Nairobi County has been excluded from the latest Sh5.7 billion in World Bank-backed conditional grants after failing to meet key governance and financial reform requirements linked to the funding.
Documents from the State Department for Devolution indicate that the county did not achieve several performance benchmarks, including reducing pending bills, strengthening own-source revenue collection, and improving payroll management through a fully integrated human resource system.
The funding forms part of the Second Kenya Devolution Support Programme (KSDP II), a Sh25.9 billion ($200 million), four-year initiative financed by the World Bank to improve county governance, public financial management and service delivery.
The programme rewards counties based on performance, with assessments focusing on areas such as financial reporting, budgeting, procurement compliance, planning, monitoring and evaluation, auditing, public participation, revenue mobilisation and human resource management.
According to the State Department for Devolution, counties were required to demonstrate progress in clearing pending bills, cleaning up payroll records, improving staff performance management and increasing locally generated revenue to qualify for the performance-based grants.
All 47 counties, including Nairobi, received the initial KSDP II disbursement earlier in the financial year. However, unlike the first tranche, which was shared equally, the second allocation was determined by each county’s performance and the Commission on Revenue Allocation’s Fourth Basis for Revenue Sharing Formula.
Every county qualified for the smaller Level I capacity-building grant, receiving Sh32.5 million from a total allocation of Sh1.67 billion after establishing basic governance structures. Access to the larger Level II development grants, however, depended on meeting the agreed reform targets.
The State Department attributed Nairobi’s exclusion partly to its continued reliance on manual payroll systems, an issue previously highlighted by Controller of Budget Margaret Nyakang’o.
Also Read: Pesalink Fee Cuts Expand to 19 Banks as Lenders Chase Retail Transfers
According to the Controller of Budget’s report for the nine months ending March 2026, the county processed Sh13.9 billion in personnel expenses through its Human Resource Information System, while Sh312 million was paid through manual payrolls. County officials said the manual payments related to casual employees hired on short-term contracts.
The Controller of Budget also criticised Nairobi for failing to implement its plan to clear pending bills. While the County Executive had committed to settling Sh8.8 billion in trade payables during the 2025/26 financial year, it paid only Sh4.9 billion. Meanwhile, the County Assembly, which had planned to clear Sh650.6 million, made no payments.
Revenue collection also fell below target. Nairobi had projected Sh19.9 billion in own-source revenue for the 2025/26 financial year but had collected only about Sh13.7 billion, according to county assembly records.
World Bank data shows that Kitui, Kwale and Migori received the largest allocations under the Sh5.7 billion KSDP II disbursement, with each county receiving Sh184.8 million, equivalent to roughly 13.3 percent of the total allocation. Kajiado, Kakamega and Uasin Gishu received the smallest allocations at Sh55.3 million each, while the average allocation per county stood at Sh123.9 million.
