Why counties have no use for development cash
Published Tue, May 22nd 2018 at 08:25, Updated May 22nd 2018 at 08:31 GMT +3
?Lack of a budget calendar, coordination and planning are some of the major teething problems still facing counties in Kenya, rendering devolution to another circus.
And as the curtains fall on the 2017-2018 budget next month to usher in another ambitious Sh2.53 trillion budget, challenges of misuse and under-absorption of funds refuse to fade away.
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Both national and county governments have been slow in putting into use the money that had been budgeted for at the beginning of July last year.
Six months after the current financial year started, Bungoma and Elgeyo Marakwet counties had even failed to budget for Sh775.4 million and Sh658.1 million respectively, which represents the amount of money they failed to spend in the previous financial year.
Analysis of bank statements from Murang’a County by the Controller of Budget Agnes Odhiambo noted that the devolved unit continued to spend Sh176.09 million after the government spending cut-off date of June 30, 2017.
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This is against Public Finance Management Act (PFM Act.)
The county government’s budget implementation review report for the first six months of the current financial year points to a sorry state of devolved units spending billions of shillings on salaries and allowances while in extreme cases failing to plan for or spend anything on development.
Within six months between July and December last year, Embu, Garissa, Kirinyaga, Kisumu, Meru, Nakuru, Nandi, and West Pokot counties did not report any expenditure on development.
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Others are Nyandarua, Nyeri, Siaya, Taita-Taveta, Tharaka-Nithi, and Vihiga.
This means that the locals may not have gotten value for money out of the billions of shillings that the national Government had planned at the beginning of July last year.
The delays come even as National Treasury Cabinet Secretary Henry Rotich prepares to present other estimates next month.
Yet, some of the counties on this list absorbed their total recurrent expenditure by at least 26 per cent.
Kirinyaga County had absorbed 44.8 per cent of its full-year recurrent budget even as it spent nothing on development.
In many counties, the Controller of Budget flagged challenges such as delay in disbursement of the equitable share of revenue raised nationally by the National Treasury, meaning that development timelines may not be adhered to.
Of the Sh399.73 billion aggregate budget estimates for the 47 county governments in the 2017-2018 financial year, Sh258.1 billion or 64.6 per cent, had been allocated for recurrent expenditure while about a third (Sh141.63 billion or 35.4 per cent) was planned for development.
Even though this allocation is skewed to recurrent expenditure, it conforms to the Public Finance Management (PFM) Act, 2012, which requires that at least 30 per cent of the budget be allocated for development programmes.
However, budget execution for six months has only served to give development a wide berth.
In six months to December 2017, Sh127.03 billion was available to counties.
During the reporting period, the Controller of Budget authorised the withdrawal of Sh109.55 billion from the County Revenue Funds (CRF), being 27.4 per cent of the total county budget for the year.
However, in the end, Sh93 billion or 89.2 per cent of the total funds released for operations went to recurrent activities such as paying salaries, leaving only Sh11.36 billion or 10.8 per cent for development activities.
This means that for every Sh892,000 that was spent on recurrent activities, just Sh108,000 went to development.
Overall, while recurrent expenditure represented 36 per cent of the annual recurrent budget, development expenditure translated to an absorption rate of eight per cent.
This is a decrease from 21.5 per cent recorded in a similar period in the previous financial year when development expenditure was Sh35.73 billion.
Treasury reported an absorption rate of eight per cent at the half-year in July last year out of the Sh141.63 billion, sending rays of hope that more money had been given to counties.
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This means that achievement of ambitious projects is in question.
At Sh93 billion, the recurrent expenditure represents 36 per cent of the annual county governments’ budget for recurrent activities and a decline from 40.1 per cent recorded in a similar period in 2016-17 when expenditure stood at Sh92.64 billion.
This decline was contributed to by a drop in the expenditure on maintenance.
A total of Sh26.52 billion was incurred on operations and maintenance during the reporting period, being 25.1 per cent of the total expenditure.
This points to low attention to the status of existing development projects.
Review of personnel emoluments shows that county governments incurred Sh66.48 billion which represents 71.9 per cent of the total recurrent expenditure on staff salaries.
Nairobi City County reported the highest expenditure on personnel emoluments at Sh6.63 billion, followed by Kakamega and Kiambu counties at Sh2.69 billion and Sh2.46 billion in that order.
At least 11 counties – Embu, Bomet, Busia, Isiolo, Kilifi, Laikipia, Machakos, Nyeri, Siaya, Turkana and West Pokot – operated for six months without internal audit committees to oversee financial operations.
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This is against the PFM Act and it subjects devolved units to loopholes of poor planning and low levels of transparency.
The report also notes that eight counties operated without establishing the County Budget and Economic Forum (CBEF) in line with PFM Act, 2012.
The absence of this forum means that such counties could not hold consultative meetings to prepare county plans, county fiscal strategy paper and the budget review and outlook paper to help plan for the resources better.
During the same period, the Nairobi County Government did not reveal to the office of Controller of Budget the projects on which it spent Sh506.89 million developmentmoney.
“The total development expenditure of Sh506.89 million represents 4.3 per cent of the annual development budget of Sh11.79 billion.
The County did not provide a schedule of the projects implemented during the period,” said Ms Odhiambo.
Counties that recorded the highest overall absorption rates were Narok, Bomet and Kilifi at 36.4 per cent, 36 per cent and 34.2 per cent respectively.
Conversely, Uasin Gishu, Siaya and Tana River recorded the lowest absorption rates at 15.4 per cent, 17.7 per cent and 17.9 per cent respectively.
“Kilifi County recorded the highest expenditure on development activities in absolute terms at Sh1.65 billion.
It is followed by Kiambu County and Kakamega County at Sh856.28 million and Sh844.69 million respectively,” says the report.