Wealth Creators

Counties Fail to Meet Fiscal Responsibilities for FY 2022/23 OCOB Reports

According to the County Government Budget Implementation Review Report released this month by the Office of Controller of Budget (OCOB) as mandated by Article 228(6) of the Constitution of Kenya, the counties have again failed to adhere to fiscal responsibility as enshrined in the PFM legislation.

The County Assemblies approved a combined budget of Ksh.515.18 billion for the counties for the financial year 2022/23, which was Ksh.20.57 billion less than of the financial year 2021/22.

The budget was to be financed by the National Government allocations as per the CARA of Ksh. 370 billion, additional allocation from the National government of Ksh. 5.36 billion while the development partners were to fund the budgets by Ksh. 17.16 billion.

The county set their combined own source revenue at Ksh.57.37 billion. Additionally, the counties had unspent money in 2021/22 of Ksh.42.02 billion which formed part of the 2022/23 as balance carried forward and thus available for use in 2022/23 FY.

The approved budget estimate of Ksh.515.18 billion had Ksh.160 billion as development component (31.2%) and Ksh.354.64 billion (68.8%) for recurrent expenditures.  

During the FY, only Ksh.466.01 billion was available for spending with the national treasury releasing 100% of the total equitable share as required by CARA 2022 of Ksh.370 billion while Ksh.42.03 billion was available for use.

The additional revenue from the national government and the development partners amounted to Ksh.16.17 billion which was 94.3% of the expected revenue receivable of Ksh.17.16 billion with the outstanding balance of 986 million having been factored in the current 2023/24 budget estimates.

During the reporting period, County Governments raised Ksh.37.81 billion from the own sources revenue, accounting for 65.9% performance on the annual target of Ksh.57.37 billion. This was a dismal improvement by 5.3% of previous year’s performance that stood at Ksh.35.91 billion.

Again, the county governments showing poor performance in own source revenue generation managing barely 18% of the total combined county potential as per the Commission on Revenue Allocation report on County Revenue Potential released last year.

During the period, a total of Ksh.430.48 billion formed the exchequer release. This was the amount authorized by the OCOB for withdrawal from the respective County Revenue Funds accounts to the County Operational Accounts for the 47 County Governments.

The Ksh.430.48 billion consisted of Ksh.336.12 billion (78.1 per cent) for various recurrent expenditures and only Ksh.94.36 billion (21.9 per cent) spent for development activities.

Of the Ksh.430.48 billion exchequer approved, the Counties spent a total of Ksh.428.90 billion, an absorption rate of 83.3 per cent of the total annual county government budgets.

The aggregate expenditure improved from an absorption rate of 74.8 percent achieved in the 2021/22 FY when the cumulative expenditure was Ksh.400.96 billion. West Pokot County had the highest absorption rate of 95.4% while Nakuru had the lease with 63.8%.

The county’s aggregate expenditures on development contradicts section 107(2) of the Public Finance Management Act that provides that ‘over the medium term, a minimum of 30% of the County Government’s budget shall be spent on development expenditure’.

Only seven counties conformed to the requirement with Marsabit spending highest on development with 35.4% while Baringo, Uasin Gishu, Mandera, Kwale, Kilifi, and West Pokot all attaining 30% on development activities. Kisii had only 5.7% of its expenditures spent on development, the report further states.

On economic classifications, counties incurred Ksh.195.09 billion (45.5%) on personnel emoluments and Ksh.135.83 billion (31.8%) on operations and maintenance.

Section 25 of the Public Finance Management (County Regulations) 2015, requires counties to spend no more than 35% of their revenue on personnel emoluments – again the counties flouting the law.

To improve the living standards of the citizens, the counties are advised to spend not less than 30% on development activities and reduce employee emoluments to less than 35%. This way more funds will be directed to improving the livelihood of the citizens.

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Murungi Ndai

Mr. Ndai is an experienced public sector economist, experienced in sub-nationals having greatly influenced development of policies relating to revenue mobilization by Counties Governments. He collaborates with the private sector, governments and NGOs to address critical topics, including county growth strategies, borrowing and leasing by counties, MSME support and public finance management. murungindai@gmail.com

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