The new revenue-sharing formula proposed by the Commission on Revenue Allocation (CRA) is among key issues to be discussed by MCAs meeting Monday in Kisumu for the fourth Annual Legislative Forum.
Other top issues to be deliberated upon are generation of revenue and absorption of the development budget by county government
The CRA chairperson, Dr Jane Kiringai, is set to kick off the discussion with a presentation on the formula proposed by the commission, before the official opening session by President Kenyatta.
The proposed formula would see resources shared based on devolved functions, with a huge percentage going to health and agriculture.
According to CRA, this would ensure prudent management of resources, ensure prioritisation of projects and motivate counties to improve revenue collection as those that collect the most would be rewarded.
However, the proposal has attracted divergent opinion, with leaders from northern Kenya saying it is discriminatory and unfair and would negatively affect their counties if adopted.
The CRA is currently seeking public views on the formula before tabling it in Parliament for consideration.
On Monday, National Treasury and Planning Cabinet Secretary Henry Rotich will be among panellists discussing the implications of the new formula on the national budget.
Kirinyaga Governor Ann Waiguru is among leaders who welcomed the new formula saying it attempts to balance inequalities in resource distribution.
Ms Waiguru, speaking recently, said the matter requires informed discussions. “It is not perfect, but it does address issues that affect the Kenyan citizen from a service delivery context, the governor was quoted saying.
“The debate on county revenue allocation requires deliberation devoid of unnecessary sabre-rattling and demeaning characterisations,” she said.
But northern Kenya governors led by Mandera Governor Ali Roba, who chairs the Frontier Counties Development Council (FCDC), have rejected the revised formula saying marginalised areas risk losing Sh10 billion annually if adopted by the Senate. FCDC brings together Mandera, Wajir, Garissa, Tana River, Isiolo, Marsabit, Lamu, Turkana, Samburu and West Pokot counties.
CRA says the proposed changes were motivated by the need to strengthen the link between constitutional mandates of counties and the intergovernmental fiscal transfer system so that finances follow functions. The other objective is to closely match funding to expenditure need, according to CRA.
However, leaders from 23 Arid and Semi-Arid Lands (Asals) counties have opposed the new formula and threatened to move to court to challenge it.
They spoke under FCDC and the Pastoralists Parliamentary Group.
Revenue collection and generation will also feature prominently on the first day of the Summit with Controller of Budget Agnes Odhiambo further sharing her findings on budget management by counties, including the absorption of development expenditures and pending bills.
The latest report of the Controller of Budget reveals that most county governments are still struggling with a high wage bill.
In West Pokot for instance, the wage bill increased by 1.2 per cent from Sh902.55 million in the first half of the 2017/18 financial year to Sh913.38 million in the period under review.
The county’s total development expenditure was Sh202.4 million, representing 9.1 per cent of the annual development budget of Sh2.12 billion.
In the county government’s budget implementation review report for the first half of the 2018/2019 financial year released in February, the Controller of Budget revealed that count governments perform poorly on development expenditure as compared to recurrent expenditure, that is salaries.
In Siaya, the total development expenditure of Sh67.88 million for the period under review represented 2.6 per cent of the annual development budget of Sh2.57 billion, while in Vihiga County, the total development expenditure of Sh413.52 million represented 22.3 per cent of the annual development budget of Sh1.94 billion.
Uasin Gishu, however, recorded an improvement in the absorption of development budget by 179.1 per cent from Sh212.99 million in the first half of the 2017/18 to Sh594.55 million in the period under review.
The report cited high expenditure on personnel emoluments and underperformance of own source revenue collection which translated to 29.9 per cent of annual target as among challenges that hamper effective budget execution.
During the first half of FY 2018/19, the county governments spent a total of Sh136.98 billion, which represents absorption of 29.5 per cent, and an increase from the absorption rate of 25.9 per cent in the first half of FY 2017/18.
A total of Sh112.25 billion was spent on recurrent expenditure and Sh24.73 billion on development activities against the recurrent budget of Sh276.44 billion and development budget of Sh187.49 billion.
Development expenditure translated to an absorption rate of 13.2 per cent while recurrent expenditure was 40.6 per cent of the annual budget for recurrent expenditure.
Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015 sets a limit of the County Government’s expenditure on wages and benefits at 35 per cent of the County’s total revenue.
According to the Controller of Budget, on aggregate, county governments spent Sh80.02 billion on personnel emoluments, which accounted for 58.4 per cent of the total expenditure for the period and an increase from Sh66.48 billion incurred in a similar period in the 2017/18 financial year when the personnel expenditure translated to 64.1 per cent of the total expenditure.
“County Governments should ensure that expenditure on personnel emoluments is contained at sustainable levels and in compliance with Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015,” Mrs Odhiambo states.
The Controller of Budget’s report also noted under performance by county governments on own source revenue collection through property taxes and taxes, among others.
During the reporting period, county governments generated a total of Sh15.37 billion, which was 29.9 per cent of the annual target of Sh51.32 billion against an expected performance of 50 per cent.
“The underperformance of own source revenue collection implies that some planned activities may not be implemented in the financial year as budgets will not be fully financed. Counties should develop and implement strategies to mobilise own source revenue,” the Controller of Budget states in the report.
Wajir County for instance is flagged for underperformance in own source revenue collection, which declined by 5 per cent from Sh36.1 million in the first half of the 2017/18 financial year to Sh26.2 million in the reporting period.
The Summit will also discuss financial oversight in the Kenyan legislatures right from the Senate to the National Assembly to county assemblies in a session to be steered by Auditor General Edward Ouko who has put many counties on the spot over irregular expenditures.
Also featuring on the first day of the talks is the place of regional development authorities and regional economic blocks and their oversight in the devolved system of government.
Delegates will discuss challenges facing the regional bodies and examine legislations, budgetary allocation and oversight for the regional blocks and the role of MCAs in the formulation of supporting policy framework.
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