Schedule 4 key to growing own source revenues

A surprising number of officials, at both levels of government, seem blissfully unaware of Schedule 4 of the Constitution.

Betting, casinos and other forms of gambling are a county function. So too are gas and electricity reticulation, energy regulation and licensing of establishments that sell food to the public. Why does it all matter?

The licensing fees and levies from these functions clearly belong to counties.

Efforts to increase county revenues must start with the implementation of Schedule 4. It is not enough for the national government to claim that these functions are “fully” devolved. It must relinquish control of the resources as well.

The Auditor-General should declare the collection of these fees and levies by the national government illegal.

For counties to grow their own source collections, revenue boards are considered best practices. The Commission on Revenue Allocation recommends that each county should have one.

The point is to have a dedicated, autonomous, professional institution collecting taxes, which is critical for standardising processes and systems.

Legacy staff 

One big question confronting the revenue boards is how to deal with legacy staff. Town, municipal and county councils had a rather limited scope of services. Their legal basis was the Local Government Act. The transition to a broader constitutional mandate requires a major rethink of organisation.

For instance, Laiforms, a system that sought to integrate the financial and operational activities of the local authorities, covered only about a third of the revenue streams of the new counties.

However, permanent and pensionable terms, the labour courts and high political costs make retrenchment difficult for the public sector.

That has not stopped the Auditor-General from finding that many counties’ wage bill is above the 35 per cent cap placed by public finance management regulations.

In addition, most revenues are fees for service. Line departments must therefore step up. 

The unbundling of services is itself not complete. Take for instance livestock movement permits. There is no standardised document that the county vets are using that is accepted across the nation.

Software systems are generally problematic. Most have underlying third-party contractual relationships that come back to haunt.

Vendors tend to hire programmers on contract. Programmers utilise third-party tools to create the software. Most clients have no access to the source code, and databases are cloud-based on accounts created by programmers! If ties sour, the client county may go offline.

A technical analysis led by the director of integrated financial management information system (IFMIS) at the National Treasury and counties found the system developed by Kwale County to be the best currently available. Of course, individual counties are making their own choices.

Point of sale (POS) devices have been touted as improving revenue collection. More recent varieties are able to integrate with mobile payments and have become frequent in restaurants.

But POS systems require staff intervention, unlike e-citizen services, for example. It is this removal of human intervention that constitutes automation.

@NdirituMuriithi is an economist.