Commission Launches the Own Source Revenue Training Report

The Commission in collaboration with the Ministry of National Treasury and Planning and the Public Financial Management Reforms (PFMR) Secretariat launched a report on the County Assemblies Own Source Revenue (OSR) Training on Friday, 3 June 2022 in Nairobi.

The Chief Guest at the launch was PS Treasury Dr Julius Muia who was represented by Ms Josephine Kanyi, Senior Deputy Director, National Treasury. Other guests included the CEO Council of Governors Ms Mary Mwiti, CRA Chairperson and CRA Commissioners, PFMR, County Assembly Forum, and Office of the Controller of Budget among other institutions.

PS Dr Julius Muia said that the launch came at an opportune time as the country is about to hold national elections and he expected that after these elections, there will be substantial changes in the leadership of county governments, both at the executive and assembly level:

“The lessons and recommendations in this report will be very critical in guiding the engagement of the Public Finance Management (PFM) institutions with county governments in the next political cycle,” he stated.

Further, he noted that the collection and administration of own-source revenue by county governments are undermined by a number of challenges including inadequate legal and regulatory frameworks, administrative and institutional weaknesses, manual revenue collection, weak revenue management systems, spending own source revenue at source and lack of effective internal controls and audit. This points to a weak link between user fees and charges imposed by counties and the cost of services which form the basis of the levies.

To resolve these challenges, he stated, the government developed the National Policy to Support Enhancement of County Government’s Own Source Revenue, which was approved by the Cabinet in 2018. Its overarching goal is to achieve a standardized policy, legal and institutional framework for local revenue-raising measures and enforcement that applies to all counties.

The Policy proposes a number of interventions both by national and county governments to enhance county-own source revenue, which includes:  the national government aligning all the laws touching on devolved functions to the constitution to ensure that county governments are given their rightful role and county governments coming up with principal legislation covering all their revenue streams.

CRA chairperson Dr Jane Kiringai appreciated the report and pointed out that it was a good indication of what can happen when institutions collaborate rather than compete. She noted that as the country goes into the election and kicks in a new cycle of devolution, there are 7 challenges that need to be addressed: challenge in setting revenue forecasts-hence in most cases that forecasts are too high or too low; setting unrealistic revenue targets mainly caused by limitations in revenue forecasts; outdated property valuation rolls especially in cities; limited legislation; automation of revenue collection; limited enactment of finance bills at the county level and data collection due to outsourcing of revenue collection. Addressing these challenges, she pointed out, will enable counties to unlock the potential they are sitting on.

Commissioner Kishanto ole Suuji gave an overview of the training. He pointed out that the Own Source Revenue training aimed at strengthening the oversight capacity of county assemblies on revenue administration and management, sensitizing county assembly members on fiscal decentralization, and providing a platform for engaging county assembly members on matters of devolution.

He further noted that the forums were organized in 5 regions comprising counties that were in close proximity to each other: Nyanza, Coast, Rift Valley, Central and Nairobi counties.

Commissioner Dr Irene Asienga made a presentation on counties’ own source revenue collection. She noted that county governments have had an upward trajectory in OSR collection recording Kshs.32 billion in FY 2017/18, Kshs.41 billion in FY 2018/19, Kshs.35.9 billion in FY 2019/20 and Kshs.34.4 billion in FY 2020/21.

She noted that county governments had the potential to collect Sh174B compared to the average collections of Ksh.30 billion, as per a report by Adam Smith consultants:

“The Adam Smith International report for Own-Source Revenue (OSR) Potential and Tax Gap Study of Kenya’s county Governments, 2018 projected a yearly average potential of Kshs.173 billion, compared to the current yearly average collections of Kshs 30.3 billion as from 2013/14 to 2020/21 financial years,” she stated.

As a way forward, the report proposes among others incorporation of the training in the induction of MCA’s immediately after an election cycle. The training content is also recommended for review so as to include new areas such as translating policy into law.

Download the report here: https://cra.go.ke/2022/06/08/commission-launches-the-own-source-revenue-training-report/