Counties achieved a historic own source revenue (OSR) collection since the start of devolution, amassing Sh58.95 billion in the 2023/24 financial year largely shored up by the health sector.
An analysis of the audit report by Controller of Budget Margaret Nyakang’o reveals that a substantial portion of this revenue is bolstered by the Facility Improvement Fund (FIF), which generated through user fees and other payments at healthcare facilities.
The FIF allows counties to reinvest funds into their healthcare networks, directly benefiting the facilities and the communities they serve.
The boost in revenue is also attributable to a concerted push for improved health services across counties with the demand for enhanced healthcare infrastructure and services increasing user fees and payments, contributing to the revenue growth.
Also, advancements in efficiency and automation within county revenue collection systems have played a crucial role. Upgrade of payment processes and better collections automation have minimised leakages and improved accuracy of revenue capture.
These technological upgrades have streamlined operations, reduced administrative burdens, and enhanced transparency, making it easier for counties to manage and utilise their resources effectively.
Financial Thinktank Bajeti Hub partly attributed the increase to the passing of The Facilities Improvement Finance Act, 2023 which was set up to help public health facilities use any money that they make to improve their status.
“The increase in revenue could also be linked to a rise in out-of-pocket expenditure on health care by residents in the rollout of the Universal Health Coverage. FIF makes up a huge percent of OSR in the counties achieving the fastest OSR growth. “Also, a substantial portion of the collected funds is earmarked exclusively for health-related matters, leaving limited resources available for other critical sectors,” explained Bajeti Hub Senior Programmes Officer John Kinuthia.
According to Dr Nyakang’o’s report covering July 2023 to June 2024, the Sh58.95 billion accounted for 72.8 per cent of the annual local revenue target of Sh80.94 billion.
Counties that outperformed their annual revenue targets included Turkana at 241.2 per cent, Vihiga at 136.3 per cent, Kirinyaga 118.4 per cent, Lamu at 116.2 per cent, Nandi at 113 per cent, Wajir at 110 per cent, Garissa 108.2 per cent, Nyeri at 106.1 per cent, Samburu at 104.1 per cent, and Murang’a at 100.2 per cent.
Counties that recorded the lowest performance of their own source revenue included Nyandarua at 42.1 per cent, Machakos at 46.5 per cent, Mandera at 50.8 per cent, Nyamira at 53.8 per cent, Bungoma at 55.8 per cent, Kajiado at 56.1 per cent, and Busia at 56.9 per cent of annual targets.
Top OSR collections were Nairobi (Sh12.5billion), Mombasa (Sh5.5 billion), Narok (Sh4.7 billion), Kiambu (Sh4.5 billion), Nakuru (Sh3.3 billion), Machakos (Sh1.5 billion), Kisumu (Sh1.44 billion), Uasin Gishu (Sh1.42 billion), Nyeri (Sh1.4 billion), Kakamega (Sh1,3 billion) and Kilifi (Sh1.2 billion).
The increased revenue has allowed counties to better support local healthcare initiatives, improve service delivery, and undertake crucial facility upgrades.
The audit shows investments made possible by the FIF have led to the construction of new facilities, expansion of existing ones, and procurement of essential medical equipment.
These enhancements have not only improved the quality of care but also expanded access to healthcare services for residents.
In Turkana, the highest revenue stream of Sh95.37 million was from Health Fees, which contributed 18 per cent of the total OSR receipts during the reporting period.
In Vihiga, the highest revenue stream of Sh171.75 million was from FIF, which contributed 51 per cent of the total OSR.
Similarly, Kirinyaga’s top revenue stream of Sh233.56 million was from Health/Hospital Fees/FIF, contributing to 36.0 per cent of the total OSR.
In Lamu, health-related revenue made up 58% of their total OSR at Sh122.08 million.
Also, in Nandi’s FIF accounted for Sh238.62 million which contributed 38% of the total OSR receipts during the reporting period.
Wajir health sector contributed Sh74.5 million to its total collection while Garissa’s contributed Sh151.91 million.
Likewise, Nyeri health sector contributed a total of Sh 740.43 million of the total OSR receipts during the reporting period.
But in Samburu, the highest revenue stream at Sh208.54 million was from Game Park and Nature fees, which contributed 78 per cent to its OSR Kitty.
Muranga’s highest revenue of Sh382.53 million was from Health/Hospital Fees (FIF), which contributed 34 per cent of the total OSR receipts during the reporting period.
“I advise county governments with recorded performance below 70 per cent of their annual target to develop revenue enhancement strategies and set realistic and achievable targets in the next financial year to avoid accumulating pending bills in the coming financial year,” Dr Nyakang’o said.
Article 209 (3) of the Constitution allows County Governments to impose property rates, entertainment taxes and any other tax that a county is authorised to charge by an Act of Parliament.
“The underperformance of own-source revenue collection implies that county governments did not implement all planned activities due to budget deficits. CoB advises county governments to develop revenue enhancement strategies and set realistic and achievable targets for the next financial year to avoid accumulating pending bills,” Dr Nyakang’o recommended.
