Counties are set to receive a record Sh428 billion from the National Treasury under a new revenue-sharing formula after President William Ruto assented to the County Allocation of Revenue Bill, 2026.
This promises more predictable funding while introducing stricter fiscal discipline and accountability measures aimed at improving service delivery.
Sponsored by Ali Roba, who chairs the Senate Standing Committee on Finance and Budget, the legislation completed its parliamentary journey after it was passed by the Senate with amendments on June 17 before being approved by the National Assembly without further changes on June 25.
The Senate forwarded the Bill to the President on the same day in accordance with Article 110(5) of the Constitution, paving the way for it to become law once assented to.
The legislation operationalises the horizontal sharing of revenue among counties as provided for under the Division of Revenue Act, 2026.
Under the new law, counties will share Sh428 billion, equivalent to 20.9 per cent of the most recent audited national revenue for the 2022/23 financial year.
The allocation is significantly higher than the constitutional requirement that counties receive at least 15 per cent of nationally collected revenue.
A key feature of the Bill is the implementation of Parliament's fourth revenue-sharing formula approved in June 2025 under Article 217(7) of the Constitution.
To cushion counties from sudden funding shocks, the first Sh387.425 billion will be distributed using a baseline allocation linked to what each county received in the 2024/25 financial year.
The remaining funds will then be shared using a new composite formula designed to balance equity and need.
Under the formula, 35 per cent of the allocation will be shared equally among all counties while 45 per cent will be distributed based on population.
Furthermore, 12 per cent will be distributed according to poverty levels, while eight per cent will be allocated based on geographical size, with the land area component capped at 10 per cent.
The approach seeks to protect counties from major budget disruptions while ensuring additional resources flow to regions facing higher population pressure and widespread poverty.
Beyond allocating revenue, the Bill introduces measures intended to strengthen financial management at the county level.
It sets ceilings on recurrent expenditure for both county executives and county assemblies in a move aimed at containing ballooning wage bills and limiting excessive recurrent spending.
This leaves more resources available for development projects.
The legislation also establishes new rules governing functions transferred between county and national governments under Article 187 of the Constitution.
Where a county transfers a function to the national government, the county executive, working jointly with the national government, will be required to determine the cost of delivering that function.
County assemblies must also continue appropriating funds for transferred functions at no less than the amount allocated in the previous financial year to prevent disruptions in service delivery.
In addition, national government entities taking over devolved functions will be required to submit quarterly reports to both the Senate and the affected county assembly detailing the status of service delivery.
The Bill also strengthens transparency in the management of devolved funds.
The Cabinet Secretary for the National Treasury will be required to publish monthly reports showing actual transfers made to counties.
County treasuries will on other hand record all transfers received and include them in quarterly and annual financial reports in line with the Public Finance Management Act, 2012.
The new reporting requirements are expected to improve public oversight, reduce disputes over delayed disbursements and enhance accountability in the use of public funds.
County governments will now benefit from more predictable financing under a formula that balances historical allocations with population, poverty and geographical needs.
It is also likely to trigger tighter financial controls to promote prudent spending and accelerate the delivery of essential public services across the country.
