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Noise over allocation of county funds is needless

By Faith Lukosi | August 6th 2020 at 00:00:00 GMT +0300

Given the raging debate on county revenue sharing formula, it is curious no one is talking about how effectively the development budget has been utilised. 

The missing voice in the debate is the absorption rate, which basically refers to the share of actual expenditure out of the budgeted expenditure (the target).

A share is a vital tool in determining efficiency and general performance of the counties as regards utilisation of the intended funds. 

For obvious reasons, a higher absorption rate is preferred since it means counties are close to their target.

It is ironical that since the advent of devolution, reports from the Controller of Budget still indicate a low absorption rate of development funds in the counties, which means a lot of funds end up being returned to the national coffers. 

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Few counties are utilising their development budgets beyond the 80 per cent mark, raising grave concerns over how serious counties are in terms of policy formulation in their Annual Development Plans.

The blatant misallocation of county funds and delays in procurement process on budget absorption in county governments, is indeed the elephant in the room. This is where we have to channel our energies.

We need to remind ourselves that before devolution, the national government hardly allocated over Sh200 billion to the functions that were devolved.

For instance, in the last pre-devolution financial year of 2012/2013, the government allocated Sh171 billion to the devolved services.

Poor roads

Counties are now receiving in excess of Sh300 billion as equitable share, yet, seven years down the line, we are still complaining of the same problems in access to health, poor roads, dwindling fortunes in agriculture and inadequate water supply.

Counties have expressed a lot of inadequacies and incapability to hit high performance levels in the absorption rate and this has been brought about by a number of issues.

Nairobi, for instance, registered its highest absorption rate of 78 percent in the 2018/19 fiscal year despite being the county that receives the biggest chunk. Incidentally, this is the same average performance rate for all counties. 

It is disappointing that the absorption rate of both the local and foreign funds borrowed from bilateral and multilateral lenders such as the World Bank stands at an average 30 per cent a year.

Most counties have struggled to complete World Bank sponsored projects, with some stretching as far back as 2013.

Visibly, there is an urgent need to audit the structures and processes pertaining to the utilisation of these funds as the country cannot achieve its Vision 2030 goals with such a low absorption of development funds.

Approved budget

Some of the credibility measures for high performance rate include the formal revisions or supplementary budgets within the year. A credible budget should not require too many changes, or even a single change of substantial magnitude.

It is worth noting that Kenya’s public finance law sets a ceiling on the size of the budget that can be changed through supplementary budgets.

A county cannot change more than 10 percent of its total approved budget within the year. Across the four years, approved budget allocations do change substantially within the year. 

The Controller of Budget has also previously revealed that most counties change their approved budget in excess of the 10 per cent limit.

For example, in 2014/15, some 16 counties made changes to their approved allocations that were above 10 percent. The number dropped to seven counties in 2015/16 but rose to nine and 12 counties in 2016/17 and 2017/18 respectively.

This could be an indication of challenges in planning and budgeting. We should also be more realistic with the revenue projections being set by counties because this will eventually have a bigger say on the absorption rate. 

We are all aware that in the Kenyan perspective, ambitious local revenue projections are used to exaggerate the development budget, and when changes are made during implementation to make budgets more realistic, cuts are concentrated on the development side of the budget. This should stop.

Ms Lukosi is a city lawyer and the Nairobi Youth Senator under the Youth Senate of Kenya

County revenue allocation CRA Senate Revenue sharing formula
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