All 47 counties are said to be only collecting 16 percent of their own-source revenue potential, resulting in a strain on service delivery.
This has now resulted in the county governments cutting down on development expenditures with most of revenue going to payment of salaries and wages.
The Commission on Revenue Allocation (CRA) early this week, noted that since the beginning of devolution, counties have been doing poorly at collecting their own-source revenue.
CRA’s vice-chairperson Humphrey Wattanga revealed that the 47 devolved units have managed only Sh306 billion in internal revenue since 2013 compared to Sh3.6 trillion counties have received from the national government during the same period.
This has seen the county governments overly rely on funds from the national government coming from an equitable share of revenue.
“Counties are currently at only 16 percent of their potential in terms of collection. From the commencement of devolution to date, counties in totality have collected Sh306 billion as their own source revenue,” Wattanga said.
He highlighted that the situation has seen development services suffer in the county governments with no county able to allocate more than 30 percent of total expenditure on development as is required by the Public Finance Management Act.
Wattanga added that the mark has remained elusive for the majority of the counties, especially those that inherited huge staff complement at the onset of the devolution.
However, many of the counties have continued to make things worse by perpetuating a hiring spree with successive regimes and in the process failing to adhere to fiscal requirement of expenditure on wages not to go beyond 35 percent of total expenditure.
To reverse counties overdependence on funds from the national government, CRA has advised county governments to roll out integrated county revenue management systems, including digitising of land and property records.
This is in addition to updating valuation rolls which Wattanga said is critical in enabling counties optimise revenue collection and improve in revenue management.
He challenged incoming commissioners and the Council of Governors to take up the idea to improve county revenue collection and management.
“We simultaneously believe that if counties improved on and raised up their fiscal effort as pertains to improving their financial management and optimising their revenue potential, the adherence to progressive and constructive fiscal responsibility principles, however aggressive, can be attained,” Wattanga said.
He also noted that the Commission has also worked hard to advance the specification and push the establishment of a single integrated county revenue management system to support counties in optimisation of revenue collection and improvement in revenue management.
To nudge the counties towards financial prudence, the CRA partnered with the World Bank to roll out a County Creditworthiness initiative aimed at enhancing revenue collection and strengthening financial management.
Laikipia, Bungoma, Makueni, Kisumu, Mombasa and Nyandarua counties have since benefited from the initiative.
To this end, in June, Laikipia County received Cabinet and Parliamentary approval to issue a Sh1.16 billion infrastructure bond.