Financial crisis looms in counties as Bills delayed

Kenya: Governors warn that salaries of county government workers will be late this month because the devolved units are in a financial crisis.

The salaries are the immediate casualty of delays by Parliament to pass two crucial Bills to allow the 47 county units access Sh226 billion allocated them by Parliament for this financial year (2014/2015).

County staff who are usually paid their salary by the 25th day of every month won‘t have cash in their bank accounts today because the Division of Revenue Bill and County Allocation of Revenue Bill are yet to be enacted by the National Assembly.

The Senate is also yet to pass the County Allocation of Revenue Act (CARA), which sets out conditional allocation and equitable sharing of revenue among 47 county governments.

Further, the Act governs the transfer of allocations, from the Consolidated Fund to the respective County Revenue Funds. The Controller of Budget cannot disburse funds to counties unless the Bill is passed.

While every county gets fixed amounts, CARA is supposed to guide further allocations depending on the individual county's population, poverty index and land area.

"We do not have any cent in our bank accounts. We normally pay salaries by 25th of every month but we will not be paying today (yesterday)," Isaac Ruto, the chairman of the Council of Governors who is also Governor of Bomet County, told the media in Nairobi yesterday.

The earliest employees would get money if Parliament fast tracks the passage of the two bills is Friday next week.

The cash crunch will also hurt contractors and other services providers to county governments. "There will be no money to pay contractors, meaning that county governments may fail to get some services from their suppliers if they can't make any internal arrangements to avoid plunging into a major crisis," added Makueni governor Kivutha Kibwana.

Yesterday, the National Assembly rushed to endorse a report by a mediation team appointed to end its stalemate with the Senate over the Division of Revenue Bill, which determines the share of national revenue between the national and county governments.

There was a major scare after the House initially shot down the Bill by acclamation yesterday with barely 50 MPs in the debating chamber. There was panic inside the near-empty chambers and it took swift action by a section of MPs led by CORD's Minority Chief Whip Jakoyo Midiwo and House Majority Leader Aden Duale to rescue the situation by lobbying members.

Nairobi MP Rachel Shebesh, who was the Speaker's chair at the time had declared that the "nays" had carried the day in the first vote by acclamation.

It was only after the Division Bell was rung that members trooped back to the House for the crucial vote, a move that also saw Deputy Speaker Joyce Laboso take the chair and lead the House through the crucial electronic voting.

Upon prompting by Midiwo, Laboso reminded MPs of the implication of the vote, telling them that a rejection would deny counties funds. Finally 71 out of the 86 members in the House voted to pass the proposed law. Only three opposed.


"Members must understand the consequences of losing this Bill. They must understand what it means to have this report rejected, especially for purposes of protecting devolution," said Midiwo.

It is expected that the Bill will be presented to the President for assent at the weekend.

Yesterday, governors warned of an impending shutdown of services from today if the Senate and National Assembly do not urgently pass the Division of Revenue Bill, which allocated county governments Sh226 billion. This is Sh36 million more than last year's allocation. Both Houses must pass the Bill before the Controller of Budget releases funds to 47 devolved units.

County assemblies have been warned by the Budget Controller that unless they revised their spending in accordance with a Commission on Revenue Allocation directive, funds would not be released to them. The governors also warned that service delivery at the Level 5 hospitals may be hit hard after Parliament cut down allocation to Sh1.87 billion, down from last year's Sh3.4 billion.