There’s no evidence the national government spends more prudently than counties

A couple of weeks ago, I wrote about the tendency by commentators who take their views too seriously to hide their political biases, by claiming that Kenya’s development demands a suspension of political debates and more serious efforts at building the economy.

This argument is based on an artificial separation of the economy from politics in a way that suggests a deep understanding of neither.  

More recently, “we are all economists school” has taken to schooling Kenyans on the demerits of devolution. Their first claim is that devolution has imposed a very expensive form of government and is responsible for driving up taxes.

With all due respect to the right to views about the real effects of the Constitution, the posh and the serious continue to purvey fallacies.

The statement above can only be made by someone who has not taken time to read the relevant portions of the Constitution regarding either devolution in Chapter 11 or Public Finance in the following chapter.

NO COMPUNCTION OR RESTRAINT

However, the classic demonstration of hostility to devolution dressed up as economic analysis is the claim about the expected effect of adjusting the distribution of funds between the county and national governments.

It has been stated in various media outlets that if Parliament were to accede to the increase of funds in counties, the tax burden would automatically rise.

Citizens of Kenya are justifiably alarmed by the extensive travel, construction of offices and beautiful parks that only find occasional use.

Such allocations indeed show that elected representatives have no compunction or restraint in spending money on trivial matters.

What is worrisome, notwithstanding, is that the great condemnation counties receive is worded as if the national government runs an impeccably smooth, financially upright operation.

The latest edition of the Auditor General’s report shows that the smugness of the national government in lecturing counties about sound financial management is laughable. Let’s consider audited accounts for the financial year starting July 01, 2012. That date is significant because county governments had not been formally constituted.

MISLEADING AND INCOMPLETE

In summary, the overall report finds that only 12 per cent of 343 financial statements reviewed were without any audit qualification, meaning that the expenditures were presented in a fair and accurate enough manner to allow an auditor to present a clean audit opinion.

On the other hand, 43 per cent of the total statements were tagged as either adverse or under disclaimer, implying that these statements are misleading, incomplete or had limitations that constrained the Auditor General from expressing meaningful audit opinion upon them.

No formal qualifications in accounting are required to note that a corporation that presented such audit results before shareholders would most likely be faced with a resolution for dissolution with key managers recommended for prosecution.   

Details of the appropriation accounts for spending approved by the legislature reveal more shocking results. Those concerned that increased allocations to counties would raise their tax burden should sit up and understand this.

Audits of the revenues received declared an adverse finding on 98 per cent of those revenues, or Sh800 billion.

LOG IN BOTH EYES

In other words, it was not possible for this professional accountant to verify government receipts because the errors and misstatements are as material and pervasive as to render the statements misleading and incomplete.

Calculations by the Institute of Economic Affairs (IEA-Kenya) shows that this amount is more than 3.5 times the amount that all counties together received during the financial year starting on July 01, 2014. Most of these misstatements on revenue are on the tax collection on income, goods and services and international trade. If this is not a big indictment to the national Government, then what is?

Reading the spending side of the budget for the same financial year shows that the Auditor General was unable to confirm whether Sh338 billion out of Sh802 billion was spent lawfully. In short, the state of public sector management of funds in Kenya is poor, and this fact predates the creation of counties.  

Selective finger-pointing is not prudent because the national government is not a better steward of public resources. Kenya’s Parliament has to take these findings seriously and moderate the tendency by officers of the national government to scold counties. The log is in both eyes and has been there for longer in the national government’s eyes.

Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame