Erratic cash releases from the Treasury, low revenue collection, massive wastage and wanton graft have condemned county governments to perpetual penury.
Since the inception of devolution in 2013, the counties have bemoaned a cash crunch and governors frequently threaten to shut down services.
Often, the county chiefs have blamed the National Treasury for the late exchequer releases – frequently piling up for months – triggering service disruptions in the counties.
Last week, the Council of Governors threatened to halt crucial services including health care, due to a prolonged delay by the Treasury to release funds.
The counties had not received funds for a record three months, causing stalled services in nearly all the 47 county governments.
“We demand the National Treasury immediately releases the funds owed to counties, failing which, county governments will have no choice but to shut down operations completely,” CoG chairman Ahmed Abdullahi said.
Section 17 of the Public Finance Management (PFM) Act, 2012, obligates the Treasury to release an equitable share of revenues to counties by the 15th of every month.
That’s never the case.
In the last financial year, for instance, the Treasury failed to release Sh30 billion to counties in what the Treasury attributed to cash flow challenges.
In 2022-23, the counties received more than Sh60 billion at the tail end of the fiscal year – too late to absorb the entire amount.
Some monies for FY 2021-22, about Sh30 billion, were not disbursed until August of the same year, two months into the new fiscal year.
In the financial year 2020-21, the Treasury had only released Sh123 billion of the total allocation of Sh316.5 billion.
The amount included arrears of Sh29.7 billion for the previous financial year ( 2019-20 ), meaning counties struggled with delays and inadequate services.
By end of 2021, the counties were yet to get Sh26.9 billion, against legal provisions requiring county cash to be disbursed without undue delay or deduction.
The previous years were no different as Treasury released money too late in the spending year –sometimes on the last day.
While the Treasury cites cash flow problems and competing obligations for the funds, critics say the exchequer is biased against counties.
Governors have argued the Treasury favours the national government over counties in releasing cash.
Legally, county governments have at least five sources of income. They include their annual equitable share, that is, the money Parliament shares vertically between the national and county governments.
Other sources of income include own-source revenue collection, loans, grants and investments.
However, despite the constitution empowering the counties to generate their own revenue, they still are overly reliant on the equitable share for nearly all operations, including salary payments.
“Many counties rely on nothing except exchequer release for operations. Urban counties may be blessed but the many rural counties have nowhere to generate revenue,” Mombasa Governor Abdulswamad Nassir said.
Despite being the counties’ only hope, the Treasury has ignored the provision, as well as the cash disbursement schedule approved by the Senate every year to guide the monthly disbursements.
The erratic disbursements sometimes mean the counties end a financial year without receiving full releases.
These delays undermine county operations.
“Devolution is under immense threat, being starved of resources, thus crippling counties’ ability to offer essential services to the Kenyans and to spur economic growth,” CoG chairman Abdullahi said.
The Commission on Revenue Allocation recently called for the transformation of the National Treasury into an independent institution to end “unfairness” that has left counties perpetually broke.
The commission said the Treasury, currently under the national government, has demonstrated bias against counties in cash disbursements.
“The Treasury should be reestablished as a shared institution of the national and county governments. We should create it as an independent office,” CRA’s economic director Lineth Oyugi had said.
CRA is an independent commission set up under Article 215 of the constitution.
Its principal function 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. Governors and senators have proposed the establishment of a devolution fund to cushion counties from perennial delays in releasing funds.
Article 203 of the constitution stipulates that in every financial year, the county governments shall get at least 15 per cent of all revenue collected by the national government.
The law states that the amount shall be calculated based on the most recent audited accounts.
Data from the CRA and Controller of Budget Margaret Nyakang’o’s office reveal the counties have received Sh3.72 trillion in equitable share and Sh170.8 billion in conditional grants from the national government since devolution inception.
The counties have also received Sh225.9 billion in loans and grants from development partners.
“The equitable share allocation to the county governments from the fi - nancial year 2013-14 to 2023-24 contributes on average 80.7 per cent to total county revenue,” the CRA reports.
In equitable share, the counties received Sh107 billion in 2012-13, Sh190 billion in 2013-14, Sh227 billion in 2014-15, Sh260 billion in 2015-16, Sh280 billion in 2016-17, and Sh302 billion in 2017-18.
In 2018-19, they received Sh314 billion and Sh317 billion in 2019- 20 and 2020-21, respectively, and Sh370 billion in both 2021-22 and 2022-23.
In the current fi nancial year, they were allocated Sh387 billion in equitable shares.
Continued underperformance of counties’ own revenue collection, has also hurt undermined diminished their finances.
Over the years, counties have failed to attain their own revenue targets, triggering big holes in their annual budgets.
“In all financial years, revenue collection has remained below target. On average, counties realised 63.5 per cent of their target,” CRA chairperson Mary Wanyonyi reported.
Counties generate their revenue mainly from land rates, single business permits, parking fees, building permits and fees from billboards and advertisements.
In addition, expenditure and audit reports by the Controller of Budget and Auditor General have revealed wastage and luxury spending, notably on travel and hospitality.
The counties have also been on the spot for harbouring corrupt officials who bleed county resources.
Several governors and county officials have been arraigned in court
for graft.
