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Coast counties on losing side as revenue allocation team revises formula

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Counties will no longer be allocated a share of the revenue collected nationally based on the population quotas.

In sweeping proposals, the Commission on Revenue Allocation recommends that the devolved units be allocated funds depending on how they utilise each coin from the public coffers to deliver services to citizens.

This means counties with a higher service delivery index will henceforth draw more resources from the exchequer, as the government tightens the noose on wastage in the counties.

In the far-reaching recommendations by CRA, service delivery in counties will account for 69 per cent of how much each county will be allocated – not population size.

The development component takes 26 per cent while revenue and efficiency component takes five per cent.

The proposals, according to CRA, are aimed at scaling up service provision at the grassroots where devolved units have been accused of blowing up billions on wages and non-essential activities.

Counties that will pump more resources into development projects will have their revenue increased in subsequent years.

While the last two formulas were used for three years each, the new formula is expected to be in effect for the next five financial years starting from 2019/2020.

Read: Cash crunch hits counties as funds delay

“The third formula parameters are enhancing service delivery, promoting balanced development, incentivise capacity to raise revenue allocation and incentivising prudent use of public resources,” the CRA said while releasing the details yesterday.

The proposed formula is a departure from the previous two formulas which heavily relied on population size to allocate funds to county governments.

Parameters in the first and second formula included population( 45 per cent) , basic equal share(25), poverty (20), land area (8), fiscal responsibility (2) and development factor (1). They were approved in 2012 and 2016.

At least 45 per cent of the equitable share was distributed based on population in the first and second formulas. The parameter determined the biggest share.

Early this month , Bungoma governor Wycliffe Wangamati petitioned the National Treasury to prioritise population density in the sharing of revenue among the 47 counties.

According to the 2009 population census, Nairobi has the highest population at 3.14 million, followed by Kakamega.

Lamu has the least population of 101,539 people. Samburu and Isiolo are also among the bottom five with 223,947 and 143,294 people respectively.

County governments will receive more money in the next financial year if a proposal on revenue sharing by the CRA is adopted by Parliament.

“CRA recommends the equitable share to county governments for the year 2019/2020 be increased from Sh314 billion to Sh335 billion ,” chairperson Jane Kiringai said yesterday.

The proposal, released yesterday for public participation, also recommends an increase in the per capita equitable share allocation from Sh8,133 to Sh8,694.

CRA is constitutionally mandated to make recommendations on the basis of equitable sharing of revenue between the two levels of government and among the 47 county governments

Speaking to the Star yesterday during a media briefing on the third revenue allocation formula, Kiringai said the additional funds are meant to enhance service delivery.

In a raft of sweeping cost-cutting measures introduced by President Uhuru Kenyatta to bridge the budget deficit, the allocation to counties in the current fiscal year was slashed by Sh9.4 billion.

In the supplementary budget approved by MPs in September, the devolved units’ allocations were reduced from the initial Sh314 billion to Sh304. 6 billion.

Read: Bill to hasten funds rollout for counties

This means each county lost on an average between Sh100 and Sh200 million for the financial year ending June 2019.

Controller of Budget Agnes Odhiambo has condemned counties for blowing up billions of shillings on non-essential activities.

In her budget implementation review report, Odhiambo delivered a stinging analysis on the counties pilfering public funds in local and foreign trips that have no economic impact on the citizens.

Over half of the countries revenue goes to recurrent expenditure, leaving a paltry amount for development.

According to CRA, the proposed Sh335 billion allocation to counties translates to 16 per cent of the total national budget.

The Constitution requires that at least 15 per cent of the total national revenue be allocated to the 47 counties annually to fund devolution.

The commission as well slashed the development vote by Sh52 billion to Sh623 billion.

This is in defiance of the Public Finance Management Act, 2012 that requires a minimum 30 per cent of the national budget to be allocated to development.

Despite a call to increase the funds, county governments collecting less revenue than others are likely to miss out on incentives given by CRA that propose an extra Sh20 for every Sh100 collected.

The commission is also proposing the creation of a county financial management index that will have a number of indicators showing how each county is utilising the devolved funds.

The index will consist of five to 10 indicators including evidence that the county budget has been prepared in a participatory manner, adopted in time and made available online.

Other indicators are evidence that necessary budget institutions are in place plus an audit outcome of the previous financial year.

Based on the performance of the index, counties will receive at least three per cent of the equitable share based on prudence in management of public resources.

“The better you use your resources, the more you get. Three per cent will be given on how well a county has spent their money and two per cent on how much they are collecting,” Kiringai said.

She added that each county would reap the same reward for engaging in sound financial management practices regardless of budget size or population.

In the new proposals, Nairobi will receive the lion’s share of the Sh335.67 billion proposed for the counties.

CRA has set aside Sh17.44 billion for the capital city, which is up from Sh15.79 billion disbursed in the last financial year.

Lamu, Tharaka Nithi and Elgeyo Marakwet counties have been allocated the lowest share of Sh2.46 billion, Sh3.76 billion and Sh4.12 billion respectively.

Nakuru has displaced Kilifi in the second position, having been awarded Sh11.7 billion up from Sh9.45 billion.

Turkana, which was the second highest recipient in 2017/2018, is now the third largest beneficiary. CRA has allocated it Sh11.69 billion.

Kakamega takes the fourth position and has been given Sh11.3 billion.

On per capita equitable share allocation, Lamu is the top county with each resident receiving at least Sh34,972. It is followed by Isiolo at Sh27,445 and Marsabit where each resident receives Sh24,069.

Other counties in the top 10 category are Tana River, Samburu, Taita, Wajir, Turkana and Garissa.

Nairobi residents receive Sh5,032 as per capita equitable share allocation followed by Kiambu at Sh5,772.

Other counties in the bottom list are Meru, Kakamega, Bungoma, Uasin Gishu, Muranga, Kisii, and Trans Nzoia.

In addition, all counties will receive 15 per cent of the equitable share for health services and 10 per cent for agriculture.

With an equitable share of Sh335 billion, every Kenyan without health insurance is assigned an equivalent of Sh1,035, every outpatient visit Sh123 and the inpatient days equivalent is Sh540.

More: Kingi opposes sharing of Asal funds by 34 counties

The 10 per cent for agriculture means every rural household is assigned an equivalent of Sh5,200.

Other allocations are three per cent for water, three per cent for urban services, 20 per cent for public administration and 18 per cent for all other services.

The 18 per cent on all other services is awarded based on population.

However, Kiringai noted that once the results from the 2019 census have been tabulated, population-based indicators will be updated accordingly.

The three per cent allocation to water means that every household without access to clean water is assigned Sh3,017 while the percentage allocation for urban services means each urban resident will receive Sh826.

With the devolution of early childhood education and technical vocational training, the commission under the new formula has allocated each Kenyan Sh1,464.

Every Kenyan has also been awarded Sh1,562 for all other services.

To administer services at the county level, the county public administration has been allocated 20 per cent of the proposed equitable share.

This means that every county is allocated Sh1.4 billion for public administration defined as an allocation that equals 1/47th of the total funds to be distributed.

Even as the commission is proposing an increase in the funds to county governments, the National Taxpayers Association is calling on the National Treasury to stop funds transfer to counties found to have embezzled money.

Speaking to the Star, NTA national coordinator Irene Otieno said continuous mismanagement of funds by county governments and other entities is a threat to devolution.

The association wants Treasury to stop the transfer for at least 60 days until they put their books in order.

This, it argues, is in line with the provision of Chapter 12 of the Constitution.

“While we understand that this step is a dangerous one, taxpayers continue to suffer despite continuous allocation of funds to the county governments. We need to stop giving short term solutions to long term problems,” Otieno said.

She said taxpayers only benefit from 20 per cent of public money while 80 per cent goes to waste.

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