Counties hurtling towards financial crisis
Council of Governors chairperson Anne Waiguru flanked by some of the governors. In a letter to National Treasury Cabinet Secretary Njuguna Ndung’u, the county bosses fell short of accusing the national government of undermining devolution.
Counties are staring at total paralysis in the coming days due to a cash crunch that has plunged the devolved units into an economic crisis.
Documents obtained by Nation yesterday revealed a dire situation, with the Council of Governors (CoG) warning that further delays in cash disbursement “will leave counties in a precarious position not desirable of a government”.
In a letter to National Treasury Cabinet Secretary Njuguna Ndung’u, the county bosses fell short of accusing the national government of undermining devolution.
Funds due to the counties on the 15th of every month hardly ever get remitted, putting the administrations in embarrassingly precarious circumstances.
The unpredictability and delays in disbursement have in the past led to paralysis of services, including virtual lockdowns of local governments.
“These unwarranted delays have jeopardised the operations of the counties, rendering them unable to pay salaries, suppliers or continue to offer essential services to citizens. We, therefore, request your office to urgently disburse the outstanding balance of equitable share,” CoG chairperson Anne Waiguru said in the letter that was copied to the Speakers of the National Assembly and Senate.
Delayed intergovernmental transfer
Counties are owed Sh92.5 billion for January, February and March according to a breakdown by the CoG. Last year, an analysis by the financial think-tank International Budget Partnership identified the delayed intergovernmental transfer of funds from the national to county governments as one of the major challenges to effective budget implementation within counties.
The study says that, despite there being a disbursement schedule, the National Treasury has on several occasions released money just days to the close of a financial year, thus making rollovers inevitable.
“Counties receive little to no disbursements in the first quarter of the financial year; disbursements peak in the fourth quarter when not much spending can be done. Coupled with the appropriation of funds by the national and county assemblies through supplementary budgets, the result of this beyond delayed implementation is accumulated pending bills and rollover funds,” the document states.
While the disbursement of funds to counties should be done per the disbursement schedule, Treasury has in the past said the schedule is just a guide and not a concrete basis for the disbursement of funds to counties.
The report states that Exchequer issues for Ministries, Departments and Agencies (MDAs) are fairly spread across the financial year unlike in counties where receipts or issues are higher in the final two quarters. However, looking further at MDA disbursements for recurrent and development expenditure, recurrent budgets perform better in terms of Exchequer issues than development budgets.
“Also, disbursement of conditional grants to counties varies from year to year. Even then, disbursement of conditional grants remains relatively poor and is dependent on adherence to the conditionalities and requirements of these grants and written instructions to the National Treasury from the relevant ministry under which the purpose of the grant is domiciled,” the IBP says.
