Proposed law hands counties greater control of public funds

Devolved governments will have a greater say in the management of revenue should a new Bill published by the Commission for the Implementation of the Constitution (CIC) be passed into law.

The Intergovernmental Fiscal Relations Bill 2011 establishes three key organs dominated by county representatives namely the Budget Council, the Senate Revenue Allocation Oversight Committee and the Loans and Grants Council.

The Budget Council will determine the sharing of revenue between national and county governments as well as horizontally among the counties. 

The Loans and Grants Council will be charged with the responsibility of developing and reviewing the public debt management policy for national and county governments.

CIC moved to draft the Intergovernmental Fiscal Relations Bill 2011 after Treasury and Local government ministries failed to reach a deal to harmonise their conflicting positions on the management of public funds.

It is understood that the commission has been increasingly concerned about the deadline and the never-ending clash between the two ministries.

The Bill in its current form could be seen as a triumph by the Local Government ministry over its Treasury counterpart after a long tussle over who should control public funds.

But the turf wars might yet resurface with a source familiar with the happenings telling the Sunday Nation that Treasury asked for more time to consider the Bill arguing that it does not represent their position. Meanwhile, the Local Government ministry has welcomed the Bill.

“Devolution is the next battlefront and you will soon see politicians going out to explain their positions on the matter,” the source said.

The source disclosed that a few weeks ago, top Treasury officials and some in Local Government presented a draft to CIC claiming that it was the harmonised Bill.

“When CIC checked with [Deputy Prime Minister Musalia] Mudavadi, he told them he was not aware of the harmonised draft. He informed CIC that his Permanent Secretary had not briefed him on the deal,” the source said.

In the new Bill, the Budget Council will be composed of 13 members, six of whom will be county representatives.

Other members of the council will be the cabinet secretaries for finance and devolved government, secretaries to the Judicial Service Commission and the Parliamentary Services Commission, principal secretaries for finance and devolved government and the chairperson of the Commission for Revenue Allocation (CRA).

The Loans and Grants Council also consists of six country representatives and three other members, giving the devolved units a greater voice in coordination and management of borrowing.

The Bill also sets the date for budget submission to Parliament by the cabinet secretary in charge of finance in the form of two Bills namely the Division of Revenue and County Allocation of Revenue.

If passed in its present form, the cabinet secretary will be expected to submit the budget to Parliament two months before the end of the financial year. That would translate to sometime around April 30 and not later.

The Division of Revenue Bill would detail the proposed equitable division of the revenue raised nationally, including conditional and unconditional grants, among the national and county governments.

The County Allocation of Revenue Bill will detail the proposed equitable division of the revenue allocated to the county governments, inclusive of funds from the Equalisation Fund that is set out in the Constitution.

The Senate Revenue Allocation Oversight Committee meanwhile will provide a forum through which the Senate would be involved in consideration of the Division of Revenue and County Allocation of Revenue Bills.

The Bill was one of the six pieces of legislation proposed by the Task Force on Devolved Government.

It aims to anchor the smooth operation of the 47 county governments.

The task force had also drafted the Devolved Governments Bill, 2011, the Inter-Governmental Relations Bill, 2011 and the Transition to Devolved Government Bill, 2011.

Others are the Urban Centres and Cities Bill, 2011 and the County Government Financial Management Bill, 2011. The Task force was appointed by the Local Government Minister Musalia Mudavadi and was chaired by law expert Mutakha Kangu.

Whereas the local government pushed for a law granting the county governments autonomy in the management of public funds, Treasury was accused of pushing for a highly centralised system which would retain control of all public financial matters.

The Ministry of Finance in their consultations with the International Monetary Fund (IMF) had proposed the establishment of a Treasury Single Account for all levels of government, which caused uproar among proponents of autonomous management of finances by devolved units.

The Kangu-led task force viewed Treasury’s proposal as an approach designed to deny counties their rightful share of the revenue and stifle development at the grassroots. Civil society groups also argued that such a move would negate the whole idea of devolution.

“Ministry of Finance (Treasury) and Central Bank of Kenya conspired with International Monetary Fund (IMF) to block devolution and dispersal of power as provided in the Constitution,” said Mr Ndung’u Wainaina of the International Centre for Policy and Conflict back in September.

Treasury had proposed the Public Finance Management Bill 2011 that for all intents and purposes granted them the control of public finance.