NAIROBI, Kenya – The National Treasury has come under heavy criticism after the Auditor-General exposed a Sh46.5 billion shortfall in the disbursement of the Equalisation Fund, money meant to lift historically marginalised counties out of underdevelopment.
The fund, enshrined in Article 204 of the Constitution, requires that 0.5 per cent of national revenue be allocated annually to support basic services—such as healthcare, water, roads, and electricity—in disadvantaged areas.
But a new audit reveals that successive governments have consistently failed to honour this constitutional obligation.
According to Auditor-General Nancy Gathungu, only Sh13.4 billion of the roughly Sh60 billion accrued to the fund since its establishment in 2011 has actually been released to beneficiaries—representing just 22 per cent of the total entitlement.
“The National Treasury is in clear breach of constitutional provisions,” Gathungu stated. “The accumulated shortfall of Sh46.5 billion represents a catastrophic failure in implementing a fund designed to address historical marginalisation.”
The report details systemic underfunding and delayed disbursements spanning over a decade, impacting 14 counties including Mandera, Turkana, Wajir, Marsabit, Lamu, and West Pokot.
In many years, only a fraction of the entitled amount was released—if at all. For instance, in 2014-15, just Sh776 million was disbursed out of an entitled Sh3.8 billion.
That figure remained unchanged for the next five years.
The situation worsened in recent financial years. In 2020-21, the entitled Sh6.8 billion saw only Sh1.4 billion reach the fund.
The 2023-24 financial year recorded the highest ever allocation—Sh8.3 billion—but once again, the Treasury failed to remit the full amount.
The audit also reveals that even the limited funds disbursed have not been fully utilised. As of June 2024, Sh2.3 billion remained idle in the Equalisation Fund account.
Governors Cry Foul
Governors from the affected counties have reacted with fury, accusing the Treasury of deliberate fiscal sabotage that has denied millions access to essential public services.
Marsabit Governor Mohamud Ali called the withholding of funds “economic sabotage.”
“How do we explain to mothers delivering in bush clinics or children walking 10 kilometres to school that the money for hospitals and roads was available but withheld?” he asked.
The Council of Governors (CoG) now warns that the continued shortfall threatens to derail the constitutional goal of equitable development—especially with the fund set to expire in 2031-32.
Kakamega Governor Fernandes Barasa, who chairs the CoG Finance Committee, criticised attempts to push arrears into future Division of Revenue Acts, warning that doing so distorts national budgeting and undermines future disbursements.
“Providing for the arrears in a different year’s Division of Revenue Act amounts to double allocation and, by extension, reduces the shareable revenue,” said Barasa. “They should ideally be provided for through an Equalisation Fund Appropriations Act.”
The CoG argues that Article 204 imposes a mandatory duty on the government—not a discretionary option—and has hinted at legal action to compel compliance.
“Every shilling withheld represents a constitutional violation that could form grounds for litigation,” the Council said in a statement.
The Equalisation Fund, introduced as part of Kenya’s devolution framework, was designed to run for 20 years.
With less than a decade remaining, pressure is mounting on the government to fast-track disbursements and rectify the backlog.
“The risk is that the Fund will lapse before fulfilling its intended mandate,” Gathungu cautioned in her report.
