The Third (3rd) Quarter Report For Fiscal Year 2025-26 On Implementation Of The Equalization Fund

REPUBLICOFKENYA EQUALISATIONFUNDADVISORYBOARD

THIRD(3RD) QUARTER REPORT FOR FISCALYEAR 2025/26ONIMPLEMENTATIONOFTHE EQUALIZATIONFUND

APRIL,2026

| PAPERS LAID | PAPERS LAID | |--------------------|----------------------------| | DATE | 031061a026 | | TABLED BY | Sen.Wakil on behalf of M.L | | COMMITTEE | | | CLERK AT THE TABLE | PolycaoMa lta-ra |

Inclusivity

TheEqualisationFund is committed tofosteringa cultureofinclusivityasrequired by the Constitution of Kenya 2010,ensuring that all marginalized communities,regardless of their ethnic or any otherdistinction,aregiven equal opportunitiesto accessservices andresources.

Transparency and Accountability

operations, ensuring that information is openly shared with our stakeholders.

Professionalism

By adhering to high ethical standards and delivering quality service, we ensure that all interactions,bothinternalandexternal,reflectthecompetenceandcommitment expectedfromapublicinstitutionwithamandatesuchasours.

Teamwork

Oursuccessdependson thecombinedeffortsofadedicated teamworkinginunison toward the common goal of strengthening our ability to serve marginalized communities.

Collaboration

OurMandateentailsworkinghand-in-handwithvariousstakeholders-National Government,CountyGovernments,andthecommunitiesweserve.Throughcollective effortandsharedresources,wedevelopsolutionsthateffectivelyaddressthediverse needsofmarginalizedcommunitiesinlinewithourlegalmandate.

Vision

Improveaccessofbasicservicesforthemarginalizedareas

Mission

oversight project implementation and foster collaboration between the National and CountyGovernments

CoreValues

TABLEOFCONTENTS

| TABLEOFCONTENTS .iii | |-------------------------------------------------------------------| | LISTOFTABLES | | ABBREVIATIONSANDACRONYMS | | FOREWORD ...vii | | PREFACE .vili | | EXECUTIVESUMMARY .ix | | 1.0INTRODUCTION | | 1.1 Preamble | | 1.2MarginalizationPolicies | | 1.2 Objectives of the Report. | | 1.2.1 General Objective | | 1.2.2 Specific Objectives. | | 2.0INSTITUTIONALFRAMEWORK | | 2.1 Preamble | | 2.2Organizational Structure 5 | | 2.3National Level Oversight. | | 2.1.1 TheEqualisationFundAdvisoryBoard. 5 | | 2.1.2Secretariat.. | | 2.2 County and Sub-County Coordination. | | 2.2.1 County Technical Committee (CTC). | | 2.2.2 Sub-County Technical Committee (sCTC) | | 2.2.3 Project Identification and Implementation Committee (PllC). | | 2.3 Financial Coordination and Oversight. | | 3.0PROJECTSANDPROGRAMSAPPROVEDFORFINANCING. | | 3.1 Preamble | | 3.2 First Marginalization Policy Projects... | | 3.3 Second Marginalization Policy Projects. ..10 | | 3.3.1 Marginalized areas... .10 |

| 3.3.2ApprovedProjectsundertheSecondMarginalizationPolicy..... .12 | |--------------------------------------------------------------------------| | 4.0STATUSOFDISBURSEMENTSOFFUNDS. ..16 | | 4.1 Transfers from the Equalization Fund .18 | | 5.OEQUALISATIONFUNDIMPLEMENTATIONSTATUS. .22 | | 5.1Preamble .22 | | 5.2lmplementationStatusofEqualizationFundProjects. .22 | | 5.2.1StatusofProjectsunderfirstpolicy .22 | | 5.2.2StatusofProjectsundersecondpolicy. 23 | | 5.3SubmissionsofCountyProjectImplementationStatusReport... .25 | | 5.4MonitoringandVerificationofSecondMarginalisation. .26 | | 6.0RESTRICTIONSIMPOSEDONACOUNTYGOVERNMENTORANYIMPLEMENTING AGENCY... .27 | | 6.1Preamble .27 | | ..29 | | 7.1Preamble .29 | | 7.2 Achievements. .29 | | 7.2 Challenges. 30 | | 7.3Recommendations 31 |

LISTOFTABLES

| Table 1: Allocation and Projects Approved by County, EF Appropriation Act 2018. 10 | | |--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------| | Table 2:Areas categorized as marginalized inthesecond MarginalizationPolicyby | Table 2:Areas categorized as marginalized inthesecond MarginalizationPolicyby | | county.... | 11 | | Table3:SecondPolicy ApprovedProjects andBudgets by county.. | 12 | | Table 4: Analysis by county and priority sectorfor approved projects.... | 14 | | Table5:Entitlement,Payment,andArrearstoEqualizationFund.. | 17 | | Table6:ProposedPayment planofEqualizationFund Arrears inKsh... | 18 | | Table7:Transfers to MDAsfor EFAppropriation Act 2018by County... | 19 | | Table8:TotalDisbursementsforEFAppropriationAct,byCounty.... | 21 | | Table9:StatusofprojectsundertheFirstPolicybycounty.... | 22 | | Table10:Statusofprojectsunderthe2ndpolicybycounty.... | 23 | | Table1l:SubmissionsofStatusReportsbyCounty.... | 25 |

ABBREVIATIONSANDACRONYMS

CDF

ConstituencyDevelopmentFund

CG

County Government

COB

Controller of Budget

COG

Council of Governors

CoK2010

ConstitutionofKenya2010

CRA

Commission on Revenue Allocation

County Technical Committee

DORA

DivisionofRevenueAct

EF

EqualisationFund

EFAB

EqualisationFund AdvisorBoard

FCDC

Frontier CountiesDevelopment Council,

FMP

First MarginalizationPolicy

GoK

Government of Kenya

IBEC

Intergovernmental Budget and Economic Council,

IFMIS

IntegratedFinanceManagementSystem

MDAS

Ministries,Departments and Agencies

NA

National Assembly

PFM

Public Finance Management

PFMA

PublicFinance Management Act

Sub-County Technical Committee

SDA

State Department and Agency

SDBE

StateDepartmentforBasicEducation

SDE

State Department of Energy

SDI

StateDepartmentforlrrigation

SDMS

StateDepartmentforMedical Services

SDR

StateDepartmentforRoads

SDTVET

State Department for Technical, Vocational Education and Training

SDWS

StateDepartmentforWaterandSanitation

FOREWORD

Article204oftheConstitutionenvisionsaKenya thatoffersaccesstoqualitybasic servicessuch aswater,roads,healthfacilities andelectricity inallparts ofthecountry marginalised areasmeanttoensure that thequalityoftheseservicesisbroughttothe level generally enjoyed by the rest of the nation, so far as possible.

AsthechairmanoftheAdvisoryBoardthathasbeenmandatedtosteerthe implementationof theFund,I amglad tobepartof the achievementsthatweshare in this quarterly report. Despite the fact that the strides have been slower than desired, theresultsareimpactfultothecommunitiesthatliveinallpartsthathavebeen identifiedasmarginalisedinboththeFirstandSecondMarginalisationPolicies.The AdvisoryBoard expressesitscommitmenttocontinueworkingwith all stakeholdersto information and engage all the stakeholders to craft policies and strategies that will expedite the realization of the objectives envisaged under Article 204.

Some of the milestones thatweshare in this report include:theFund so far approved 1599projectsworthoverKsh.9.89billionforimplementationinthe34beneficiary counties under the Second Policy. These projects span across water, roads, health, energyandeducationsectors;potentiallyimprovingthequalityofservicesinthese sectorstoapproximatelysix(6)millionKenyansthatliveintheidentifiedmarginalised areas under the second marginalisation policy. lmplementation of projects under the First marginalisationPolicy is almost complete,whereKsh.11.81 billion was approved toimplement360projects in14countiesidentified asmarginalised under thepolicy.

Finally, I assure all our esteemed stakeholders that the challenges we share in this report arenotviewedasbottlenecksbutratherasopportunitiesforfurtherengagementto improvetheimplementationoftheFund and ultimatelythequalityofbasicservicesto populationslivinginmarginalised areas.

AMB.(ENG.)MAHBOUBM.MAALIM,CBS,OGW,

BoardChairperson

PREFACE

The Equalization Fund is sharing the third quarter report of the FY 2025/26 on the implementationoftheFundnotonlyasatooltoinformkeystakeholdersonthe progressmadesofarbutalsotofulfilltherequirements of thePublic Finance (Equalization Fund Administration)Regulations, 2021. Regulation 27 requires the Board to,on a quarterlybasis,submit a report to the CabinetSecretarywith a copy to theCommissiononRevenueAllocation and ControllerofBudget.Thisreport is also sharedwith theParliamentofKenyapursuant toRegulation20 thatrequirestheCounty ExecutiveCommitteeMembersresponsibleforFinance,toonanannualbasis,prepare a report on implementation of all projects financed by the Fund with a copy to the Secretary, Commission on Revenue Allocation, Controller of Budget and Parliament.

This report has been made possible by the implementing entities through submission of implementation status which have facilitated preparation of this report. We are grateful to the beneficiary counties through the County Executive committee members that oversee implementation of the Equalization Funded projects under the second policy and have submitted quarterly progress reports to enable compilation of this quarterly progress.

To thecriticalstakeholdersthatwearesharingthereportwith,werequestthatwhere we have shared challenges, it is an opportunity to strengthen the engagement mechanismsforbetterment of implementing theFund.TheFund is fully committed to workingwithallstakeholderstoaddressthechallengesandfulfil theaspirationsof Article204oftheConstitutionofKenya.

GUYOBORU,MBS C.E.O/FundAdministrator

EXECUTIVESUMMARY

ThisThirdQuarterlyReportforFinancialYear2025/26outlinestheimplementation of the Fund from inception to date and provides an update on progress made during the third quarter of FY 2025/26(1stJanuary to 31st March2026).lthighlights the Article204oftheConstitutionofKenya(2010).

The report has been prepared in accordance with the Public Finance Management (Equalization Fund Administration) Regulations,2021,which require the Fund to submit quarterly reports to the Cabinet Secretary, National Treasury and Economic Planning (TNT&EP), with copies to the Commission on Revenue Allocation (CRA) and the Controller of Budget (CoB). It consolidates implementation reports from national government Ministries, Departments and Agencies (MDAs) and beneficiary county governments undertaking EF projects under theFirst and Second Marginalization Policies. The report presents an overview of implementation status, financial performance, key challenges, and emerging priorities.

During the third quarter of FY2025/26,theFund continued implementation of projects across 34 counties under the Second Marginalization Policy and advanced efforts to counties.

Under the First Policy, 360 projects were approved through the Equalization Fund approximately 81 percent of these projects had been reported as substantially complete and 19 percent as ongoing at varying stages of implementation by the implementing MDAs.

counties, 1,599 projects valued at Ksh. 9.89 billion have been approved. By the end of the third quarter, about 44.85 percent of these projects were fully complete, while enhanceintergovernmentalcollaboration anddelivertangible developmentoutcomes in marginalized areas.

Since inception,thetotalentitlementtotheFund amounts toKsh.80.09billion of which KSh. 22.7 billion has been appropriated. Of the total appropriation, Ksh. 12.4 billion was for the first policy and Ksh. 10.3 billion for the second policy. The first policy wasfullyfunded and asat31stMarch,2026,a totalofKsh.7.3billionhadbeenreceived by the Fund for the continuous implementation of the EF Appropriation 2023. In the third quarter of FY 2025/26,Ksh 2.3 million waspaid into theFund.

Ksh. 10.9 billion of the total appropriation of Ksh. 11.8 billion, to MDAs implementing projectsunder the FirstPolicy.While disbursements fromthe EqualizationFund Appropriation Act, 2023 amount to Ksh 4.8 billion to beneficiary county governments under the Second Policy. The overall absorption rate under the Second Policy stands at 48 percent, with notable performance recorded in Murang'a (1o0 percent), Taita Taveta (98 percent), Isiolo (97 percent), Homa Bay (94 percent), Kisumu (94 percent), Mandera (92 percent),and Nandi (92 percent).

Despite steady progress,several challenges persist.The most critical is the accumulation of arrears amounting to Ksh 60.38 billion, which has limited the general implementation of theFund'sconstitutional mandates.Theuse of sub-locations as planningunitsunder theSecondPolicyhasfragmentedresources,reducing thescale and sustainability of interventions. Additionally, delays in legislative and administrative processes — including project reprioritization by beneficiary counties and the enactmentofappropriationinstruments—haveaffected timelyimplementation. Capacity gaps at the county level, particularly in technical planning and financial reporting, also continue to impede effective delivery.

To address these challenges, the Fund has strengthened coordination with the National Treasuryto expeditesettlement of arrears,enhanced technical support and monitoring to build county capacity, and proposed policy reforms aimed at streamlining and consolidating the marginalization framework into a more unified and predictable system.

Going forward, the Fund will focus on completing the remaining projects under the First Policy and accelerating implementation under the Second Policy.Priority areas include strengthening intergovernmental coordination and engaging the National Treasury toanchorfutureallocationswithin theDivisionofRevenueActs toenhance predictability and timeliness of disbursements. The Fund will also continue collaborating with the CRA to advocate for a revised marginalization framework that reduces resource fragmentation and maximizes impact at the community level.

Inconclusion,theEqualization Fundremains a critical constitutional mechanism for promoting equitable development and bridging service delivery gaps in marginalized regions.Its interventions continue to expand access to essential services for millions of Kenyans, demonstrating the effectiveness of coordinated national and county governmentsaction.

1.0 INTRODUCTION

1.1Preamble

The Equalisation Fund is established under Article 204(1) of the Constitution of Kenya, 2010, which requires that 0.5% of all revenue collected by the national government each year, based on the most recent audited accounts of revenue received, as approved by the National Assembly,be paid intothe Fund.The Fund,as provided by Article 204(2),is intendedtoprovidebasicservicessuchaswater,roads,healthfacilities,and electricityto marginalized areas, with the goal of elevating service standards in these regions to the level generally enjoyed by therest of the nation,sofar aspossible.

1.2 MarginalizationPolicies

The identification of marginalized areas is guided by Article 216(4) of the Constitution, which mandates the Commission onRevenue Allocation(CRA) to determine,publish and identify the marginalised areas for purposes of Article 204(2). Pursuant to this mandate, the First Marginalization Policy was published in 2013; the Commission used three Development Index (CDl).

The countrywide perception survey on which county was marginalized was conducted by the Commission in June 2012. Individual and group questionnaires were administered to respondents in organized forums to list three marginalised counties. From the data collected and analyzed, the Commission ranked the counties based on frequency from the mostmarginalised to theleast.

The Historical Injustice Report defined historical injustices toinclude exclusion of segments of the community from the mainstream economic, political and social arenas that drive distribution of national resources and services. The Report covered three out of the eight former provinces of Kenya, namely; Coast, North Eastern and Rift Valley. The Report gave account of historical injustices that resulted in some areas/ communities/groups being marginalized on one or more of the grounds alluded to in Article 27(4). Further, the report listed some of the groups or communities which were considered minorities, and recommended a list of counties in which these groups are domiciled.

The CDl was a composite index that measured thewell-being of the people based on four broad dimensions: health,education,infrastructure and poverty. The infrastructure indicators included;roads,electricity and water.Health indicatorswere immunization, sanitation and deliveries in health facilities. The education had literacy and secondary education indicators. The counties were ranked in order of their development index from theleast to themost developed.

The Commission considered the outcome of the three approaches above and employed a methodological triangulation in the identification of the final list of the 14 marginalized counties as shown in part three of this report.

The Second Policy, published in 2018, diverged from the First Policy by using a sub-location as a unit of analysis as opposed to a county in the First Policy. The marginalised areas were identified using a deprivation index composed of five social-economic parameters, namely; net primary school attendance rate, net secondary school attendance rate, access to safe drinking water, use of electricity and use of improved sanitation.

services in key sectors including roads,water,health and electricity in areas defined as marginalised. Given that Article 204 is not limiting, indicators in education were included in the analysis. Roads was excluded from the analysis due to lack of disaggregated data on the status of roads below the county level.

The identification of marginalised areas was based on an index of deprivation calculated based on the five indicators using the Principal Component Analysis (PCA). Based on the PCAindex,atotalof7,131sublocationsspreadacross47countieswererankedfromthe locations, were identified as marginalised in the Second Policy. These sub locations are spreadacross34counties,107constituenciesand374wards.

In determining the criteria for sharing of revenue from the Equalisation Fund, the Commission considered both the population of an area and the level of deprivation. The number of identified marginalized areas are presented in part two of this report.

The Report covers the period up to 31s March, 2026, and consolidates status reports from beneficiary counties and national government MDAs. It provides a comprehensive overview of projects approved and funded under the First and Second Marginalization asreportedbytheimplementingentities.

1.2ObjectivesoftheReport

on reporting, as outlined in Regulations 22(g) and 27. Regulation 27 requires the Board tosubmit quarterlyreports to the CabinetSecretary,National Treasury,with copies to the CRA and the Controller of Budget. Regulation 22(g) further mandates the Secretariat to prepare and submit updates to the Board and the Cabinet Secretary to ensure transparency reports and make performance improvement recommendations.

In this regard, this third quarter report for FY 2025/26 provides information on approved projects, disbursement status, implementation progress, achievements, challenges encountered and theirrecommendations andrestriction(s)onimplementingentitiesin the utilization of the Fund. Beyond fulfilling a legal obligation, the report serves as a critical accountability and learning tool thus promoting transparency, guiding resource allocation, and supporting evidence-based decision-making. Ultimately, it reflects a shared commitment to improving the quality of basic services in marginalized areas, in line with theConstitution'svision forinclusive and equitable development.

1.2.1GeneralObjective

The general objective of this report is to provide a comprehensive assessment of the implementation and performance of the Equalisation Fund up to the third quarter of FY

2025/26. The report covers both the First and Second Marginalization Policies, with a view to promoting transparency, accountability, and evidence-based decision-making.

1.2.2SpecificObjectives

• theendofThirdQuarterofFY2025/26underboththeFirstandSecond MarginalizationPolicies;
• ii) To analyze the status of disbursements of funds tovarious projects and the overall implementation progress achieved up to the Third Quarter of the FY 2025/26;
• ii) To report on the status of disbursements from the Fund to respective county governments and national government implementing agencies up to the Third Quarter of the FY 2025/26, highlighting financial flows under both policies;
• iv) To outline any restrictions imposed on county governments or implementing entities involved in the execution of projects up to the Third Quarter of the FY 2025/26; and
• To report on the achievements and challenges encountered up to the Third Quarter of FY 2025/26 and recommendations to address the challenges.

2.OINSTITUTIONALFRAMEWORK

2.1 Preamble

s ne oo ob Administration of the Equalisation Fund published through Gazette Notice No. 171l of 2015.These guidelines provided for direct implementation by national government Ministries, Departments, and Agencies (MDAs). However, the Council of Governors (COG) challenged the constitutionality of the guidelines through High Court petition no. 272 of 2016. The High Court in its decision of 2019 granted the prayers of the COG declaring the 2015 Guidelines unconstitutional. Further, the High Court directed the National Treasury to review the administration framework and develop new legal instrument to operationalize the Fund. Consequently, the Public Finance Management utilization as conditional grants to county governments.

2.2 Organizational Structure

The PFM (Equalisation Fund Administration) Regulations, 2021 establish a multi-tiered institutional framework for the oversight of the implementation of the Fund at both the nationalandcountylevels.Thisinstitutionalframeworkisintendedtoensuretheeffective management and implementation of the Fund from the national level down to the community level.

2.3 National Level Oversight

At the national level, two key bodies provide strategic direction and administrative support for the Equalisation Fund:

2.1.1 TheEqualisationFundAdvisoryBoard

The Equalisation Fund Advisory Board, established under Regulation 4(l), provides strategic leadership and crucial oversight. This diverse board comprises of an independent Chairperson, appointed by the Cs National Treasury, Principal Secretaries from the e a representatives), and representatives from pastoralist communities, the National Assembly, the Council of Governors, and various stakeholder groups from beneficiary areas. The Chief Executive Officer(CEO) serves as the Board's Secretary. EFAB's extensive mandate, as outlined in Regulation 8(h), includes advising the Cabinet Secretary on fund allocation, appraising and prioritizing projects, closely monitoring implementation, reviewing quarterly reports, and recommending performance improvements to ensure the fund achieves its intended objective.

2.1.2Secretariat

The Secretariat is the operational backbone of the Equalisation Fund, providing essential Secretariat, which is established under Regulation 22. The Secretariat's responsibilities monitoring implementation progress, preparing comprehensive quarterly reports for the Board consideration, as well as proposing corrective measures to enhance overall performance and efficiency, among others.

2.2County and Sub-County Coordination

Successful realization of the Equalisation Fund's objectives requires robust coordination mechanisms at the county and sub-county administrations to enhance efficiency and accountabilityinfundutilization.

The regulations also decentralize project identification through County Technical Committees (CTCs), Sub-County Technical Committees (sCTC) and Project Identification and lmplementation Committees (PllCs) at the ward level to enhance efficiency and accountability in fund utilization.

2.2.1 County Technical Committee (CTC)

Constituted under Regulation 14, the CTC is mandated to ensure that all proposed projects are consistent with local development priorities and comply with established eligibility criteria. The Committee is chaired by the County Commissioner and includes, among its membership, the County Executive Committee Member for Finance from the beneficiary counties. Additional members comprise CDF managers, representatives from the County collaborationandenhances transparencyandaccountabilityinprojectidentification, selection,and oversight.

2.2.2 Sub-County Technical Committee (sCTC)

Established under Regulation 16 and chaired by the Sub-County Commissioner, the sCTC functions include receiving and evaluating project proposals, assessing their feasibility, These responsibilities are aimed at strengthening transparency, accountability, and effective coordination at the sub-county level.

2.2.3 Project Identification and Implementation Committee (PllC)

of the Equalisation Fund. At the grassroots level, the Project ldentification and Implementation Committee,established under Regulation 18 and chaired by theAssistant County Commissioner (ACC), is pivotal for fostering community-level participation. Its diverse membership includes village administrators, representatives of women, youth, minorities,and personswith disabilities(PWDs),as well as CDF committee members and representatives fromlocalNGOs and faith-basedorganizations.This committeeis instrumental in identifying and prioritizing projects that are responsive to local needs, developing proposals, and overseeing local implementation. The direct involvement of the PllC intheidentificationandimplementationallowsforembeddingtheprinciplesof accountability, inclusivity, and effectiveness in delivery of services tailored to the unique challengesofmarginalizedareas.

2.3 Financial Coordination and Oversight

Under Regulation 20, the County Executive Committee Member (CECM) for Finance is CECM is also responsible for preparing detailed quarterly and annual financial reports and ensuring adherence to all procurement and financial regulations.

In line with the constitutional provisions and all relevant laws; the Controller of Budget plays an indispensable oversight role. Under Articles 204(9) and 228 of the Constitution, the Controller of Budget authorizes all withdrawals from the Equalisation Fund, adding a critical layer of financial accountability and control. This independent authorization process acts as a safeguard, ensuring that funds are disbursed responsibly and per approved plans, thereby bolstering transparency and accountability.

Additionally,pursuant to Article 226(3) the Equalisation Fund is audited by the Office of The Auditor General as is the accounts of all governments and State organs.

Finally, Article 226(2) provides that the accounting officer of a national public entity is accountable to the National Assembly for its financial management, and the accounting officer of a county public entity is accountable to the county assembly for its financial management.

This multi-layered financial oversight, coupled with the integrated framework spanning national to community levels, significantly strengthens transparency, efficiency, and the equitable delivery of essential services to Kenya's marginalized areas.

3.0PROJECTSANDPROGRAMSAPPROVEDFORFINANCING

3.1Preamble

Article216(4)oftheConstitutionofKenya2010mandatestheCommissiononRevenue Allocation(CRA)todevelop,publish,andperiodically review a policy outlining the criteria for identifying marginalized areas in line with Article 204. As of March 31, 2026, the CRA had developed and published two marginalization policies, both of which are currently being implemented.

3.2FirstMarginalizationPolicyProjects

The First Marginalization Policy, published in February 2013, established the criteria for identifying marginalized areas and guiding the allocation of resources under the Equalisation Fund for the Financial Years 2014/15 to 2017/18. Under this policy, fourteen (14)counties were identified as the initial beneficiaries of the Fund,namely:Turkana, Mandera,Wajir,Marsabit,Samburu,West Pokot,TanaRiver,Narok,Kwale,Garissa,Kilifi, TaitaTaveta,Isiolo,and Lamu.

Subsequently, the Equalisation Fund Appropriation Act, 2018 approved a total allocation of Ksh. 12.4 billion for the implementation of 360 projects within these counties. Given that the unit of analysis under the First Policy was the county, the interventions are expected to benefit approximately 9.4 million people residing in the identified marginalized areas.

In terms of allocation, Turkana County received the highest funding amounting to Ksh. 1.05 billion for the implementation of 14 projects, while Lamu County received the lowest allocation of Ksh. 722.2 million supporting 38 projects. This variation highlights that the numberofprojectsdoesnotnecessarilycorrespondtotheleveloffunding,as allocations per project are influenced by the scope, scale, and sector-specific cost of individual projects. The distribution of funds and the number of approved projects across the beneficiary counties aresummarized inTable 1.

Table 1:Allocation andProjectsApprovedbyCounty,EF AppropriationAct2018

| Development Votes by County | Appropriated Amount | No of projects | |-------------------------------|-----------------------|------------------| | Garissa | 783,500,000.00 | 9 | | Isiolo | 746,900,000.00 | 17 | | Kilifi | 763,500,000.00 | 58 | | Kwale | 795,300,000.00 | 29 | | Lamu | 722,199,600.00 | 38 | | Mandera | 967,600,000.00 | 12 | | Marsabit | 886,200,000.00 | 27 | | Narok | 809,500,000.00 | 29 | | Samburu | 865,917,863.00 | 14 | | Taita Taveta | 751,200,000.00 | 38 | | Tana River | 859,000,000.00 | 26 | | Turkana | 1,050,200,000.00 | 14 | | Wajir | 929,800,000.00 | 27 | | West Pokot | 870,382,138.00 | 22 | | Total | 11,801,199,601 | 360 |

Source:EqualizationFundAdvisoryBoard(EFAB)

3.3 Second Marginalization Policy Projects

3.3.1 Marginalizedareas

the identification of marginalized areas by shifting the unit of analysis from the county level to the sub-location level. At the time of its development, the country comprised 7,131 sublocationsacrossthe47counties.

Using a deprivation-based methodology, the Policy identified 1,424 sub-locations as marginalizedplanning units.Theseareasaredistributedacross 374wards,107 constituencies, and 34 counties, namely: Baringo, Bomet, Bungoma, Busia, Elgeyo Marakwet, Garissa, lsiolo, Homa Bay, Kajiado, Kericho, Kilifi, Kisumu, Kitui, Kwale, Laikipia,Lamu,Machakos,Mandera,Marsabit,Meru,Migori,Murang'a,Nandi,Nakuru, Narok,Samburu,Siaya,Taita Taveta,Tana River,Tharaka-Nithi,Turkana,Trans Nzoia, Wajir,andWestPokot.

The distribution of marginalized areas across counties reflects a targeted approach aimed at addressing intra-county disparities, with varying concentrations of deprivation observed across different regions. Consequently, the number of marginalized sub-locations differs significantly by county,underscoring the localized nature of development challenges and the need for tailored interventions.The detailed breakdown of constituencies,wards, and sub-locationsispresentedinTable2.

Table2:Areascategorized asmarginalized inthesecondMarginalizationPolicyby county

| S/NO. | County | Constit uenciesds | War | Sub- locatio ns | S/N 0. | County | Constituen cies | War ds | Sub- locations | |---------|------------|---------------------|-------|-------------------|----------|---------------|-------------------|----------|------------------| | | Baringo | 4 | 15 | 90 | 18 | Bomet | 1 | 3 | 3 | | 2 | Garissa | 6 | 27 | 83 | | Bungoma | 1 | 4 | 9 | | 3 | Homa-Bay | 4 | 10 | 20 | 20 | Busia | 2 | 3 | 3 | | | lsiolo | 2 | 8 | 25 | | E/Marakwet | 3 | 6 | 11 | | 5 | Kajiado | 3 | 13 | 64 | 22 | Kericho | 3 | 4 | 10 | | 6 | Kilifi | 6 | 19 | 78 | | Kisumu | 2 | 4 | 4 | | 7 | Kitui | 4 | 17 | 63 | | Laikipia | 2 | 5 | 18 | | 8 | Kwale | 4 | 15 | 39 | | Lamu | 2 | 7 | 10 | | 9 | Mandera | 6 | 31 | 97 | 26 | Machakos | 1 | 2 | 2 | | 10 | Marsabit | 4 | 18 | 68 | | Meru | 3 | 4 | 5 | | 11 | Migori | 4 | 9 | 27 | 28 | Murang'a | 1 | 1 | 1 | | 12 | Narok | 6 | 26 | 112 | | Nakuru | 1 | 1 | 1 | | 13 | Samburu | 3 | 15 | 95 | 30 | Nandi | 2 | 4 | 19 | | 14 | Tana River | 3 | 14 | 65 | | Siaya | 3 | 5 | 5 | | 15 | Turkana | 6 | 28 | 144 | 32 | TaitaTaveta | 2 | 2 | 2 | | 16 | Wajir | 6 | 30 | 94 | | Tharaka-Nithi | 2 | 4 | 7 | | 17 | West Pokot | 4 | 19 | 149 | 34 | Trans Nzoia | 1 | | 1 | | | TOTAL | | | | | | 107 | 374 | 1424 |

Source:SecondPolicyandCriteriaforSharingRevenueAmongMarginalizedAreas

3.3.2 Approved Projects under the Second Marginalization Policy

In accordance with Regulation 20 of the Public Finance Management (Equalisation Fund Administration) Regulations, 2021, as at 31st March 2026, the Board had received a total of 1,647 project proposals from the 34 beneficiary counties, of which 1,599 projects were approved for implementation while the remaining projects had pending issues for addressing by the beneficiary counties and were referred back reflecting ongoing project appraisal and quality assurance processes.

The approved projects, valued at approximately Ksh. 9.89 billion, demonstrate continued expansion in programme implementation under the Second Marginalization Policy. Analysis of approved projects indicates both inter-county and sectoral variations. In terms ofprojectvolume,WajirCounty recorded thehighestnumberof approvedprojects(192), followed by Narok (150), Baringo (143), Kitui (119), and Marsabit (105). This distribution indicates relatively higher concentration of approved interventions in counties with extensive marginalized areas and higher project demand. Other notable contributors include Turkana (99), Mandera (91), and Garissa (90), further highlighting the spatial spread of programme implementation across AsAL and underserved regions. A detailed breakdown of approved projects by county, alongside their respective budgetary allocations,ispresented inTable3.

Table 3:SecondPolicyApprovedProjects and Budgetsby county S/No. County Margin AppropriatedAmount

| | | alized Areas | | Approved Projects | Projects Budget | |----|------------|----------------|-------------|---------------------|-------------------| | | Baringo | 06 | 595,027,099 | 143 | 585,607,226 | | 2 | Bomet | 3 | 19,215,175 | 3 | 19,215,174 | | 3 | Bungoma | 9 | 58,779,836 | 8 | 58,779,836 | | | Busia | 3 | 17,979,656 | 3 | 17,979,656 | | 5 | E/Marakwet | 11 | 65,114,751 | 16 | 56,644,349 | | 6 | Garissa | 83 | 630,912,260 | 06 | 621,784,868 | | 7 | Homa-Bay | 20 | 131,603,304 | 31 | 131,603,302 | | 8 | Isiolo | 25 | 166,157,751 | 26 | 166,157,751 | | 6 | Kajiado | 64 | 414,765,595 | 30 | 398,767,237 | | 10 | Kericho | 10 | 60,882,122 | 12 | 60,882,122 | | 11 | Kilifi | 78 | 539,901,714 | 68 | 539,901,714 |

| S/No. | County | Margin alized Areas | AppropriatedAmount | Approved Projects | Projects Budget | |---------|---------------|-----------------------|----------------------|---------------------|-------------------| | 12 | Kisumu | 4 | 24,333,610 | 4 | 24,333,610 | | 13 | Kitui | 63 | 397,477,349 | 119 | 397,477,349 | | 14 | Kwale | 39 | 292,590,513 | 60 | 292,425,424 | | 15 | Laikipia | 18 | 119,303,227 | 29 | 119,302,927 | | 16 | Lamu | 10 | 57,614,460 | 10 | 57,614,460 | | 17 | Machakos | 2 | 12,923,347 | 2 | 12,923,347 | | 18 | Mandera | 97 | 753,408,998 | 91 | 753,408,998 | | 61 | Marsabit | 68 | 469,644,478 | 105 | 481,756,157 | | 20 | Meru | 5 | 29,927,013 | 6 | 29,004,018 | | 21 | Migori | 27 | 177,764,414 | 41 | 177,512,998 | | 22 | Murang'a | 1 | 5,679,579 | 1 | 5,679,579 | | 23 | Nakuru | 1 | 6,435,119 | 1 | 6,435,119 | | 24 | Nandi | 19 | 116,745,012 | 32 | 116,745,012 | | 25 | Narok | 112 | 771,670,228 | 150 | 727,316,971 | | 26 | Samburu | 95 | 649,686,536 | 56 | 649,686,536 | | 27 | Siaya | 5 | 31,973,185 | 7 | 31,910,044 | | 28 | Taita Taveta | 2 | 13,335,187 | 3 | 13,329,996 | | 29 | Tana River | 65 | 442,122,368 | 63 | 431,557,313 | | 30 | Tharaka-Nithi | 7 | 44,005,716 | 9 | 43,306,307 | | 31 | Trans Nzoia | 1 | 7,478,246 | 1 | 7,478,246 | | 32 | Turkana | 144 | 1,144,091,494 | 66 | 1,144,091,494 | | 33 | Wajir | 94 | 730,167,615 | 192 | 691,610,040 | | 34 | WestPokot | 149 | 1,021,690,952 | 88 | 1,021,690,952 | | | TOTAL | 1,424 | 10,020,407,909 | 1599 | 9,893,920,12 |

Source:EqualizationFundAdvisoryBoard(EFAB)

Sectoral distribution of the approved projects indicates a strong emphasis on Water (494 projects) and Roads (409 projects), followed by Health (310 projects) and Education (280 S oe e d s i e m ( distribution,as reflected in Table 4,underscores a clear prioritization of basic service delivery infrastructure in marginalized areas,particularly in water access and transport connectivity, which are critical enablers of socio-economic development in the beneficiary counties.

A detailed analysis by county further shows significant variation in sectoral allocation. Wajir County that recorded the highest number of approved projects (192), has a strong focus on Roads (62), Water (47), Health (39), and Education (39), while Energy has only (5)

projects. Narok County followed with 150 projects, largely concentrated in Education (95) and Roads (25), complemented by Water (23), and Health (7).

Other notable counties include Baringo (143 projects), with emphasis on Education (60) and Water (44); Kitui (119 projects), dominated by Water (42), Roads (30), and Health (27); and Marsabit (105 projects), with a balanced spread across Education (26), Health (21), Roads (19), and Water (29). Counties such as Turkana (99 projects), Mandera (91 projects), and West Pokot (88 projects) also reflect significant multi-sectoral investment, particularly in Water, Roads, and Health infrastructure.

Table 4: Analysis by county and priority sector for approved projects

| S/No. | County | Education | Energy | Health | Roads | Water | Grand Total | |-------------------|----------|-------------|----------|----------|---------|---------|---------------| | 1 | Baringo | 60 | 6 | 18 | 15 | 44 | 143 | | 2 | Bomet | | | 1 | 1 | 1 | 3 | | 3 Bungoma | | 1 | | 1 | 3 | 3 | 8 | | 4 Busia | | | 2 | | 1 | | 3 | | 5 Elgeyo Marakwet | 1 | | 2 | 3 | 4 | 6 | 16 | | 6 | Garissa | 4 | 17 | 34 | 20 | 15 | 06 | | 7 | Homa Bay | 3 | | 5 | 18 | 5 | 31 | | 8 | Isiolo | | | 4 | 15 | 7 | 26 | | 9 Kajiado | | 2 | 1 | 6 | 8 | 13 | 30 | | 10 | Kericho | | 2 | | 4 | 6 | 12 | | 11 Kilifi | | | | 20 | 27 | 21 | 68 | | 12 | Kisumu | | | 1 | 2 | 1 | 4 | | 13 Kitui | | 20 | | 27 | 30 | 42 | 119 | | 14 Kwale | | 13 | 12 | | 15 | 20 | 60 | | 15 Laikipia | | 8 | | 2 | 1 | 18 | 29 | | 16 | Lamu | | 1 | 3 | 1 | 5 | 10 | | 17 | Machakos | | | 1 | | 1 | 2 | | 18 Mandera | | | 10 | 30 | 18 | 33 | 91 | | 61 Marsabit | | 26 | 10 | 21 | 19 | 29 | 105 | | 20 Meru | | 1 | 1 | | 2 | 2 | 6 | | 21 Migori | | | 10 | 12 | 7 | 12 | 41 | | 22 Murang'a | | | | | | 1 | 1 | | 23 Nakuru | | | | | | 1 | 1 | | 24 Nandi | | | | 4 | 19 | 9 | 32 | | 25 Narok | | 95 | | 7 | 25 | 23 | 150 | | 26 | Samburu | | 8 | 6 | 25 | 17 | 56 | | 27 Siaya | | | 1 | 1 | | 5 | 7 |

| S/No. | County | Education | Energy | Health | Roads | Water | Grand Total | |---------|--------------|-------------|----------|----------|---------|---------|---------------| | 28 | Taita Taveta | | | | | 3 | 3 | | 29 | Tana River | | 8 | 13 | 15 | 27 | 63 | | 30 | TharakaNithi | | | 3 | 3 | 3 | 9 | | 31 | Trans Nzoia | | | 1 | | | 1 | | 32 | Turkana | 6 | 8 | 26 | 10 | 49 | 66 | | | Wajir | 39 | 5 | 39 | 62 | 47 | 192 | | 34 | WestPokot | 1 | 1 | 22 | 39 | 25 | 88 | | | Grand Total | 280 | 105 | 311 | 409 | 494 | 1599 |

Source:EqualizationFundAdvisoryBoard(EFAB)

4.OSTATUSOFDISBURSEMENTSOFFUNDS

In the Third quarter of FY 2025/26, Ksh.2,300,000,000 was paid into the Fund for implementation of projects funded by EF Appropriations Act 2023 under the Second Equalization Fund amounted to Ksh.19,715,190,941, leaving a balance of ksh. 3 billion of thetotalappropriated amountofksh.22.7billion.

Table 5 summarizes entitlements, payments into the Fund, and the arrears as of March 31, 2026.

Table5:Entitlement,Payment,andArrearstoEqualizationFund

| Arrears | | (g)=(e)-(f) | 0 | | 3,000,000,00 | | 7,727,000,000 | 4,700,000,000 | 5,760,000,000 | 6,788,490,000 | 6,825,317,433 | 7,068,474,211 | 7,338,574,000 6,367,623,784 | 4,802,170,425 | 60,377,649,853 | |----------------------|--------------------------------------|---------------------------|-----------------|-----------------|---------------------------------|-----------------|-----------------|-----------------|-------------------|-----------------|-----------------|-------------------|-------------------------------------|------------------|--------------------| | Payment into EF | | | | | 400,000,000 6,000,000,000 | 6,000,000,000 | | | | | | | 1,030,000,000 1,485,190,941. | 4,800,000,000 | 19,715,190,941 | | Amount | Reflected in the DORA (Ksh.) | 0 | | | 3,400,000,000 6,000,000,000 | 6,000,000,000 | 7,727,000,000 | 4,700,000,000 | 5,760,000,000 | 6,788,490,000 | 6,825,317,433 | 7,068,474,211 | 8,368,574,000 7,852,814,725 | 9,602,170,425 | 80,092,840,794 | | EF Entitlement | (0.5% of Audited Revenue) | 2,340,759,850 ()S000=(P) | 2,646,500,000 | 2,646,500,000 | 2,646,500,000 3,884,500,000 | 4,678,265,000 | 4,678,265,000 | 4,678,265,0 | 5,190,175,000 | 6,788,490,000 | 6,788,490,000 | 7,068,474,200 | 8,368,575,000 7,852,814,725 | 9,602,170,425 | 79,858,744,200 | | Audited and approved | revenues by National Assembly (Ksh.) | 468,151,970,000 | 529,300,000,000 | 529,300,000,000 | 529,300,000,000 776,900,000,000 | 935,653,000,000 | 935,653,000,000 | 935,653,000,000 | 1,038,035,000,000 | 1,357,698,00,0 | 1,357,698,00,0 | 1,413,694,840,000 | 1,673,715,000,000 1,570,562,814,725 | 1,920,434,085,08 | 15,621,877,439,450 | | Base Year for | audited revenues Most recent | 2008/2009 | 2009/2010 | 2009/2010 | 2009/2010 2012/2013 | 2013/2014 | 2013/2014 | 2013/2014 | 2014/2015 | 2016/2017 | 2016/2017 | 2017/2018 | 2019/2020 2020/2021 | 2021/2022 | | | Financial | Year | 2011/12 | 2012/13 | 2013/14 | 2014/15 2015/16 | 2016/17 | 2017/18 | 2018/19 | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 2024/25 | 2025/26 | TOTAL | | `N/S | | | 2 | 3 | 5 | | | 8 | 9 | 10 | | 12 | 13 14 | 15 | |

Source:DivisionofRevueActs2014/15-2025/26andEFAB

The National Treasury drew up a payment plan for the arrears in the year 2023, as tabulated in Table 6, committing to make additional payments amounting to Ksh.9.98 billion annually to clear arrears in addition to the O.5 percent of the National Audited revenue approved by the National Assembly.

Table6:ProposedPaymentplanofEqualizationFundArrearsinKsh.

Financial Year (A)

Source:TheNationalTreasury

| | Budget Estimates (B) | Equalization Fund Arrears (C) | |-------------|------------------------|---------------------------------| | 2023/24 | 8,368,574,0 | | | 2024/25 | 8,368,574,000 | 9,976,766,000 | | 2025/26 | 9.590.000,000 | 9,976,766,000 | | 2026/27 | 10,960,000,000 | 9,976,766,000 | | 2027/28 | 14,393,000,000 | 9,976,766,000 | | Grand Total | 51,680,148,000 | 39,907,064,000 |

Asof31stMarch,2026,theNationalTreasuryhasbeentransferringfundstoEqualization Fund upon request for full implementation of the Second Marginalization Policy as appropriated in Equalization Fund Appropriation Act 2023.

4.1 Transfers from the Equalization Fund

The Parliament appropriated Ksh.12.4 billion being allocation for Financial Years; 2014/2015, 2015/2016 and 2016/2017 through the EqualizationFund Appropriation Act of2018for theimplementationof360projectsin14countiesidentified asmarginalized in the First Marginalization Policy.The National Treasury transferred the total appropriated amounttotheEqualizationFundAccount.

Asof31stMarch2026,thetotalamounttransferredtoMDAsforimplementationofthe First Policy projects is Ksh.10,921,282,757.30 as shown in Table 7.

Table7:TransferstoMDAsforEFAppropriationAct2018byCounty

| No. | County | Allocation EF Appr.Act 2018 | Transfers to MDAs | Outstanding Balances | |-------|--------------|-------------------------------|---------------------|------------------------| | 1. | Garissa | 783,500,000.00 | 774,289,296.16 | 9,210,703.84 | | 2. | Kwale | 795,300,000.00 | 719,824,837.78 | 75,475,162.22 | | 3. | Lamu | 722,199,600.00 | 670,858,586.67 | 51,341,013.33 | | 4. | Kilifi | 763,500,000.00 | 678,387,803.44 | 85,112,196.56 | | 5. | Isiolo | 746,900,000.00 | 689,070,137.50 | 57,829,862.50 | | 6. | Mandera | 967,600,000.00 | 967,266,621.60 | 333,378.40 | | 7. | Marsabit | 886,200,000.00 | 844,847,881.55 | 41,352,118.45 | | 8. | Narok | 809,500,000.00 | 673,216,354.00 | 136,283,646.00 | | 9. | Samburu | 865,917,863.00 | 816,633,852.02 | 49,284,010.98 | | 10. | Taita Taveta | 751,700,000.00 | 715,074,403.43 | 36,125,596.57 | | 11. | Tana River | 859,000,000.00 | 840,670,032.51 | 18,329,967.49 | | 12. | Turkana | 1,050,200,000.00 | 898,888,876.11 | 151,311,123.89 | | 13. | Wajir | 929,800,000.00 | 851,715,888.99 | 78,084,111.01 | | 14. | WestPokot | 869,882,138.00 | 780,538,185.53 | 89,843,952.47 | | | Totals | 11,801,199,601.00 | 10,921,282,757.29 | 879,916,843.71 |

Source:EqualizationFundAdvisoryBoard(EFAB)

2022/2023 through the Equalization Fund Appropriation Act,2023for implementation of projects in 34 counties with areas identified as marginalized under the Second Marginalization Policy. Pursuant to Regulation 24 of the PFM (Equalization Fund Administration) Regulations, 2021, the funds are utilized as conditional grants to the beneficiary counties in accordance with the Division of Revenue Act and the EF Appropriation Act of 2023.

4,820,633,832.05 to SpecialPurpose Accounts of respective 27-beneficiary county completioncertificates.

DuringthethirdquarterofFinancialYear2025/26,theFunddisbursedatotalofKsh. 1,014,338,054.40 to 12 counties namely: Migori, Kwale, Bungoma, Laikipia, Wajir, Kajiado, Marsabit, Samburu,Murang'a, Baringo, Narok, and Turkana.

Thetotaldisbursementstothebeneficiarycounties areshowninTable8.

Table 8:Total Disbursements for EF Appropriation Act, by County

Source of Data: Equalization Fund Advisory Board (EFAB)

| Outstanding Balance | 470,853,457.40 19,215,174.00 | 11,364,846.80 | 17,979,656.00 | 65,114,752.00 640,784,868.00 | 8,034,077.40 5,219,584.80 | 183,793,592.10 | 60,882,122.00 | 358,202,550.70 1,559,426.30 | 277,414,842.55 250,207,950.85 51,848,883.00 | | 57,614,460.00 | 3,639,525.00 60,932,331.30 | 86,085,685.10 17,089,843.00 123,306,18.0 0.00 | 3,388,216.60 9,283,702.80 616,174,796.10 168,450,207.00 | 31,910,044.00 293,332.75 | 268,990,331.10 | 42,915,203.00 ,478,246.00 | 465,079,236.20 | 5,202,807,051.95 574,620,189.00 243,079,601.10 | |-----------------------------------------------------|--------------------------------|----------------------|-----------------|--------------------------------|---------------------------------------|----------------------|-----------------|----------------------------------------|-----------------------------------------------|--------------------------|------------------------|---------------------------------------|----------------------------------------------------------------------|------------------------------------------------------------|-----------------------------------------|---------------------------|-----------------------------|---------------------------------------|--------------------------------------------------| | Absorptio n Rate Total Disbursements asat31tMar2026 | 21% %0 124,173,641.60 | 81% %0 47,414,988.20 | %0 | %0 | 94% 97% 123,569,224.60 160,938,163.20 | 55% 5 226,972,003.90 | %0 | 35% 94% 3 196,091,145.30 22,774,183.70 | 30% 17% 3 118,562,504.45 49,460,239.15 | 57% %0 5 67,454,044.00 O | 72% 9,283,822.00 | 92% 82% 693,457,163.70 389,099,471.90 | 41% 33% 100% 3 11,914,175.00 59,562,562.00 5,679,579.00 3,046,902.40 | 92% 20% 74% 7 110,716,056.20 152,360,779.90 472,640,753.00 | %0 %86 9 3 13,036,663.25 173,062,036.90 | %68 0% | %0 O | 58% 22% 646,470,677.80 164,281,700.00 | 76% 48% 4,820,633,832.05 778,611,350.90 | | Third Quarter Disbursements | 61,255,489.80 | 14,668,021.00 | O O | 0 | 0 O | 32,196,275.60 | | | 49,460,240 | 36,817,307 | | 73,640,507.70 | 59,562,562 5,679,579 | 152,360,780 153,688,148 | 0 0 | 0 | O | 210,727,445 164,281,700 | 1,014,338,054.4 | | Second Quarter Disbursements | | 32,746,967.25 | | | 70,946,512.60 | 121,989,923.50 | | | 118,562,504.45 | | 9,283,822.00 | 103,151,648.00 | 11,914,175.20 | 6,303,020.00 | 13,036,663.25 29,730,587.80 | | 197,651,337.50 | | 192,049,609.40 907,366,770.95 | | First Quarter Disbursements | | 58,779,835 | 17,979,656 | 640,784,868 | 131,603,32 | 410,765,596 | | | | | | | | | | | | | 10,023,440,883 | | Approved Budget | 595,027,099 19,215,174 | | | 65,114,752 | 166,157,748 | | 60,882,122 | 554,293,696 24,333,610 | 395,977,347 299,668,190 119,302,927 | 57,614,460 | 12,923,347 754,389,495 | 475,185,157 29,004,018 | 182,868,880 5,679,579 6,435,119 | 119,999,759 768,535,576 641,090,960 31,910,044 | 13,329,996 442,052,368 | 42,915,203 ,478,246 | ,111,549,914 | 738,901,889 | 1,021,690,952 | | County | Baringo Bomet | Bungoma | Busia | Elgeyo Marakwet Garissa | Homa Bay Isiolo | Kajiado | Kericho Kilifi | Kisumu | Kitui Kwale Laikipia | Lamu | Machakos Mandera | Marsabit Meru | Migori Murang'a Nakuru | Nandi Narok Samburu Siaya Taita Taveta | Tana River | Tharaka Nithi Trans Nzoia | Turkana | Wajir West Pokot | Total |

5.0EQUALISATIONFUNDIMPLEMENTATIONSTATUS

5.1Preamble

This section presents the status of implementation of projects financed under the Equalisation Fund pursuant to both the First and Second Marginalisation Policies.For theThirdQuarterReportofFY2025/26,thestatusofprojectsisinformedbyprogress projects under theFirstPolicy,aswell asreportsreceived fromCountyGovernments implementingprojects under theSecondPolicy.

5.2ImplementationStatusofEqualizationFundProjects 5.2.1 Status of Projects under first policy

Under the First Marginalisation Policy and the Equalisation Fund Appropriation Act, 2018, a total of 360 projects were implemented directly by National Government Ministries, Departments, and Agencies (MDAs). The implementing MDAs subsequently sought andobtained concurrence fromtheEqualisationFundAdvisoryBoard(EFAB) toundertake additional components and segments to enhance the utility and sustainability of the respective projects through the utilization of savings realized from the initial 360 projects.

Progress reports submitted by the implementing MDAs indicate that, as at 31st March 2026: 249 projects, representing 69.17 per cent of the total; were 100% fully complete uuad ym (-o) aidon Auisns aam (h'i) sad g :asn u! pue minorworks;13projects representing 3.61%were 75%-89%level of completion;15 projects representing 4.17 percent were at 50%-74% completion; and 37 projects (10.28%) were still below 50% implementation rate,as detailed in Table 9. Any ongoing works at these project sites relate to enhancements,rehabilitation,or optimization of scope rather than the introduction of newprojects.

Table9:StatusofprojectsundertheFirstPolicybycounty

| County | <50% | 50%-74% | 75%-89% | %66-%06 | 100% | Totals | |----------|--------|-----------|-----------|-----------|--------|----------| | Garissa | 0 | 1 | 0 | | 8 | 9 | | lsiolo | 1 | 3 | 0 | 2 | 11 | 17 | | Kilifi | 7 | | 1 | 5 | 45 | 58 | | Kwale | 4 | | | | 24 | 29 |

| County | <50% | 50%-74% | 75%-89% | %66-%06 | 100% | Totals | |--------------|--------|-----------|-----------|-----------|--------|----------| | Lamu | 6 | 3 | 3 | 2 | 24 | 38 | | Mandera | 0 | 0 | 0 | 1 | 11 | 12 | | Marsabit | 0 | 0 | 2 | 4 | 21 | 27 | | Narok | 7 | 2 | 1 | 8 | 11 | 29 | | Samburu | 1 | 0 | 0 | 2 | 11 | 14 | | Taita Taveta | 2 | 2 | 0 | 6 | 28 | 38 | | Tana River | 1 | 0 | 0 | | 25 | 26 | | Turkana | 4 | 1 | 0 | 3 | 6 | 14 | | Wajir | 0 | 2 | 2 | 12 | 11 | 27 | | W/Pokot | 4 | 1 | 3 | 1 | 13 | 22 | | Sub Total | 37 | 15 | 13 | 46 | 249 | 360 | | | 10.28% | 4.17% | 3.61% | 12.78% | 69.17% | |

Source:ReportsbyMDAscompiledbyEFAB

5.2.2StatusofProjectsundersecondpolicy

approved for implementation across the thirty-four (34) counties. Reports received from the beneficiary county governments indicate that 718 projects, representing 44.85 per cent of the approved projects, were fully complete, while the remaining projects were atvariousstages of implementation.

Table 10 presents the implementation status of 1,601 projects as a result that Samburu County split 2 of its approved health projects during implementation therefore resulting inthe2additionalwhilesubmittingstatusreports.

Table10:Statusofprojectsunderthe2ndpolicybycounty

| S No. | County | <50% | 50%-74% | 75%-89% | %66-%06 | 100% | Totals | |---------|-----------------|--------|-----------|-----------|-----------|--------|----------| | 1 | Baringo | 96 | 9 | 4 | 5 | 29 | 143 | | 2 | Bomet | 3 | 0 | 0 | | 0 | 3 | | 3 | Bungoma | 2 | 0 | 0 | | 6 | 8 | | 4 | Busia | 3 | 0 | 0 | | 0 | 3 | | 5 | Elgeyo Marakwet | 16 | 0 | 0 | | 0 | 16 | | 6 | Garissa | 06 | 0 | 0 | | 0 | 06 | | 7 | Homa Bay | 1 | 0 | 0 | | 30 | 31 | | 8 | Isiolo | 1 | 0 | 0 | 11 | 14 | 26 | | 9 | Kajiado | 8 | 10 | 4 | 1 | 7 | 30 | | 10 | Kericho | 12 | 0 | 0 | | 0 | 12 | | 11 | Kilifi | 40 | 1 | 1 | | 26 | 68 | | 12 | Kisumu | 0 | 0 | 0 | | 4 | 4 |

| S No. | County | <50% | 50%-74% | 75%-89% | %66-%06 | 100% | Totals | |---------|---------------|--------|-----------|-----------|-----------|--------|----------| | 13 | Kitui | 81 | 0 | 0 | | 38 | 119 | | 14 | Kwale | 49 | 0 | 0 | 1 | 10 | 60 | | 15 | Laikipia | 12 | 0 | 0 | | 17 | 29 | | 16 | Lamu | 10 | 0 | 0 | | 0 | 10 | | 17 | Machakos | 0 | 0 | 0 | | 2 | 2 | | 18 | Mandera | 4 | 0 | 0 | | 87 | 91 | | 19 | Marsabit | 14 | 0 | 0 | 2 | 89 | 105 | | 20 | Meru | 1 | 1 | 0 | 2 | 2 | 6 | | 21 | Migori | 19 | 2 | 0 | | 20 | 41 | | 22 | Muranga | 0 | 0 | 0 | | 1 | 1 | | 23 | Nakuru | 0 | 1 | 0 | | 0 | 1 | | 24 | Nandi | 2 | 1 | 0 | | 29 | 32 | | 25 | Narok | 123 | 16 | 2 | | 9 | 150 | | 26 | Samburu | 23 | 6 | 3 | 2 | 24 | 58 | | 27 | Siaya | 7 | 0 | 0 | | 0 | 7 | | 28 | Taita Taveta | 0 | 0 | 0 | 1 | 2 | 3 | | 29 | Tana River | 31 | 1 | 0 | 1 | 30 | 63 | | 30 | Tharaka Nithi | 9 | 0 | 0 | | 0 | 9 | | 31 | Trans Nzoia | 1 | 0 | 0 | | 0 | 1 | | 32 | Turkana | 18 | 10 | 8 | 1 | 62 | 66 | | 33 | Wajir | 56 | 0 | 0 | | 136 | 192 | | 34 | West Pokot | 26 | 10 | 4 | 4 | 44 | 88 | | | Sub Total | 758 | 89 | 26 | 31 | 718 | 1601 | | | | 47.35% | 4.25% | 1.62% | 1.94% | 44.85% | |

Source:ReportsbybeneficiarycountiesandcompiledbyEFAB

Under the Second Marginalisation Policy, projects are implemented indirectly through County Governments.Analysisof theinformationpresented in Table 11 indicates that, of project implementation. The analysis reveals the following:

• i. Seven hundred and eighteen (718), representing 44.85 per cent of the approved projects,werereportedtobefully complete andsome already in usebyresidents ofthemarginalisedareas;
• ii. Thirty-one (31), representing 1.94 percent of the approved projects, were reportedtobesubstantiallycomplete andreadyforuseby theresidentsof the marginalisedareas;

• ili. Twenty-six(26) projects,accounting for1.62per cent of the approved projects, werebetween75and89percentcompleteandwerethereforenearing completion;
• iv. Sixty-eight(68)projects,representing 4.25 per cent of the approvedprojects, werebetween50 and74percentcomplete;and
• V. Seven hundred and fifty-eight (758) projects, accounting for 47.35 per cent of the approvedprojects,were at lessthan50percent of implementation.

5.3Submissions of CountyProject ImplementationStatusReports

Pursuant to Regulation 20,the County Executive Committee Members responsible for Finance, on a quarterly basis prepare reports on funds received and implementationstatusof allprojectsfinanced by theFund.Thesereports CabinetSecretaryfor theNational Treasurywithcopies toParliament,the Secretary,Commission onRevenueAllocation and ControllerofBudget. theSecondMarginalizationPolicyhadsubmittedreportsonthestatusof

As of31stMarch,2026,twenty-five(25)counties outof the34countiesunder implementation of projects.These countiesinclude:Baringo,Bungoma,Homa Bay,Isiolo,Kajiado,Kilifi,Kisumu,Kitui,Laikipia,Machakos,Mandera,Marsabit, Meru,Migori,Murang'a,Nakuru,Nandi,Narok,Samburu,Taita Taveta,Tana River,Turkana,Wajir,and West Pokot.However,the nine (9) counties that had notsubmittedreportsinclude:Bomet,Busia,ElgeyoMarakwet,Garissa,Kericho, eleven.

Table11:SubmissionsofStatusReportsbyCounty

| No. | Submitted | No. | Not Submitted | |-------|-------------|-------|-----------------| | 1. | Baringo | 1. | Bomet | | 2. | Bungoma | 2. | Busia | | 3. | Homa Bay | 3. | Elgeyo Marakwet | | 4. | Isiolo | 4. | Garissa | | 5. | Kajiado | 5. | Kericho | | 6. | Kilifi | 6. | Lamu | | 7. | Kisumu | 7. | Siaya | | 8. | Kitui | 8. | Tharaka Nithi |

| No. | Submitted | No. Not Submitted | |-------|--------------|---------------------| | 9. | Kwale | 9. Trans Nzoia | | 10. | Laikipia | | | 11. | Machakos | | | 12. | Mandera | | | 13. | Marsabit | | | 14. | Meru | | | 15. | Migori | | | 16. | Murang'a | | | 17. | Nakuru | | | 18. | Nandi | | | 19. | Narok | | | 20. | Samburu | | | 21. | Taita Taveta | | | 22. | Tana River | | | 23. | Turkana | | | 24. | WestPokot | | | 25. | Wajir | |

Source:EqualizationFundAdvisoryBoard

5.4 Monitoring andVerification ofSecond Marginalisation

The PFM (Equalisation Fund Administration) Regulation 8(e) provides that the Equalisation Fund Advisory Board (EFAB) is to carry out monitoring and evaluation of projects implemented by the county governments using the Equalisation Fund. This function ensures transparency, accountability, and alignment with the constitutional goal of addressing marginalization.

As at 31stMarch2026,theFund hasconducted monitoring andverification ofprojects in eleven(11) counties of the total 34 counties.These countiesinclude:lsiolo,Samburu, West Pokot,Tana River,Kisumu,Nandi,Mandera,Homa Bay, Migori, Marsabit,and Laikipia. The Fund has planned to continue with the monitoring and verification of projectsin theremainingcountiesduringthefourthquarter.

6.0RESTRICTIONSIMPOSEDONACOUNTYGOVERNMENTORANY IMPLEMENTINGAGENCY

6.1Preamble

Fund Administration) Regulations, 2021. Under this framework, the Fund is operationalised as a conditional grant to county governments, meaning that its utilisation is strictly guided by predefined legal and policy conditions aimed at ensuring equity,accountability,and targeted development in marginalised areas.

In line with Article 204(2) of the Constitution, the use of the Equalisation Fund is subject to specific statutory and regulatory safeguards designed to uphold prudence and ensure thatresources are directed to their intendedpurpose.ThePublicFinance Management (Equalisation Fund Administration) Regulations, 2021 further elaborate these restrictionsasfollows:

• i.The Fund shall be applied exclusively to the provision of basic services such as water, access roads, health facilities, and electricity in marginalised areas. The intention is to progressively raise the quality of these services in such areas to a level comparable, as far as practicable, with the rest of the country, as provided forintheConstitution;
• ii. All fundedprojects must be locatedwithin marginalised areas as identified under theapprovedpolicyframeworkdevelopedby theCommissiononRevenue Allocation(CRA)fortheidentificationand allocationoftheEqualisationFund;
• ili. Countygovernmentsofeligibleareasarerequiredtoestablishandoperate dedicatedspecial-purposebankaccounts attheCentralBank ofKenyafor purposesofreceivingandmanagingEqualisationFundresources;
• iv. CountyCommissionersin eligiblecounties aremandated to establish technical and implementation &amp; oversight committees at the county,sub-county,and ward levels in accordance with Regulations 14, 16, and 18 of the 2021 Regulations, to support coordination, supervision, and accountability;
• v.

(EFAB),throughtheChief ExecutiveOfficer,beforecommitting additional resources toprojects already approvedunder thefirstmarginalisationpolicy frameworkandfundedby theEFAppropriationAct2018;and

• Vi. Project implementation under the Fund is undertaken through the Integrated Financial Management Information System (IFMis), which provides a structured platform for planning, budgeting, procurement, expenditure tracking, and reporting.

Theseprovisions areintended to ensure thatEqualisationFundresourcesareutilised strictly for their intended purpose,with strengthened oversight,transparency,and alignment to constitutional and regulatory requirements.

7.0ACHIEVEMENTS,CHALLENGESANDRECOMMENDATIONS

7.1Preamble

This section outlines the key achievements realized since the inception of the Fund, highlightsthechallengesencountered underboththeFirst andSecond Marginalization Policies,and provides recommendations aimed at addressing these challenges and strengthening theimplementationof theFund

7.2Achievements

Project implementation across beneficiary counties:

• Implementation of projects across all 34 beneficiary counties under the Second Marginalization Policy is ongoing. As of March 31, 2026, a total of 1,599 projects hadbeenapproved,with46.22%(740projects)reportedassubstantially complete.
• Under the First Marginalization Policy, 81.94 % of projects (295 out of 360) had been reported substantially complete by MDAs as of March 31, 2026
• TheFundhasdisbursedKsh.10.9billionandKsh.4.8billionunderthefromthe EFAppropriation Acts of 2018and2023 respectively. Of this,Ksh. 1.014,338,054.40wasdisbursedinQuarter3ofFY2025/26fortheSecond Policy and Ksh.122,654,121.50 for the first policy.
• Monitoring and verification have been conducted on 317 projects across 11 counties:West Pokot (42),Samburu (28), Isiolo (16), Mandera (25),Tana River (27),Nandi (30), Kisumu (4), Migori (24), Homa Bay (25), Marsabit (79), and Laikipia (17).

Continuousstakeholder engagements:

• roles as well as provisions of the Regulations. During the third quarter of the FY 2025/26,theFundconductedsensitizationforCountyTechnicalCommitteesfor twelvebeneficiarycountiesthathad laggedbehind inimplementationofthe Nzoia,Busia,Bomet,ElgeyoMarakwet,Siaya andKericho.

• Five(5)counties(Garissa,Wajir,Migori,Narok and Kwale were also capacity builtandtrainedonIFMis

7.2Challenges

SpreadingtheFundtoothinlyundertheSecondmarginalizationPolicy

• Theuseofsublocationasaunitofanalysisandidentifying1,424areasas marginalised in the Second MarginalizationPolicyresulted inspreading of the funds too thinly.These thinlyspread oftheFundresult in microprojectwhich may not achievetheimpact thatwas envisioned byArticle 204toprovidebasic services including water,roads,health facilities and electricity to marginalised areastotheextentnecessarytobringthequalityofthoseservicesinthoseareas tothelevelgenerally enjoyedby therest of thenation,sofar aspossible.
• The spread of the fund has also resulted to a large number of projects proposed, as of March31,2026,a total of 1647projects havebeenproposed bybeneficiary countieswhile1,599havebeenapproved forimplementation.

SlowImplementation:

While the Fund is fully operational, progress has been slow:

• TheFundisowedKsh.60billioninunpaidarrearsasofMarch31,2026.While the National Treasury has previously expressed commitments to Parliament in clearingthe arrears,thishasnotbeenhonored.
• The Public Finance Management (PFM) Regulations (2021) require project identification and prioritization through Ward, Sub-County, and County committees. However, delays in proposal submissions, as well as frequent

UncertaintyintheFundDistribution

The First and Second Marginalization Policies apply significantly different methodologies for identifying marginalized areas and allocating resources. This hasresulted in inconsistencies in beneficiary areas and funding levels,creating uncertainty for implementing entities and counties.Consequently,long-term planningishindered,potentiallyreducingtheoverall impactofprojects.

7.3Recommendations

Inordertocurethechallenges,theEFrecommends thefollowing:

Develop andReviewoneMarginalizationPolicy

• InlinewithArticle216(4)of theCoK,theCommissiononRevenueAllocation (CRA)should establish,publish,andregularlyreviewa singleMarginalization Policythatdefines thecriteriaforidentifyingmarginalized areasunderArticle 204(2). This would enhance predictability and enable long-term planning for more impactful projects.
• Marginalization Policy should adopt an approach that does not result in spreadingtheFund toothinlygeographicallyandintermsof allocated amounts for the benefiting areas.

PrioritizeimplementationoftheFund

• the EqualizationFund should be theDivisionof RevenueAct(DoRA),rather than the National AppropriationAct.TheNational Treasury should prioritize thesepaymentsonceDoRAisenactedandfacilitatethetimelytablingofthe EqualizationFundAppropriationBill onthebasisofDoRA.
• TheEFAppropriationBillshouldthereforebesubmittedtoParliament concurrently with the National Appropriation Bill following the enactment of DoRA
• ·WithpaymentsintotheFundbasedonDoRA,thisinadvertentlymakes this constitutional Fund a separatevoted entity outside theNational Treasury and enabletimelytransfers.
• GiventhattheEqualizationFund isaconstitutionalallocationratherthana discretionary one,its budget should not be subjected to revisions during supplementary budgets.Such revisions negatively affect the financing of the

already Equalization Fund Appropriated Acts and results in accumulation of pendingbills and EF arrears.