The Commission on Revenue Allocation wants the National Treasury transformed into an independent institution to end ‘unfairness’ that has left counties perpetually broke.
CRA said the Treasury, as currently established as an entity under the national government, has demonstrated bias against counties in cash disbursements.
“The Treasury should be re-established as a shared institution of the national and county governments. We [should] create it as an independent office,” CRA’s economic director Lineth Oyugi said.
The National Treasury, she argued, should be made an independent office similar to office of Auditor General and Controller of Budget to "end bias" against the devolved units.
Oyugi made the radical proposal when she appeared before the Senate’s Finance and Budget Committee alongside CRA CEO James Katule, commissioners and directors.
The team was before the panel to explain the rationale behind the commission’s proposal to allocate counties Sh407 billion in the next financial year.
Oyugi argued that the Treasury, which has not disbursed funds to counties for three months, was using ‘financial constraints’ as an excuse to deny the devolved units funds.
As this happens, the national government is enjoying full disbursements with its employees getting salaries on time.
“Treasury is supposed to be the Treasury for both the national and county governments. But what is happening is that increasingly, the Treasury defends the national government,” Oyugi said.
“You know there is not a single employee of the national government and its institutions including MDAs who hasn’t been paid for three months.”
Oyugi, who spoke with blessing of her bosses, including the commissioners, said that if it was indeed true that the Treasury faces cash flow problems, the crunch should affect all the county and national government entities.
“So, if we are in a cash crunch, that the National Treasury wants us to believe in, then all of us for the last three months, we shouldn’t have been paid,” she said.
Treasury owes counties Sh96 billion. The funds are outstanding disbursements for January, February and March.
Appearing before the same committee on Wednesday, Treasury CS Njuguna Ndung'u said the government faces acute cash flow challenges that affected several programmes including disbursement to counties.
“We are caught up between two extremes; high level of debt financing and financing constraints due to limited access to finance in domestic and international financial market,” she said.
The Mandera Senator Ali Roba-led committee is conducting public participation on the Division of Revenue Bill, 2023.
The Bill splits between the national and county governments revenues raised nationally.
Yesterday, the commission rejected proposal by the Treasury to give counties Sh385 billion as equitable share in 2023-24 FY and stuck to its proposal of Sh407 billion.
“Though the allocation to the county governments of Sh385.4 billion meets the requirements of Article 203(2), of allocating at least 15 per cent of the most recent audited accounts as approved by the National Assembly, the commission submits that the allocations do not amount to equitable sharing of revenue between the national and county governments,” CRA said.
The commission reiterated that with the projected revenue growth of Sh55 billion in the next fiscal year, the county government’s allocation be increased from Sh370 billion to Sh407 billion.
CRA argued that some of the government priorities including agriculture productivity, MSME enterprise economy, housing, health and digital expressway are either county functions or concurrent functions.
“It is therefore important to adequately finance both levels of government if these priorities are to be realised,” the commission stated.
Appearing separately before the committee, the Council of Governors, through its Finance committee chairman Fernandes Barasa (Kakamega), demanded an allocation of Sh425 billion.
“The council proposes an adjustment revenue growth of Sh55 billion to the baseline allocation of Sh370 billion, this being a 15 per cent increase from FY 2022-23 allocation translating to a total allocation of Sh425 billion as county equitable share for 2023-24,” Barasa said.