The Commission participated in the induction of Governors and Deputy Governors from September 14th – 18th, 2022. The theme of the induction was Towards Better Governance & Outcome Driven Service Delivery in Counties. The Commission presented in session 4: County Planning, Budgeting & Financing. The session objective was to equip county leaders with extensive knowledge on the legal and institutional framework surrounding planning, budgeting, implementation and reporting.
The Commission’s presentation focused on CRA’s mandate, financing counties, own source revenue and public financial management. The Commission’s mandate is to make recommendations concerning the basis for the equitable sharing of revenue raised by the national government; between the National and County Governments and among the County Governments.
The chairperson informed participants that by the end of the Financial Year 2022/2023 counties will have received a total of Ksh.3.58 trillion from various sources as outlined in the figure below:
This equitable share for County Governments recommended by the Commission has been consistently above the constitutional threshold of 15% of the latest audited accounts. The audited accounts used as bases for Shareable Revenue to county governments from FY2013/14 – FY2022/2023 are shown below:The Commission explained how revenue is allocated among the 47 county governments through a formula developed by the Commission: The Third Basis on Revenue Sharing Among County Governments. In formulating the Basis, a sectoral approach was followed based on the functions assigned to County Governments in the Fourth Schedule of the Constitution, and the criteria provided in Article 203.
Accordingly, the Commission’s recommendations submitted to Parliament sought to address four objectives namely: to enhance equitable service delivery; to promote balanced development; to incentivize Counties to optimise capacity to raise revenue and incentivize prudent use of public resources by the Counties.
Own Source Revenue
The Commission further informed the participants that there has been mixed growth in county government’s own source revenue:
However, the growth in total county governments’ OSR has been consistently below the aggregated target set by the county governments since the inception of devolution. The cumulative total of missed targets is Ksh. 152 billion:
The Commission further pointed out that Governors and Deputy Governors are required to carry out public participation in their counties through the county budget economic forums (CBEFs). CBEFs provide a means of consultation by county governments on county plans, budgeting, economy & financial management at county level:
The Commission also presented the process of nominating members to the CBEF forum. The process begins with the appointment of the county executive committee members, after which calls for nomination for members to the CBEF are done, as illustrated below:
In conclusion, the Commission noted that based on its observation of own source revenue performance in county governments, improvements of OSR are correlated to the tone at the top. County leaders who focus on improving OSR do so no matter whether they are automated or not. The Commission therefor recommends that the county leadership sets the right tone from the word go to ensure increase revenue collection.
Further, the Commission noted that adherence to the 70% recurrent and 30% development rule is especially challenging for counties that inherited a large workforce such as Nairobi. The definition of development expenditure, therefore, needs to be reviewed as it leads to audit queries in such counties.