually requires the Senators to develop a 5-year policy framework on how the devolved funds are split among the 47 Counties:

217. (1) Once every five years, the Senate shall, by resolution, determine the basis for allocating among the counties the share of national revenue that is annually allocated to the county level of government.

For the short-term, i.e., during the constitutional transitional period however, the requirement is actually a 3-year policy framework as provided under Article 16 in the Sixth Schedule:

16. Despite Article 217 (1), the first and second determinations of the basis of the division of revenue among the counties shall be made at three year intervals, rather than every five years as provided in that Article.

As a Commission, the CRA is an interested party on behalf of the people's sovereignty, and must be involved in the design and formulation of the two Bills. Chapter 12 - Public Finance, Part 1 - Principals and Frameworks of Public Finance:

205. (1) When a Bill that includes provisions dealing with the sharing of revenue, or any financial matter concerning county governments is published, the Commission on Revenue Allocation shall consider those provisions and may make recommendations to the National Assembly and the Senate.
(2) Any recommendations made by the Commission shall be tabled in Parliament, and each House shall consider the recommendations before voting on the Bill.

Lest anyone should forget:

216. (1) The principal function of the Commission on Revenue Allocation is to make recommendations concerning the basis for the equitable sharing of revenue raised by the national government–– (a) between the national and county governments; and (b) among the county governments.

Thus the CRA and Parliament must closely liaise in the determination of how and what amounts of National Revenues are allocated to the Counties every 5 years, and each year, how much is allocated to each of the 47 Counties.

(NB. The role of the CRA is discussed under the CRA link while those of the Senate and the National Assembly are detailed under their respective links).

The New Constitution has guaranteed that money going into the Revenue Fund is predictable both in its amount and timing:

219. A county’s share of revenue raised by the national government shall be transferred to the county without undue delay and without deduction, .......

This explains, as we saw a short while ago in Article 218, why the two Bills containing the resolutions on how National and devolved funds are shared, must be considered and enacted in good time, i.e., under clear constitutional timelines:

218. (1) At least two months before the end of each financial year, there shall be introduced in Parliament–– (a) a Division of Revenue Bill, ....... (b) a County Allocation of Revenue Bill, .......

For the 2013/2014 financial year, the Senate adopted the National Treasury's proposal for a monthly cash disbursement schedule of devolved funds to be done by the 15th of every month. Of note is that the CRA had earlier proposed quarterly disbursement of the money. By the second disbursement of devolved funds on the 17th September 2013, none of the 47 Counties had managed to absorb more than 50 per cent of monies in their County Revenues, a concern that led the Cabinet Secretary of the National Treasury to urge these sub-national governments to speed up on their budget implementations. The first (delayed by legislation) tranche was made on the 30th of August.

There is a third potential source of County Finance; loans and grants:

212. A county government may borrow only— (a) if the national government guarantees the loan; ....... .

The fact that the Counties will be permitted to borrow is an indication of the liberal provisions of the New Constitution towards devolution. As the above sub-clause (a) of Article 212 shows, a sub-national government intending to borrow must secure guarantees from the National government. While some may feel that this requirement may compromise the independence of the Counties and their governments, it is perhaps a good thing since the National government (and Parliament) may be more inclined to take a wider national view of any implications arising out of the indebtedness of a County.

There exists a fourth possible source of money to the Revenue Fund:

202. (2) County governments may be given additional allocations from the national government’s share of the revenue, either conditionally or unconditionally.

This source includes those allocations that are given directly to a County as conditional grants from the Equalisation Fund:

202. (3) The national government may use the Equalisation Fund–– (b) ....... indirectly through conditional grants to counties in which marginalised communities exist.

As usual, the CRA must be involved:

(4) The Commission on Revenue Allocation shall be consulted and its recommendations considered before Parliament passes any Bill appropriating money out of the Equalisation Fund.

Lastly, the Constitution of Kenya 2010 provides for a fifth source of County 'Revenue' by way of transfer of emergency advances from the National Government-managed Contingencies Fund to Counties : 

208. (2) An Act of Parliament shall provide for advances from the Contingencies Fund if the Cabinet Secretary responsible for finance is satisfied that there is an urgent and unforeseen need for expenditure for which there is no other authority.

The Contingencies and County Emergency Fund Act of 2011 establishes the framework for the operation of these transferred funds. The Act also allows Counties to create their own County Emergency Funds to which their Governments are permitted to make budget allocations i.e., for a rainy day. What is unclear from the Act however, is whether the National Government is permitted to spend such allocations directly on an emergency service that it may provide to a County, and perhaps recover the money later from the normal devolved funds to that County.

The discussion above on the 5 sources of County Revenue are captured in this infographic by the International Budget Partnership - Kenya, below:


Fig 1: Sources of Revenue for Kenyan Counties



Source: International Budget Partnership - Kenya


In this section we have showed that the process of allocation of funds into the Revenue Funds of the Counties closely follows the general theme in the Constitution that demands the people be well represented in the allocation and management of Public Funds. This is achieved either through their direct participation or by resolutions and Acts of Parliament. We have also seen that the CRA plays an important role in that process as a protector of the people's sovereignty over Public Finance, thus underlining that theme.

NB. The CRA and Public Finance are discussed under the Commissions and Public Finance links respectively.





Budgeting of the Revenue Fund


Once the money comes into the County Revenue Fund, two conditions must be in place prior to its use. First, National and/or County legislation must permit a withdrawal or charge on the Fund, and secondly, authority must be obtained from the Controller of Budget. Chapter 12 - Public Finance,

207. (2) Money may be withdrawn from the Revenue Fund of a county government only— (a) as a charge against the Revenue Fund that is provided for by an Act of Parliament or by legislation of the county; or (b) as authorised by an appropriation by legislation of the county.
(3) Money shall not be withdrawn from a Revenue Fund unless the Controller of Budget has approved the withdrawal.

In other words just about every cent in the Revenue Fund will have been planned for even before it gets into the Fund! This is a good example of the various provisions in the Constitution that attempt to shift the management of public money from the centralised control of the executive to local control by elected officials and the new independent office of the Controller of Budget; and ensure that the people are not only well represented in the administration of Public Finance, but that their sovereignty is protected as well. (NB. The office of the Controller of Budget is discussed under the Independent Offices link). 

Speaking of budgeting, the Constitution of Kenya 2010 has laid out a 3-step general framework in the budgeting process to be followed by all the 47 Counties. These three steps involve consultative planning with the National Government and the Controller of Budget, preparing a budget using a standardised format, and presentation of their budget proposals to their county assemblies on specific dates, as defined by legislation. Part 5 - Budgets and Spending:

220. (2) National legislation shall prescribe— (a) the structure of the development plans and budgets of counties; (b) when the plans and budgets of the counties shall be tabled in the county assemblies; and (c) the form and manner of consultation between the national government and county governments in the process of preparing plans and budgets.

The keen reader will notice that hidden within Article 220 (2) above is the need to ensure that policy, planning and budgeting meets the requirements of fair, equitable and affirmative distribution of County Finance, as echoed in Article 201 on the principals of Public Finance. The other key intention of the Constitution is to ensure openness and accountability in governance. In that regard, budgeting at the County level must observe a clear style of reporting devoid of ambiguities and vagueness. In broad terms, a County's budget must state expenditure, deficit finance, and debt:

220. (1) Budgets of the national and county governments shall contain— (a) estimates of revenue and expenditure, differentiating between recurrent and development expenditure; (b) proposals for financing any anticipated deficit for the period to which they apply; and (c) proposals regarding borrowing and other forms of public liability that will increase public debt during the following year.

In spite of the foregoing, public finance experts have frequently faulted the failure of the Constitution as well as the PFMA to provide for more meaningful formats of budget planning. "The budget is meant to be organised around programmes (sets of related activities) with clear objectives", (Larkin, J 2014). In other words, to provide sufficient detail of "....... how inputs become outputs". Larkin faults the long-used and opaque system where public budgets are simply presented as recurrent and development inputs without any mention of expected outcomes: "Traditionally, the Kenyan budget has been organised following what is called a “line item format.” This just means that the budget is full of budget lines for inputs, and not much else".......

Larkin also recommends that Counties be compelled to explain how they plan to measure their achievements every budget year. "It (budget planning) entails the creation of programmes with indicators and targets, and emphasises narrative detail rather than long lists of obscure inputs." (Larkin, J 2014).

Obviously, the intention of Article 220 is not to baby-sit County governments while they carry on with their budgeting mandates:

224. On the basis of the Division of Revenue Bill passed by Parliament under Article 218, each county government shall prepare and adopt its own annual budget and appropriation Bill in the form, and according to the procedure, prescribed in an Act of Parliament.

Rather, it is this author's view that the budgets of Counties must be easy enough to be followed even by the general public. Therefore while the respective County Assemblies are considering budget proposals from their governments, the people of the Counties and any other interested party should be able to participate in the process, and in a language they can understand.

Indeed, various non-governmental groups have taken the time to develop a simply-worded tool that the public can adopt for use to understand the contents of a public finance budget and through which they can ask their local leaders how they want their resources allocated and spent each and every time.


Because the recurrent expenditure of the Counties includes key items such as the wage bill for County public officers, they must consult and be guided by the Salaries and Remuneration Commission SRC in drawing up the pay structures and caps of their employees:

230. (4) The powers and functions of the Salaries and Remuneration Commission shall be to— (b) advise the ....... county governments on the remuneration and benefits of all other public officers.





Administration of the Revenue Fund


We saw at the beginning of this discussion on the Revenue Fund that the Controller of Budget COB, must approve every withdrawal from the Fund. Actually, it is the same Controller who also gives the green light for the transfer of devolution monies from the National Funds (mentioned in Articles 204, 206 and 207) into the County (Revenue) Funds. Part 6 - Financial Officers and Institutions:

228. (4) The Controller of Budget shall oversee the implementation of the budgets of the ....... county governments by authorising withdrawals from public funds under Articles 204, 206 and 207.
(5) The Controller shall not approve any withdrawal from a public fund unless satisfied that the withdrawal is authorised by law.

In a bid to streamline the management of devolved funds, the Transition Authority, the body mandated to midwife devolution of functions and therefore, funds, to the Counties, announced on the 3rd of September 2013 that Governors will only be allowed to make one withdrawal each month from the County Revenue Fund, ostensibly to control spending and end the misuse of those funds. This measure would also allow the Authority and the Office of the COB to keep pace with the money trails at the Counties, so the two are not seen to appear to shut the stable (Revenue Fund) door only after the horse has bolted. This is important because by that time, none of the Counties had fully integrated the Treasury's IFMIS into their accounting and financial operations.

The COB is also required to keep tabs on how the withdrawals are being used and by whom, and issue tri-annual reports:

(6) Every four months, the Controller shall submit to each House of Parliament a report on the implementation of the budgets of the national and county governments.

Thus all Counties must, as required by legislation, put in place proper controls and open reporting systems in the management and use of the money from the Revenue Fund.

225. (2) Parliament shall enact legislation to ensure both expenditure control and transparency in all governments and establish mechanisms to ensure their implementation.

190. (2) County governments shall operate financial management systems that comply with any requirements prescribed by national legislation.

The COB's reports in sub-article 228. (6) above may very well form the basis on which a rogue County government finds itself in trouble with the rest of the country, resulting in its 'take-over' by the National government:

(3) Parliament shall, by legislation, provide for intervention by the national government if a county government— (b) does not operate a financial management system that complies with the requirements prescribed by national legislation.
(4) Legislation under clause (3) may, in particular, authorise the national government — (a) to take appropriate steps to ensure that the county ....... operates a financial management system that complies with the prescribed requirements; and (b) if necessary, to assume responsibility for the relevant functions.

Or worse still, the rogue County may face a possible denial of funds by the National Executive:

225. (3) Legislation under clause (2) may authorise the Cabinet Secretary responsible for finance to stop the transfer of funds to a State organ or any other public entity— (a) only for a serious material breach or persistent material breaches of the measures established under that legislation; ........

The gist of sub-article 190 (3) clearly lends credence to the need and relevance of a restructured and modern, professional Provincial Administration, PA able to quickly deploy and take over the function(s) of a County government that is not keeping up or one which is not playing by the rules. (NB. The PA is discussed further under the Provincial Administration link.)

And at the end of every financial year, prompt audit reporting by the Auditor-General is made on the financials of the Counties (including County organs and bureaucracies) and County Funds:

229. (4) Within six months after the end of each financial year, the Auditor-General shall audit and report, in respect of that financial year, on— (a) the accounts of the ....... county governments; (b) the accounts of all funds and authorities of the ....... county governments;

A damning report from the Auditor-General against a County government can also lead to the application of the interventions provided under clauses (3) and (4) of Article 190.

The Constitution appears to set a very strict framework in the administration of County Finance. It is hoped that this will minimise corruption, waste and inefficiency at the regions as well as to keep the public well informed about how money is being spent in their respective Counties.






1. The Constitution of Kenya, 2010. National Council for Law Reporting. The Attorney-General.

2. Division of Revenue Bill, 2013. The Parliament of Kenya. The National Assembly. Retrieved May 15, 2013.

3. Nyamori, Robert (2013). "CDF has no role in constituencies any more; transfer it to county governments". Daily Nation Opinion, Retrieved 23 May 2013.

4. The Contingencies and County Emergency Fund Act of 2011. The Attorney-General.

5. Larkin J, (2014). "Programme-based budgeting still a mystery to Kenyan county planners". The EastAfrican OpEd. Retrieved September 8, 2014.

6. 16 Key Questions About Your County Budget: A Tool for Reading and Understanding County Budgets. Institute of Economic Affairs, The Institute for Social Accountability, International Budget Partnership, WALINET, World Vision Kenya, ARTICLE 19, and I Choose Life – Africa. Retrieved October 2014.


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