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Equalisation Fund illegality a sour taste for counties

Monday April 6 2020

Equalisation Fund

The Equalisation Fund Advisory Board was declared an illegal entity by the High Court in 2019. PHOTO | FILE | NATION MEDIA GROUP 

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The fate of 84 hospitals in 14 marginalised counties now hangs in the balance due to a row between the national government and the devolved units over expenditure of the multibillion-shilling Equalisation Fund.

The Equalisation Fund Advisory Board, under the auspices of which the hospitals were built between December 2017 and May 2019, was declared an illegal entity via a High Court decision in November 2019.

This means that the hospitals, which are complete, remain unused as the national government cannot hand over structures that were constructed by an entity that the courts have declared illegal.

Health Cabinet Secretary Mutahi Kagwe has resorted to pleading with the counties to accept the hospitals.

“It would be prudent that the facilities be handed over so that they can be used as response centres to the (Covid-19) pandemic in marginalised counties,” Mr Kagwe said in an April 2 letter addressed to Council of Governors chairman Wycliffe Oparanya.



The letter has also been copied to Attorney-General Kihara Kariuki, Treasury Cabinet Secretary Ukur Yatani and Health Principal Secretary Susan Mochache.

The current situation, Mr Kagwe says, means that the Equalisation Fund budget cannot be uploaded to the Ifmis system to enable processing of payments.

In the 2016/17 financial year, Mr Kagwe said, the ministry was allocated Sh1.964 billion to build the hospitals. He now wants the matter settled out of court and modalities of handing over the hospitals agreed upon.

“Allow the National Treasury to upload the budget for the 2019/20 budget to facilitate payments of pending bills in line with the presidential directive and allow contractors to complete the remaining works,” he urged the governors.

In the November 2019 ruling, the High Court held that the national government was only limited to the operational aspects of the fund, including the preparation, allocation and execution of budgetary decisions with regard to that account, using established financial procedures.

“These provisions do not give the national government any powers in relation to the decisions and manner of expenditure of the monies in that account. Under Articles 204 and 216, these functions are the preserve of the Commission on Revenue Allocation (CRA),” the High Court ruled.


This was a huge win to the 14 counties that joined the Senate and the CRA to file the case that sought to have the court declare that the fund, meant for the benefit of marginalised counties, can only be disbursed by the national government through the respective county governments, and in accordance with the recommendations made by the CRA as approved by Parliament.

They are Turkana, Mandera, Wajir, Marsabit, Samburu, West Pokot, Tana River, Narok, Kwale, Garissa, Kilifi, Taita Taveta, Isiolo, and Lamu.

In 2018, they shared Sh11.98 billion, with Turkana getting the largest share at Sh1.05 billion followed by Mandera (Sh967.6 million) and Wajir (Sh929.8 million).

The other big beneficiaries were Marsabit (Sh886.2 million), Samburu (Sh869.7 million) and Tana River (Sh859 million).