Review LATF use for the exceptions

Following resumption of the publication of financial reports by local authorities, the Local Government Ministry has done well to ensure the annual disclosures are meaningful to lay readers.

This, and the encouragement of greater public participation in Local Authority Service Delivery Action Plans, are among the most useful developments in ongoing reforms. For a larger-scale picture, however, the introduction of templates for financial reporting last year, through Gazette Notice No 6218, and publication of detailed financial profiles in the annual report of the Local Authorities Transfer Fund stand out as key steps forward.

Released yesterday, the 2007/8 annual report highlights two key problem areas — debt resolution and project implementation. As Mr Sammy Kirui, Permanent Secretary in the Local Government Ministry points out, increased responsibilities are not possible if these issues remain unresolved.

The question of legacy debt is particularly vexing, especially for the Nairobi City Council, which carries more than half the Sh13.6 billion total debt outstanding. A deadline of June 2010 for councils to pay off all their debt or lose LATF funding is likely to be problematic for Nairobi, which is running a Sh2 billion budget deficit this year. Losing its LATF allocation would practically double the size of the hole in its budget. Its debt burden rose 17 per cent last year, and with its revenue collection efficiency (against budget) at 94 per cent, the cut would inevitably lead to haemorrhaging.

Legacy Debt

As we have urged before, NCC legacy debt, owed to statutory bodies like NSSF and NHIF, and workers co-operatives, requires an alternative approach as no fiscal magic will enable the council to keep pace with their growth.

On the use of LATF and other revenues in projects, we wish to recall the worrying observation on devolved funds in a terminal review of the Economic Recovery Strategy 2003-8. While criticisms of failure to perform as expected and suggestions some restructuring was necessary may primarily have been targetted at the Constituency Development Fund (CDF), the reservations should inform the LATF Advisory Committee’s deliberations on the direction of future reforms.

LATF, which the team recognises as "the main devolved funding mechanism", has a significant role in the Vision 2030 strategy that succeeded the ERS. Its success in resolving the issues noted in the terminal review will not only improve the functioning of local authorities but could also inform changes to CDF and other devolved funds ahead of plans for greater decentralisation.

A key criticism of LATF and CDF has been a tendency to plan for too many small but underfunded projects. The result is low levels of implementation and many stalled projects. This is often a politically inspired failing as MPs and councillors try to accommodate their electorates.

Kirui’s assurance instruments to address this problem and reward better project planning and implementation are in the works hold great promise for the success of devolved funds. Lessons must be shared.

An impact study and a strategic plan developed last year have also identified unresolved issues with respect to not just the fund, but also local authorities. Recent steps to merge or kill off unviable councils — reducing them from 175 to 102 and cutting staff numbers by half — are a necessary, if painful, beginning.

Political Meddling

Whether the Government can rally Parliament behind the plan, however, reducing an opportunity for patronage, remains to be seen. Deputy PM and Local Government Minister Musalia Mudavadi will have his work cut out for him when the matter comes before Cabinet and later MPs.

Reforms in Local Government have the potential to transform the country, but only if they are insulated from the petty politics that characterises local authorities. We recently decried two instances of violent and uncalled for attempts by councillors to influence spending improperly. If such incidents recur, it may be prudent to acknowledge and preempt them in our reforms.