Three Salient Issues that must be Addressed for Successful Execution of Devolved Functions
Kenya’s devolution is currently in the 9th financial year of implementation (2013/14-2021/22).
This devolved system came into being under the 2010 constitution, where the country went
from a highly centralized system to a devolved structure where political, administrative, and
fiscal powers were shifted to 47 County Governments. This move has been defined as a key
democratic milestone as the goal of devolution is to bring service delivery closer to citizens,
generating high hopes. The world bank in its report, ‘Devolution without disruption: pathways
to a successful new Kenya’, acknowledges that Kenya’s devolution is ambitious, even by
international standards. The ambitious plan of devolution in Kenya means that the risks
associated with devolution are equally huge. Since its inception, devolution has made great
milestones, with its own share of challenges.
Delays in intergovernmental transfers
Under Kenya’s devolved structure the national budget and county budgets are inextricably
linked. This linkage fundamentally arises because revenue is raised nationally and shared
between the two levels of government through the annual division of revenue process.
Revenue is raised nationally given the national government’s ability to raise revenue from
broad-based taxes that far exceed those of counties. Intergovernmental transfers between the
national government and county governments are composed of conditional and unconditional
transfers. The equitable share, which is the county government’s largest source of revenue, is
an unconditional transfer. The objective is to ensure counties’ have autonomy to implement
their budgets as they see appropriate. The Constitution of Kenya, Article 203(2) states that for
every financial year, the equitable share of the revenue transferred to county governments
shall not be less than 15% of all revenue collected by the national government based on the
most recent audited accounts of revenue.
Article 202(2) of the Constitution further mandates that counties may receive additional
allocations from the national governments’ equitable share revenue in the form of either
conditional or unconditional grants. Conditional grants are allocations to counties meant to
ensure provision of certain objectives which are of priority to the national governments. Unlike
the county equitable share, conditional grants are tied to implement specific national policies
and cannot be diverted to other budget purposes. Counties also receive funds from
development partners and are usually negotiated by the national government.
On paper, the intergovernmental transfers shoud follow a disbursement schedule that
uniformly spreads the releases throughout the financial year. However, in practice this is hardly
the case and the process is characterised by persistent delays since the inception of devolution.
This pattern has a number of consequences. The first quarter of the financial year is the most
affected, with counties receiving as low as 14% against the ideal target of 25%. Even in
Electronic copy available at: [Link]
instances where the counties are compensated in the subsequent quarters, budget execution
does not proceed effectively as counties have less time before the end of the financial year. As
a result, they are unable to absorb and spend the entire amount of funds released. This is aside
the difficulty the counties face when they have to revise their budgets in order to spend the
balance from the previous financial year, leading to further delays.
Delays in approval of division of revenue bills
The division of revenue bill provides for division of revenue between the national government
and county governments while county allocation revenue bill states the amount of revenue
each county is allocated. The Constitution requires that when any bill concerning county
government has been passed by one house of the parliament, the Speaker of that House shall
refer it to the Speaker of the other house. If both the National Assembly and the Senate pass
the bill in the same form, the speaker of the house in which the bill originated shall within
seven days refer the bill to the president for assent (Government of Kenya 2010). By the 16th
of March of each financial year, the Parliament (National Assembly and the Senate) ought to
have approved these bills for the timely disbursement of funds. Unfortunately, there are
instances where the two bills are not approved on time due to differences between the
National Assembly and the Senate around the size of the division of revenue between the two
levels.
In financial year 2019/20, the county revenue allocation bill was approved on the 6th October,
three months into the financial year. As per the law, this bill is critical for the counties to finalize
their budgets and the inability to approve the bill on time consequently delays the whole
budget process. This could partly explain the trend in delays in disbursement of funds in the
first quarter of the new financial year.
Manual processes
With the approval of county revenue allocation bill, funds for the County Governments are
unlocked which allows counties to access those funds. However, the county treasury
undertakes several steps to request for the funds. When Counties, through the county
treasury, put in a request for the funds, the office of the controller of budget scrutinizes the
documents they have presented to ensure all the expenditures outlined in the budget are
lawful before approval. The documents that counties present are quite demanding, especially
at the beginning of the financial year where counties have to submit up to 14 documents,
including the approved budgets by the County Assemblies. The documents are physically
submitted to the office of the controller of budget in Nairobi, accompanied by 2-3 signatories.
Physical submission of documents in Nairobi is tedious, costly, and time-consuming for all
counties, especially those located far away from the capital city, often leading to delays in the
process. Despite the complexities in the process, county officials have managed to prepare and
Electronic copy available at: [Link]
submit these documents in most instances. Over the past 7 financial years, there have been
only 11 instances out of a total of 282 possibilities where a county had not approved budget
on time. Automation of the process in place of physical presence and reduction of
documentary requirements are much needed reforms.
Delays in disbursement of funds are known to reduce effectiveness of resource distribution
and budget execution. The National Assembly and the Senate should ensure that the revenue
bills are approved on time and ensure parity principle in approving these bills to ensure equal
spending between the two levels of the government. Equally, reforms towards digitalization
and decentralization of the revenue requisition process should be initiated to reduce costs and
delays.
By Darmi Jattani and Oscar Ochieng
Electronic copy available at: [Link]