National Assembly Majority Leader Kimani Ichung’wah /FILE
President William Ruto’s administration is pushing for a major shift in how additional allocations, commonly known as conditional grants, are disbursed to counties.
A proposed law seeks to eliminate the requirement for county governments to enter into formal agreements with the National Treasury before accessing allocated money.
The bill sponsored by National Assembly Majority Leader Kimani Ichung’wah targets sections of the existing law that govern additional allocations, arguing they create unnecessary bureaucracy.
“The purpose of the Public Finance Management (Amendment) Bill, 2025, is to ensure there shall be no duplication in the management of additional allocations through intergovernmental agreements,” the Kikuyu MP said in the bill’s memorandum.
At the heart of the amendment is the repeal of Sections 191A to 191E of the Public Finance Management Act, which currently dictate a process for intergovernmental agreements.
Under the existing framework, the funds cannot be utilised without a legal framework, causing paralysis in a number of county operations that depend on the resource.
As such, counties must negotiate terms with the Treasury, submit agreements to their assemblies for approval within 14 days, and ensure public participation before funds can be released.
The agreements must also be published in the Kenya Gazette and submitted to the Senate and the Controller of Budget.
The government now deems the lengthy processes redundant, arguing that they cause delays and inefficiencies, hence hampering counties’ ability to utilise funds promptly.
The delays have been cited in the construction of various county headquarters, some of which have stalled for ages, with contractors abandoning sites over breaches of agreements.
Five counties have been constructing the office spaces for years, thanks to the bureaucratic bottlenecks and perennial budget cuts by National Treasury.
The funds are the same ones that counties are to use for the aggregations and industrial parks as well as make payments to community health promoters.
“This financial uncertainty could undermine the effectiveness and sustainability of such projects, especially in sectors that rely heavily on external funding,” the National Assembly’s budget committee said after approving additional Sh50 billion to counties last month.
By scrapping the provisions, the Treasury would no longer mediate conditional grants, effectively giving counties faster access to funds without the current layers of approval.
The existing law was designed to ensure conditional grants, which are often earmarked for specific projects like healthcare or infrastructure, are used as intended.
There were concerns at inception that without binding agreements, the additional funds could be mismanaged or diverted.
If passed, the law would mark a notable departure from the current system, where conditional grants are tightly regulated.
Governors have been pushing for a free hand to manage the billions, which include donor cash.
The county chiefs recently raised concerns about the national government still clinging to cash for functions which have been devolved.
Through their council, the governors have called for a meeting to address the delays in the transfer of functions and related funds.
The county chiefs said that as of May 2025, the devolved units were owed Sh75 billion in pending disbursements.
CoG urged the National Treasury to release the additional allocations that have been signed into law already.
While counties complain about delays in disbursements, MPs have argued that oversight mechanisms are crucial for preventing misuse.
INSTANT ANALYSIS
County governments may welcome the reduced bureaucracy, but the change could also spark debates about whether efficiency is being prioritised over accountability.
As the bill heads to the National Assembly for consideration, its reception will likely hinge on how lawmakers balance these competing interests.
The proposed changes arrive amid longstanding tensions between national and county governments over fiscal autonomy.
