What delayed funding portends for counties

The National Treasury has once again been accused of undermining devolution after failing to release funds for counties on time.

Nearly four months into the start of the financial year, the county governments are yet to receive development funds.

A look at the transactions at the National Treasury show that the development module on the Integrated Financial Management Information System (Ifmis) is yet to be activated.

Ideally, the module should have been up and running by August or latest September but if the delay persists, the devolved units will not receive the funds by December, posing absorption challenges.

It is unlikely that the counties will receive the funds this year considering that only two months remain, a move that will delay or stall the implementation of projects and exert pressure for the absorption of the funds within the budget plans.

STRAINED

The delay is also likely to get the counties on the wrong side with contractors and suppliers, who are likely to blacklist them over delays in meeting their financial obligations.

According to the Division of Revenue Act, 2018, the 47 county governments were allocated Sh372 billion by the national government.

About Sh314 billion of the vertical allocation is in equitable share and the balance in conditional grants from the national government and other development partners.

A governor, who did not want to go on record, said that the counties are “literally surviving” and that the delayed disbursement will be complicated by the “usually” tedious procurement regime when the funds are finally released.

“It is really a serious challenge and we may not accomplish what we meant to achieve this financial year. We are only getting money to pay salaries for staff and nothing more,” the county boss said.

Treasury Cabinet Secretary Henry Rotich is by law required to disburse monthly funds as a block to the county revenue fund held at the Central Bank of Kenya in Nairobi.

BLACKLIST

On Saturday, Mr Rotich dismissed claims that funds have delayed, noting “we do not separate between recurrent and development expenditures”.

However, Makueni Senator Mutula Kilonzo Jnr accused Mr Rotich of violating the constitution and described the delay “a crisis of monumental proportions”.

“The counties will grind to a halt and no one will agree to engage with them because of their bad credit rating,” Mr Kilonzo said.

The County Allocation of Revenue Act, 2018, details the horizontal formula of sharing the funds among the counties and depending on how much each county gets, they have an obligation to set aside at least 30 percent of their budgets for development expenditure in line with the international standards.

According to the Controller of Budget Agnes Odhiambo, 14 counties – among them Kirinyaga, Kisumu, Nakuru, Garissa, Meru, Nandi and Embu – did not incur any expenditure on development during the first half of the 2017/18 financial year.

DELAY

Ms Odhiambo attributed the failure to delay in disbursement of cash from the National Treasury, which affected the timely implementation of county development programmes.

“In the reporting period, the National Treasury did not fully adhere to the disbursement schedule, which affected execution of budgeted activities,” Ms Odhiambo said in her quarterly report.

The financial regulations provide that once the development module is activated on Ifmis, the counties must take about two months to advertise for procurement of supply of goods and services.

They are also required to give room for the possibilities of appeals emanating from the award of tenders.

The situation is likely to be compounded further after the National Assembly slashed the county funds by Sh9.4 billion when it approved the supplementary budget almost a month ago.

The budget saw the national government reduce its Sh3.026 trillion budget by Sh37 billion.

However, to actualise the reduction, the MPs are required to amend the Division of Revenue Act, 2018 with the concurrence of the Senate.

APPROVAL

But with the Senate against the reduction of county funds, the push and pull between the two Houses may have started in earnest and their differences over the Division of Revenue Act Amendment Bill will likely head to a mediation process.

But assume that the MPs pass the Division of Revenue Act Amendment Bill, the Senate will be obligated to review the County Allocation of Revenue Act, which takes time.

The Senate will also be required to pass the county disbursement schedule before the money is released, meaning that the first half of the financial year will likely end without counties receiving development funds.

This is because the county assemblies will also have to rework their Appropriation and Finance Acts to incorporate the reduced budgets before the development module on Ifmis is activated.

Cumulatively, according to Ms Odhiambo, the remaining 33 counties incurred Sh11.36 billion on development during the period under review, representing an absorption rate of eight percent of the annual development budget.

This is a decrease from 21.5 percent reported in a similar period of financial year 2016/17 when development expenditure was Sh35.73 billion.