The Commission on Revenue Allocation submitted its views on the Equalization Fund Appropriation Bill, 2023 (Senate Bills No. 3 of 2023) to The Senate Standing Committee on Finance and Budget on Wednesday, March 29, 2023. This is in line with Article 204(4) of the Constitution, which requires Parliament to consult the Commission, before passing any Bill appropriating money out of the Equalisation Fund.
Members of the Commission on Revenue Allocation make submissions on the Bill to the Senate Standing Committee on Budget and Finance
The Bill seeks to appropriate Ksh. 13.8 Billion from the Equalisation Fund to finance development projects in 1424 marginalized areas that are spread across 34 constituencies for priority projects identified by local communities. Essentially, the Bill authorizes the issue of a sum of money out of the Equalisation Fund and its application towards the service of the year ending 30th June, 2023; to appropriate that sum for certain public basic services; and for connected purposes.
While making submissions on behalf of the Commission, Vice Chairperson, Koitamet Olekina pointed out that the Bill needed to specifically indicate where the Appropriated Fund monies would be deposited, as there was no indication as to where the amounts would be deposited.
“There is need to amend the clause by inserting -Special Purpose Funds established in CBK will be opened by the Board where the appropriated funds will be deposited. Once matrix is approved, the money will be sent to the various bank accounts for each of the counties as established by PFM Equalization Regulations.” He said.
Clause by Clause Analysis of the Bill by CRA
JUSTIFICATION FOR CHANGE
Clause 1 Heading
This Act may be cited as the Equalisation Fund Appropriation Bill, 2023 and shall be deemed to have come into force on 1st July, 2022. This heading is stating that the Bill will come to force retrospectively. This is not proper.
Amend to state that the Bill will apply for financial years 2021, 2022 and 2023
Clause 4 Exemption from CRF
The Funds appropriated under this Act shall be excluded from being paid into the respective County Revenue Fund. No indication where the amount will be paid.
Amend the clause by inserting 34 Special Purpose Funds established in CBK will be opened by the Board where the appropriated funds will be deposited. Once matrix is approved, the money will be sent to the various bank accounts for each of the counties as established by PFM Equalization Regulations
Add Clause 7
Provide for unutilized funds at the end of financial year
Insert that all unutilized funds will remain the EF to be utilized in the preceding year
Add Clause 8
Provide that a distribution schedule will be prepared by the Secretariats in consultation with CRA
Every quarter the Board shall publish exchequer released marginalized areas for each and a copy to CRA and COB
The Bill was read a First Time in the Senate on Tuesday, March 7, 2023, and thereafter stood committed to the Standing Committee on Finance and Budget. The Committee invited key stakeholders to submit their views on the Bill, in line with Article 118 of the Constitution (Public access and participation).
More About the Equalization Fund
The Equalisation Fund was established under Article 204 (1) of the Constitution of Kenya 2010 (CoK 2010) which requires that one half per cent (0.5%) of all the revenue collected by the National Government each year, calculated on the basis of the most recent audited revenue received, as approved by the National Assembly, to be paid into the Fund.
Article 204 (2) of the CoK 2010 provides that the national government shall use the Equalisation Fund only to provide basic services including water, roads, health facilities and electricity to marginalized areas to the extent necessary to bring the quality of those services in those areas to the level generally enjoyed by the rest of the nation, so far as possible.
The resources from the Equalization Fund are meant to improve eservices in marginalized areas in health, electricity, water and roads in line with Article 204 (2) of the Constitution.
“The national government shall use the Equalisation Fund only to provide basic services including water, roads, health facilities and electricity to marginalized areas to the extent necessary to bring the quality of those services in those areas to the level generally enjoyed by the rest of the nation, so far as possible.”
A Technical Training Institute built with monies from the Equalisation Fund
The monies in the Fund can only be used through an Appropriation Bill enacted by Parliament. If unspent in a particular year as appropriated in the Bill, the monies shall remain in that Fund for use in accordance with clauses (2) and (3) during any subsequent financial year.
Appropriation into the Equalisation Fund to date
In the first three Financial Years after the establishment of the Fund- 2011/12, 2012/13 and 2013/14, the Equalisation Fund had no allocation and in addition, the First Policy identifying the marginalized areas had not been developed by the Commission on Revenue Allocation (CRA) by then.
The total entitlement to the Fund since inception is KSh 54,035,184,050 see Table 1. The total allocation to the Fund (approved by Parliament) since inception is KSh26,293,791,644. Out of this, KSh.12,400,000,000 was appropriated through the Equalisation Fund Appropriation Act 2017 and subsequent re-appropriation in the Equalisation Fund Appropriation Act 2018. The KSh.12,400,000,000 was administered directly through Guidelines published through Gazette Notice No 1711 dated March 13, 2015.
Equalisation Fund Entitlement and Allocation since Inception