This is the third County Budget Implementation Review Report (CBIRR) for the Financial Year 2017/18. It covers the period from July 2017 to March 2018. It highlights the progress made in budget implementation by each of the 47 County Governments.
The Controller of Budget has prepared the report to fulfil the requirements of Article 228 (6) of the Constitution of Kenya, 2010 and Section 9 of the Controller of Budget Act, 2016.
Both laws require the Office of the Controller of Budget (OCOB) to submit to each House of Parliament a report on the implementation of budgets of both the National and County governments every four months.
See Also: The Budget Process in Kenya
This report provides information on receipts into, and withdrawals from the forty-seven County Revenue Fund Accounts (CRF).
Each county government has a County Revenue Fund at the Central Bank. The county government should deposit all money raised or received on its behalf into the County Revenue Fund, except money reasonably excluded by an Act of Parliament. (Article 207 of the Kenyan Constitution).
The report also provides information on expenditure by the County Governments. The OCOB classifies the expenditure as either development or recurrent expenditure and compares it with that incurred in a similar period of FY 2016/17.
A financial year in Kenya runs from 1st July of the current year to 30th June of the coming year. A financial year is a period the government uses for accounting and budgeting purposes, and for financial reporting.
The basis of the report is on analysis of:
- financial reports received from County Treasuries in line with Sections 166 and 168 of the Public Finance Management Act, 2012,
- data from the Integrated Financial Management Information System (IFMIS), and
- OCOB records of exchequer issues (county governments authorized withdrawals from the CRF).
The report identifies key challenges that affected effective budget implementation during the reporting period. It also contains appropriate recommendations to address the challenges.
The Office expects that the information in this report will be useful to all stakeholders and inform timely decision making on budget implementation.
The Legislature, the Public and other oversight institutions are responsible for oversight on budget implementation. The Executive is vested with the responsibility of implementation.
The OCOB says it is committed to promoting prudent financial management in the public sector. It encourages readers of this report to take an active interest in budget formulation, implementation, monitoring and evaluation.
This article presents a summary of the report. See the link to download the full report at the end of the post.
Money available to the 47 counties in FY 2017/18
On aggregate, the approved budgets for the County Governments for the Financial Year (FY) 2017/18 amounted to KSh413.63 billion. The budgets comprised of KSh266.98 billion (64.5 per cent) for recurrent expenditure and KSh146.65 billion (35.5 per cent) for development expenditure.
To finance the FY 2017/18 budget, Parliament allocated the County Governments:
- KSh302 billion as the equitable share of revenue raised nationally,
- KSh23.27 billion as conditional grants from the National Government,
- KSh23.27 billion additional allocations as loans and grants from Development Partners
The County Governments also hoped to generate KSh52.52 billion from own sources of revenue. There was also KSh26.66 billion in unspent funds from FY 2016/17.
Money available to counties in the reporting period
During the reporting period (July 2017 to March 2018), total revenue available to the County Governments amounted to KSh232.8 billion. The amount comprised of:
- KSh174.52 billion from the equitable share of revenue raised nationally and conditional grants to Level 5 Hospitals,
- KSh4.45 billion as World Bank and DANIDA grants and loans,
- KSh4.94 billion from the Road Maintenance Fuel Levy Fund,
- KSh22.23 billion generated from own sources of revenue, and
- KSh26.66 billion as cash balance brought forward from FY 2016/17.
In the first nine months of the FY 2017/18, the aggregate revenue raised by County Governments from own sources amounted to KSh22.23 billion. This was a decline of 11.2 per cent compared to KSh24.71 billion raised in a similar period in the previous financial year (2016/17).
The KSh22.23 billion accounted for 42.3 per cent of the annual local revenue target of KSh52.52 billion.
Counties that generated the highest amount of local revenue were; Nairobi City, Mombasa and Narok at KSh7.64 billion, KSh1.68 billion and KSh1.63 billion respectively.
Mandera, Lamu and Tana River Counties collected the least amount of revenue at KSh46.97 million, KSh41.49 million, and KSh16.19 million respectively.
Exchequer issues in the reporting period
The Controller of Budget authorized the withdrawal of KSh194.33 billion from the County Revenue Funds (CRF). This amount comprised of KSh166.82 billion (85.8 per cent) for recurrent and KSh27.51 billion (14.2 per cent) for development activities.
The total amount withdrawn from the CRF account represents 47 per cent of the total County Government’s Budget Estimates for FY 2017/18.
Counties that had the highest amount of funds released from the County Revenue Fund were; Nairobi City at KSh14.87 billion, Kiambu at KSh7.83 billion, and Kakamega at KSh6.65 billion.
Those that received the lowest releases were Tana River at KSh2.04 billion, Isiolo at KSh1.79 billion and, Lamu at KSh1.38 billion.
Total expenditure in the reporting period
The total expenditure during the period was KSh183.66 billion. It comprised of KSh157.67 billion for recurrent expenditure (59.1 per cent of the annual recurrent budget) and KSh25.98 billion for development expenditure (17.7 per cent of the annual development budget).
The KSh183.66 billion expenditure was 44.4 per cent of the total annual County Government’s budgets.
Counties that recorded the highest overall absorption rates were Murang’a at 55.4 per cent, Narok at 53.8 per cent, and Laikipia at 53.7 per cent.
Tana River, Vihiga, and Nakuru Counties recorded the lowest overall absorption rates at 35.6 per cent, 35.4 per cent, and 34.7 per cent respectively.
The counties that experienced the highest absorption rate of development expenditure were Kilifi at 53.8 per cent, followed by Murang’a and Mombasa at 52.1 per cent and 40.6 per cent respectively.
Three Counties, namely; Garissa, Kirinyaga, and Kisumu did not report expenditure on their development budget.
Absorption rate is computed as a percentage of expenditure to the approved budget.
Expenditure by economic classification
Analysis of expenditure by economic classification shows that the counties spent:
- KSh108.04 billion (27 per cent) was spent on personnel emoluments (salaries, allowances, etc),
- KSh49.63 billion (58.8 per cent) on operations and maintenance, and
- KSh25.98 billion (14.2 per cent) on development activities.
The expenditure on personnel emoluments (PE) accounted for 58.8 per cent of the total expenditure for the period. It was an increase of 18.2 per cent from KSh91.39 billion incurred in a similar period in FY 2016/17. In 2016/17, personnel expenditure translated to 44 per cent of the total expenditure.
The Counties that reported the highest expenditure on personnel emoluments as a percentage of total expenditure were; Kirinyaga, Meru, and Elgeyo Marakwet at 78.9 per cent, 75.3 per cent, and 74.7 per cent respectively.
Key challenges and recommendations
There are key challenges that faced County Governments as they executed their budgets in the reporting period. They include:
- delays in the disbursement of the equitable share of revenue by the National Treasury,
- high expenditure on personnel emoluments,
- under-performance on own sources of revenue collection,
- late submission of quarterly financial reports to the Controller of Budget, and
- delays in the establishment and operationalization of County Budget and Economic Forums (CBEF) contrary to Section 137 of the PFM Act, 2012.
To address these challenges, the Office of the Controller of Budgets recommends that:
- County Governments should establish optimal staffing levels to ensure that personnel expenditure is within the set limit of 35 per cent of the County’s total revenue as provided in Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015.
- The County Treasuries should develop and implement strategies to enhance own-source revenue collection,
- National Treasury should adhere to the (County Allocation of Revenue Act (CARA), 2017 (revenue) Disbursement Schedule in order to enhance effective budget execution by the counties.
- County Treasuries should prepare and submit financial reports in line with Section 166 and 168 of the PFM Act,2012.
- Counties should establish and operationalise the County Budget and Economic Forums (CBEF) in line with Section 137 of the PFM Act, 2012 to provide means for consultation on matters pertaining to budgeting and financial management at the County level.
For more about how the county governments spent your money, get your copy of The County Budget Implementation Review Report 3rd Quarter FY 2017/18 (18 downloads) .
You can also read about how the counties spent your money in the first half of FY 2017/18.