County governments continue to face serious financial challenges that disrupt services, after failing to meet local revenue targets, thus increasingly becoming reliant on the state for top-up funds.
Counties run on cash transfers from the national government and own-source revenue in the form of taxes, charges, fees, loans and grants. In the first quarter of 2022/23 (July–September), they raised Sh6.17 billion from local sources, marking a decline compared to the Sh6.76 billion generated during a similar period in 2021/22. The performance is 10.7 per cent of the annual target of Sh57 billion, implying overdependence on cash from the National Treasury.
Controller of Budget Margaret Nyakang'o has recommended the 47 counties review their 2022/23 targets to make them realistic after they failed to meet their first-quarter projections. The devolved units target Sh57 billion from their own sources by June 30, 2023, a figure Dr Nyakang'o says may not be reached going by the dismal performance in the first three months of this financial year.
“On under-performance of their own-source revenues, counties are advised to review their 2022/23 revenue targets to confirm that they are realistic and implement strategies to mobilise their revenue collection, including building staff capacity in revenue administration.”
Isiolo raised 49 per cent after realising Sh55.7 million, followed by Narok that realised 38.7 per cent by collecting Sh941.5 million. Samburu raised Sh80 million (33.3 per cent), while Vihiga and Nyeri realised Sh44.1 million (27.8 per cent) and Sh183.8 million (26.3 per cent) respectively to make it to the five-name list.
Five other counties collected less than 10 per cent of their annual target during the first quarter of the financial year. They are Nyamira (Sh11.9 million, 4.5 per cent), Bomet (Sh17.4 million, 5.8 per cent), Kilifi (Sh85.6 million, 5.8 per cent), Murang’a (Sh60.1 million, four per cent) and Kajiado (Sh51.6 million, 3.4 per cent).
According to the Fourth Schedule of the Constitution, counties get their revenue from market and trade licensing fees, parking fees, liquor licensing, county parks, beaches and public cemeteries. They also control licensing of domestic animals, ferries, tourism and casinos.
While taxes and charges for the provision of services are constitutional obligations, counties have been encouraged to make themselves financially independent. This month, the Commission on Revenue Allocation (CRA) also noted that counties have been doing poorly at collecting their own-source revenue since the beginning of devolution.
To nudge the counties towards financial prudence, the CRA partnered with the World Bank to roll out the County Creditworthiness Initiative aimed at enhancing revenue collection and strengthening financial management. Laikipia, Bungoma, Makueni, Kisumu, Mombasa and Nyandarua have since benefitted. The commission also advised the counties to roll out integrated revenue management systems, including digitisation of land and property records.
In her report, Dr Nyakang'o further raised the alarm that 24 counties did not absorb their development funds during the reporting period. This was linked to challenges in setting up new county administrations after the August 2022 polls.
The remaining counties, however, spent less than 10 per cent of their annual development budget during the first quarter.
Only three counties were the highest spenders of development budgets—Narok at 9.8 per cent, Vihiga at 9.2 per cent and Nyamira at 8.8 per cent. During the period, the Controller of Budget authorised withdrawals of Sh56.3 billion from the County Revenue Funds to the County Operational Accounts. The sum comprised Sh2.3 billion (4.1 per cent) for development and Sh54 billion (95.9 per cent) for recurrent expenditures.
Counties have budgeted to spend Sh160.6 billion (33.5 per cent) on development and Sh318.27 billion (66.5 per cent) on recurrent expenditure by June 30, 2023. To finance their budgets, counties expect to receive Sh370 billion as an equitable share, Sh5.7 billion as conditional grants from the National Treasury and Sh23.7 billion from development partners.
Further, they had an unspent cash balance of Sh22.5 billion from the 2021/22 financial year.
