Parliament criticises Treasury’s Sh335bn county cash

Parliament’s budget think tank has pointed out inconsistencies in the National Treasury’s proposal to allocate Sh334.9 billion to counties in the next financial year, casting doubt on the basis for that allocation.

The Parliamentary Budget Office (PBO) also said that, at the current inflation rate, increasing the money to counties by Sh32.9 billion will only cover the rise in the price of goods, therefore being of no benefit to the devolved units.

PBO reached the verdict after scrutinising the Budget Policy Statement (BPS) submitted to Parliament two weeks ago, which is under scrutiny by the various departmental committees in either House.

“There are inconsistencies in the actual amount of sharable resources to be allocated to the county governments in the 2017 BPS,” PBO said in its analysis. “Some parts of the document indicate that the county sharable resources are Sh300 billion while other parts indicate it as Sh299.1 billion.”

PBO, which consists of economic and budget experts as well as fiscal analysts, also pointed out a Sh10 billion gap between the amount Treasury indicated as ordinary revenue (Sh1.549 trillion) and shareable revenue (Sh1.539 trillion).

“The components of the shareable revenue need to be known for better review,” it concluded.

Treasury has proposed to allocate the national government Sh1.24 trillion and county governments Sh299 billion to share amongst themselves equitably. The counties would also get Sh35.8 billion as conditional grants — money for specific projects and the 11 Level 5 hospitals.

PBO also cast doubts on the Treasury’s projections for the increase of revenue to be shared between the national and county governments on the basis that past targets have never been met.

PBO’s criticism could result in the legislators having to decide how much the devolved units are to get if they agree with the experts’ verdict that Treasury’s figures do not make much sense.

Treasury had differed with the recommendations by the Commission on Revenue Allocation (CRA) in proposing the allocation to go to the counties.

SHARE EQUITABLY

This could be because of the counties’ failure to use all the money allocated to them in the last two financial years, in which they are reported by the Controller of Budget to have ended up with Sh46.7 billion and Sh47.89 billion in their accounts respectively.

CRA had proposed that the counties receive Sh331.6 billion to share equitably and then an additional Sh35.96 billion for the conditional allocations, bringing the total to Sh367.6 billion.

The team led by Micah Cheserem had based the increase by 18.3 per cent from the Sh280.3 billion allocated in the current financial year on revenue growth equivalent to the average to the last three years and an additional Sh8.7 billion to fund additional functions to counties such as libraries and roads.

According to the PBO, the financial performance of the counties has been above average over the last two financial years. Remittances of their share of revenue from the Treasury has been at 95 per cent over the two years but the counties did a poor job collecting their own taxes, averaging less than 70 per cent of target.

Counties spent above 90 per cent of their recurrent expenditure – money for salaries and operations – and have been unable to get to the target of 35 per cent of their expenses considered ideal.

From a recurrent expenditure of Sh191.85 billion in 2015/16, they spent Sh118.65 billion on salaries and wages and Sh73.2 billion on operations and maintenance.

Less than 70 cent of that budgeted for development was spent, with the counties spending Sh90.44 billion on that vote in 2014/15 and Sh103.45 billion in 2015/16.