The failure by the National Treasury to release Sh30.8 billion to the counties by the end of the 2023/24 financial year has raised concerns over the implications for service delivery by the counties.
This is due to the failure to disburse funds to devolved units in a timely manner, the Treasury breaks legal obligations and has a negative impact on the district in the provision of services.
What does the law say?
Section 17 of the Public Finance Management (PFM) Act, 2012, requires the Treasury to respect the Constitution when managing public funds, including releasing an equal share of revenue to the districts by the 15th of each month.
“The National Treasury will, at the beginning of each quarter, and in any event not later than fifteen days from the beginning of the quarter, disburse money to the district government,” the PFM Law states.
But through the 2023/24 year, which ends on June 30, the governor continues to complain about frequent delays by the Treasury in releasing the same share.
How many districts are entitled to a share of the same revenue in 2023/24?
The 47 counties were budgeted to receive Sh385.4 billion equal share of the revenue collected by the national government. This equates to a monthly release of Sh32.1 billion issued to the district account every 15th of the month.
But the delay by the Treasury was felt through the fiscal year from July 2023 to June 2024, until the last month when the district started operations in June 2024, while the Treasury still owes Sh98 billion.
In June alone, the Treasury released Sh67 billion to the counties, more than double the monthly Sh29 billion for the financial year.
So, what is the formula used to share the Sh385.4 billion among the districts?
The Commission on Revenue Allocation (CRA) uses a formula known as the Third Revenue Sharing Basis to determine how much each district is entitled to, during a given fiscal year.
The formula has been in effect since the 2020/21 fiscal year and will expire in the current fiscal year.
According to the Third Basis of Revenue Sharing, the main determining factor of the amount received by the district is the need for public administration, which receives 20 percent of the total allocation.
It refers to issues such as district planning and development, ensuring and coordinating community participation in governance and the implementation of national government policies specifically on natural resources and environmental conservation.
The third basic formula also provides 18 percent of the revenue that can be shared between districts for district services such as early childhood education, village polytechnics and other public facilities.
Another 16 percent of the district’s revenue is based on transportation, trade development and regulatory needs, which have an impact on its own revenue.
For districts that depend heavily on agriculture to support their economy, the delay can be very painful, as 10 percent of the revenue can be used based on the agricultural needs of a district.
How will the late release of funds affect services in the district?
With an allocation of 17 percent for health service needs in a district, the delay in releasing funds by the Treasury has resulted in Kenyans not being able to access treatment in hospitals, as many run without medicines or are often closed due to strikes by health workers, mostly due to salary issues.
Citizens are also affected when they do not engage in public participation for programs and other governance issues, as these exercises are part of the fair share budget and are affected when the Treasury suspends funding.
Poor families dependent on the support of stimulus programs such as food aid, cash payments, school meal programs and other initiatives also suffer when the district does not receive contributions on time, because 14 percent of the revenue can be used based on the population. poor people in a district.
Reports also related to the delay in the release of funds from the Treasury to public entities with waste, as most entities are forced to spend money quickly when it is released before the end of the financial year, creating a gap in spending.
