County governments are facing a growing financial squeeze after a Controller of Budget report revealed that eight counties are sitting on Sh70.23 billion in bills that have gone unpaid for at least three years.
The long-running debts have left suppliers, contractors and county workers waiting for payment, with Nairobi carrying the biggest share of the historical obligations at Sh49 billion.
The report by Controller of Budget Margaret Nyakang'o shows that Mombasa has the highest proportion of trade payables that are at least three years old, accounting for 88 per cent of its outstanding bills.
Wajir follows at 80 per cent, Nairobi at 76 per cent, Kiambu at 67 per cent, Embu at 65 per cent, Machakos at 54 per cent, Garissa at 52 per cent and Taita Taveta at 51 per cent.
The eight counties are headed by governors with different terms in office. Abdulswamad Nassir of Mombasa, Cecily Mbarire of Embu, Johnson Sakaja of Nairobi, Andrew Mwadime of Taita Taveta, Kimani Wamatangi of Kiambu and Wavinya Ndeti of Machakos are serving their first terms.
Ahmed Abdullahi of Wajir and Nathif Jama of Garissa returned to county leadership in 2022 for second terms after spending five years out of office.
Nairobi's historical debt is far higher than that of the other seven counties, standing at Sh49 billion. Kiambu has Sh3.2 billion, followed by Mombasa with Sh2.95 billion, Wajir with Sh1.9 billion, Machakos with Sh1.39 billion, Taita Taveta with Sh1.2 billion, Embu with Sh822.3 million and Garissa with Sh182.98 million.
"There are significant risks for county executives in settling their bills" Dr Nyakang'o said, referring to the large pending-bills portfolio.
The report also highlights Vihiga, where Governor Wilber Ottichilo is overseeing Sh790.57 million in bills that have been outstanding for more than three years.
The county, however, has not taken on new debt since Ottichilo secured a second term in 2022.
By June 30, 2026, counties collectively owed Sh172.53 billion in trade payables. Recurrent activities accounted for Sh126.40 billion, while Sh46.15 billion was linked to development activities.
County assemblies accounted for Sh6.4 billion of the total.
Nairobi's Sh86.9 billion made up slightly more than half of the total trade payables reported by counties. Other counties with large amounts included Kilifi at Sh7.8 billion, Kiambu at Sh5.6 billion, Machakos at Sh4.28 billion, Narok at Sh4.17 billion, Mandera at Sh3.79 billion, Wajir at Sh3.1 billion, Nakuru at Sh3 billion and Turkana at Sh2.82 billion.
Trade payables refer to financial obligations arising when goods or services have been properly procured and delivered or provided but remain unpaid at the close of a financial year.
Dr Nyakang'o said some counties had not followed their plans for settling the outstanding obligations.
The Public Finance Management (County Governments) Regulations, 2015, provide that eligible trade payables should be treated as a first charge in the financial year that follows, under Regulation 55(2)(b).
The report further shows that counties have continued to accumulate fresh debts, with more than Sh95.44 billion incurred since 2022.
Mandera recorded Sh2.2 billion in new debt in a single financial year, the highest among the counties listed. Machakos followed with Sh1.84 billion, Kilifi Sh1.68 billion, Turkana Sh1.53 billion, Kiambu Sh1.47 billion and Meru Sh1.44 billion.
Kakamega accumulated Sh1.23 billion, Busia Sh1.12 billion, Bomet Sh1.1 billion, Kisii Sh1.06 billion and Siaya Sh1.03 billion.
The financial strain is also being felt by county employees. Salary arrears and unpaid statutory deductions had reached Sh100.24 billion by June 30.
County executives accounted for Sh98.44 billion, while county assemblies owed Sh1.80 billion. More than Sh52.45 billion of the outstanding employee-related payments had been pending for at least three years.
The Controller of Budget also raised concern over cases where counties may have deducted employee benefits but failed to remit the money to pension schemes, potentially affecting retirees.
County spending patterns point to further pressure on finances. During the year, counties spent Sh369.89 billion on recurrent activities, representing 89.23 per cent of their annual recurrent budgets.
Development spending, meanwhile, stood at Sh126.69 billion.
Employee compensation alone consumed Sh235.96 billion, which was about Sh109 billion more than the amount spent on development.
The combined wage-to-revenue ratio stood at 47 per cent, exceeding the statutory limit of 35 per cent.
Homa Bay recorded the highest ratio at 56 per cent, followed by Nyeri at 52 per cent and Taita Taveta at 49 per cent.
Mombasa and Kwale had the lowest ratios at 26 per cent, followed by Tana River at 28 per cent.
The report cautioned that the ratios may have been higher because some counties did not fully settle employee compensation during the year, resulting in lower reported figures.
Development expenditure also fell short of county budgets. Counties had allocated Sh233.69 billion for development but spent only Sh126.69 billion, translating to an absorption rate of 54.21 per cent.
The rate was down from 57 per cent in the year ended June 30, 2025.
Thirteen counties used less than half of their development allocations. Kisumu recorded the lowest absorption rate at 25.9 per cent, followed by Siaya at 26.53 per cent and Nairobi at 28.47 per cent.
At the same time, counties were dealing with 128 stalled projects valued at Sh6.3 billion.
Nairobi had the largest number, with 57 stalled projects worth Sh2.24 billion. Isiolo followed with seven projects valued at Sh1.77 billion.
Baringo had 23 stalled projects, while Kakamega and Machakos each had 22. The projects in the three counties were valued at Sh1.28 billion.
Siaya reported one stalled project worth Sh1.88 million, despite having paid the contractor twice the value of the project.
Dr Nyakang'o called on counties to make development projects a priority in the 2026/27 financial year. She also urged them to complete procurement and cash-flow plans early and submit exchequer requisitions without delays.
The Controller of Budget warned that the reported debt figures may not present the full picture because some counties submitted inconsistent information on their trade payables.
The counties flagged over inconsistent data were Kilifi, Kisumu, Laikipia, Nakuru, Marsabit, Murang'a, Narok, Nyeri, Tharaka Nithi and Turkana.
Nandi did not report any trade payables.
County assemblies in Elgeyo Marakwet, Kirinyaga, Kisumu, Lamu, Nyamira, Samburu, Tana River, Uasin Gishu and West Pokot also reported no trade payables.