The Controller of Budget (COB) has published the First Quarter County Governments Budget Implementation Review Report (CBIRR) for the financial year (FY) 2017/18. The Controller of Budget prepared this report according to Article 228 (6) of the Constitution of Kenya 2010.
Article 228 (6) requires the Office of the Controller of Budget to submit to each House of Parliament a report on the implementation of the budgets of the National and County Governments every four months.
This is the first report in FY 2017/18 and examines budget performance by the forty-seven counties for the period July to September 2017. The Controller of Budget obtained the information to prepare the report from:
- the County Allocation of Revenue Act (CARA) 2017,
- the CARA, 2017 Revenue Disbursement Schedule;
- the FY 2017/18 Approved County Governments Budgets,
- expenditure returns submitted by the County Treasuries, and
- financial data from the Integrated Financial Management Information System (IFMIS).
The Constitution of Kenya, 2010 and the Public Finance Management Act, 2012 are the basis for the analysis, findings and recommendations. The report highlights achievements
and challenges the county governments faced in implementing their budgets. It proposes recommendations to address the challenges to promote prudence in the usage of public funds.
The report presents both aggregate and disaggregated (individual) analysis of revenue and expenditure performance by each of the 47 County Governments. This article presents a summary of the report.
Aggregate approved budget estimates for the 47 counties
The aggregate Approved Budget Estimates for the County governments in the FY 2017/18 amounts to KSh374.68 billion. The amount comprises of KSh239.9 billion (64 per cent) for recurrent expenditure and KSh134.78 billion (36 per cent) for development activities.
The allocation for development activities conforms to Section 107(2) (b) of the Public Finance Management Act, 2012. The Section requires both levels of government (national and county) to allocate at least 30 per cent of the budget for development expenditure.
Aggregate revenue available for the 47 counties
To finance the FY 2017/18 Approved Budget, County Governments expect to receive:
- KSh302 billion as the equitable share of revenue raised nationally,
- KSh23.27 billion as total conditional grants from the National Government,
- KSh16.41 billion as total conditional grants from the Development Partners,
- KSh55.92 billion from local sources (local revenue), and
- KSh25.17 billion cash balance from FY 2016/17.
Revenue received in the first quarter of FY 2017/18
In the first quarter of FY 2017/18, County Governments received:
- KSh20.43 billion as the equitable share of revenue,
- KSh4.94 billion from the Road Maintenance Fuel Levy Fund,
- KSh4.82 billion as revenue generated from local sources, and
- KSh25.17 billion cash balance from FY 2016/17.
The local revenue of KSh4.82 billion collected during the first quarter was 8.6 per cent of the annual target. However, it was a decline of 32 per cent compared to KSh7.09 billion the counties generated in a similar period of FY 2016/17.
Revenue performance against annual target
The Counties that recorded the highest amount of local revenue were:
- Nairobi City County at KSh1.49 billion,
- Narok at KSh 692.38 million, and
- Mombasa at KSh307.91 million.
The counties that generated the lowest amount were Tharaka Nithi, Lamu and Tana
River at Ksh6.14 million, KSh5.45 million and KSh3.95 million respectively.
Analysis of local revenue as a proportion of the annual revenue target indicates that Samburu, Baringo and Isiolo Counties recorded the highest proportion at 21.7 per cent, 20.5 per cent and 18.3 per cent respectively.
Exchequer issues in the first quarter of FY 2017/18
During the reporting period, the Controller of Budget authorized withdrawal (exchequer issues) of KSh37.79 billion from the County Revenue Funds (CRF) to the County Operational Accounts.
The withdrawals comprised of KSh37.26 billion (98.6 per cent) for recurrent expenditure and KSh530.64 million (1.4 per cent) for development expenditure. This was a decline by 50.1 per cent from KSh75.69 billion released in a similar period of FY 2016/17.
Nairobi City County received the highest amount at KSh4.33 billion, followed by Kiambu and Narok at KSh1.7 billion and KSh1.34 billion respectively.
Three Counties, Marsabit, Tana River and Wajir did not receive funds for operations during the period due to delays in approval of their FY 2017/18 Budgets.
Total expenditure in the first quarter of FY 2017/18
The 47 county governments had a total expenditure of KSh35.43 billion between July and September 2017. This represents an absorption rate of 9.5 per cent of the total annual County Governments’ budgets.
Yet, this was a decrease from an absorption rate of 14.5 per cent the counties attained in a similar period of FY 2016/17. In FY2016/17, the total expenditure was KSh56.55 billion.
The KSh35.43 billion expenditure consisted of KSh34.27 billion for recurrent activities (96.7
per cent) and KSh1.15 billion (3.3 per cent) for development activities.
The Counties that attained the highest expenditure in absolute terms were:
- Nairobi City at KSh4.56 billion,
- Kiambu at KSh1.7 billion, and
- Narok at KSh1.33 billion.
Review of the expenditure by economic classification showed that the counties spent:
- KSh27.75 billion (78.3 per cent) on personnel emoluments (wages, salaries, allowances, etc.),
- KSh6.52 billion (18.4 per cent) on operations and maintenance, and
- KSh1.15 billion (3.3 per cent) on development activities.
Three Counties, Marsabit, Tana River, and Wajir did not report any expenditure during the reporting period.
The Challenges the COB identified in the reporting period
The Office of the Controller of Budget identified the following challenges that continued to hamper effective budget implementation:
- high expenditure on personnel emoluments,
- under-performance in local revenue collection,
- delay by the National Treasury to disburse the equitable share of revenue raised nationally due to delay in approval of the County Allocation of Revenue Act (CARA), 2017 and an error in the Cash Disbursement Schedule,
- IFMIS connectivity challenges and frequent downtime,
- low expenditure on the development budget as a result of the delay in the release of funds, and
- failure to budget for all revenue sources as contained in the County Allocation of Revenue Act (CARA), 2017.
COB recommendations to address the challenges
In order to address the challenges, the COB recommends that the counties should ensure the following:
- contain the wage bill at sustainable levels and in compliance with Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015, which sets the ceiling on the County Governments expenditure on wages at 35 per cent of the total revenue,
- develop and implement strategies to enhance local revenue collection,
- liaise with the National Treasury to ensure the Treasury disburses the equitable share of revenue raised nationally in line with the CARA, 2017 Cash Disbursement Schedule,
- liaise with the IFMIS Directorate to address IFMIS connectivity challenges and frequent downtime, and
- prepare Supplementary Budgets to capture all revenue as provided for in the CARA, 2017.
For more about how the counties spent your money, see The County Governments Budget Implementation Report 1st Quarter FY 2017/18 (42 downloads) .