The Politics and arithmetic during revenue allocation to Counties from National Treasury

Each financial year, the National Assembly enacts the Division of Revenue Act, (DORA). This is the Act that stipulates how all Nationally collected revenues – majorly from taxes, will be divided between the National Government and the County Governments.

This is usually a very political, yet technical negotiation that takes weeks and months to arrive at. The Commission on Revenue Allocation (CRA) from its technical perspective, is required by law to recommend its proposed figure, the COG through their political and county pressures has its recommendation while the National government has its offer on the table. The three parties, led by the Deputy President as the chair, sits in the Intergovernmental Budget and Economic Forum (IBEC), and strike a balance.

For the FY 2023/24 discussions that led to setting the Equitable Share to Counties, the Council of Governors (COG) was demanding Ksh.425 billion to go to counties while the CRA had proposed Ksh.407 billion. The National Treasury (NT) was offering Ksh.370 billion maintaining the previous year, claiming the economic situation was tough. The NT later gave an offer of Ksh.385.4 billion which was ultimately enacted by the senate.

For the FY 2023/24, the allocation of revenue raised nationally between the National Government and the County Government has been allocated as below:

Type/Level of AllocationAmount (Ksh)% of last Audited and Approved National Revenues
National Government2,177,365,426,00076.92%
County Governments385,425,000,00023.03%
Equilization Fund8,368,574,0000.5%
Total Sharable Revenue2,571,159,000,000100%

It is imperative to note that although the Equitable Share Allocation to counties increased by slightly over Ksh.15 billion, the real percentage allocation reduced from 26.17% to 23.03%, while the allocation to the National Government took the 76.92% up from 73.33% representing over Ksh.413 billion.  

The Ksh385.425 billion allocated to county governments in FY 2023/24 is the amount that is subjected to the third Formula to counties.

The Act further gives ceilings of the Recurrent expenditures for both the County Assembly and the Executive. Within the ceilings, only Nairobi, Kiambu, Kakamega and Nakuru county assemblies can spend over Ksh.1 billion for Recurrent while all county executives should fall within a billion in the spending as stipulated in the legislation.

This recurrent expenditure does not, however, include emoluments which is set as 35% of the total county revenue as per PFM Regulation Sec. 25.

County Allocations

Nairobi County traditionally, ranks highest in the allocation with slightly over Ksh.20 billion, with its coefficient being 5.21 treated as a percentage multiplier of the total Equitable Share Allocation to Counties.

Turkana and Nakuru Counties have Ksh.13.1 billion and Ksh.13 billion respectively while Kakamega, Kiambu and Kilifi will be allocated Ksh.12.9 billion, Ksh.12.2 billion and Ksh.12.1 billion, respectively. To close the Ksh.10 billion allocation gap are Kitui and Bungoma each having Ksh.11 billion and Ksh.10 billion, respectively. 

The formula further allocated Wajir, Narok. Kisii, Machakos and Meru Counties each slightly over Ksh.9 billion with Meru and Wajir getting Ksh.9.8 billion each. Garissa, Homa Bay, Kajiado, Migori, Makueni, Kwale, Kisumu and Uasin Gichu are in the Ksh.8 billion league.

Transzoia, Mombasa, Murang’a, Nandi, Busia and Marsabit lie within the Ksh.7 billion percentile while the Ksh.6 billion counties are Baringo, Bomet, Kericho, Nyeri, West Pokot and Tana River.

Counties ranking lower in allocation include Samburu, Kirinyaga, Laikipia, Vihiga, Taita Taveta and Embu with the Ksh.5B bracket, while Tharaka Nithi will get Ksh.4.3 billion whereas Isiolo and Elgeyo Marakwet each getting Ksh.4.8 billion.

Lamu County ranking the lowest with a cumulative parameter index of 0.84, will be contented with Ksh.3.2 billion annual allocations.

We will be keen however, to follow-up on the various County Own Source Revenue projections and other revenue lines available to the counties as total revenues available for the county governments’ spending.

With the County Assembly paralyzing its operations leading to the delayed approval of the county budgets, and further the delayed disbursement of the final county allocations for the month of June that pushed the closure of year to the July 15, 2023, the county spending is expected to lag by almost a month.

Before a county spends money, the budget must be fed into IFMIS which is strong financial management that while used well and as required by the counties, would give the required control in spending, while giving real-time reports for management purposed. The system is also useful in procurement – where the majority of counties ignore using.

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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.
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