At least eight counties from Nyanza and Western regions are facing a cash crunch after the National Treasury threatened to withhold their funding for failing to clear pending bills.
The counties are Kisumu, Kisii, Siaya, Kakamega, Migori, Bungoma, Busia and Vihiga.
They join 28 others across the country facing the same predicament.
The Council of Governors has decried continued withholding of allocations, even after the appointment of a new Controller of Budget whose role is to approve release of cash from the government's main account -- the Consolidated Fund Services -- to ministries, counties and state agencies.
As a result, doing business with the regional governments is increasingly becoming risky owing to routine delay in payments.
Counties' pending bills are accumulating daily, with governors accusing the National Treasury of slowing the regional economy by not disbursing funds to pay debts on time.
Suppliers and contractors, in the meantime, are facing auctioneers as banks seize their assets to recover unpaid loans.
Legally, the counties are entitled to at least 15 per cent of the government's audited revenues. The Public Finance Management Act, 2012, mandates the National Treasury to disburse funds to the counties at the beginning of every month, but not later than the 15th day from the beginning of the quarter.
But as a result of the delays, the majority of counties are unable to repay their debts, staff salaries or embark on projects that improve the lives of Kenyans.
Ms Margaret Nyang'ate Nyakang'o was last Wednesday sworn-in as the second Controller of Budget (CoB) under the current Constitution.
President Uhuru Kenyatta announced her appointment in a Gazette notice dated December 4, 2019.
CoG Chairman Wycliffe Oparanya said counties are yet to get November disbursement totalling Sh31.6 billion.
The Public Financial Management (PFM) Act, 2012, demands that pending bills be cleared before any other payments are made.
"Whereas the earlier delay on disbursements of funds was attributed to expiry of the term of the CoB, the council notes that the President appointed a new C0B, hence approval of disbursements of funds should be fast-tracked to allow county governments to realise their targets for the quarter.
The chairperson said counties with pending bills have made deliberate efforts to clear the arrears, including those inherited from the defunct local authorities.
Acting Treasury Cabinet Secretary Ukur Yattani requested Parliament to stop transfer of funds to the affected counties, noting that they had contravened the PFM Act by failing to make efforts to clear eligible pending bills.
But the MPs, through the Budget and Appropriations Committee, declined the request.
The other counties affected are Narok, Machakos, Nairobi, Isiolo, Tana River, Tharaka-Nithi, Bomet, Kirinyaga, Nandi, Mombasa, Kiambu, Garissa, Baringo, Taita Taveta, Turkana, Meru, Samburu, Nakuru, Murang'a Mandera, Marsabit, Trans Nzoia, Kitui, West Pokot, Embu, Wajir and Lamu.
A letter from Mr Yattani to the counties joining the list dated December 5 asked the counties to provide a repayment plan.
"Failure to settle all the eligible pending bills may result to the National Treasury invoking Article 225 of the Constitution and stop transfers of funds to your county governments," warned Mr Yatani in the letter.
But Mr Oparanya defended the counties, saying: "The method used by National Treasury to categorise county governments did not take into account the issue of historical debts and only concentrated on payment of pending bills between July 1 and October 31 2019. This threshold does not take into account the efforts being made by the county governments to clear the accrued pending bills."