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Kiringai: Revenue sharing is technical and political

Sunday July 7 2019

Jane Kiringai

Commission for Revenue Allocation Chairperson Jane Kiringai speaks during the launch of the third draft Revenue Allocation Formula on December 18, 2018. PHOTO | FILE | NATION MEDIA GROUP 

Commission on revenue Allocation chairperson Dr Jane Kiringai responds to your questions.

1What recommendations has the Commission on Revenue Allocation (CRA) given to ensure speedy resolution to the ongoing stalemate between the National Assembly and the Senate regarding the Division of Revenue Bill 2019? Njenga, Juja

The Commission is a member of the Intergovernmental Budget and Economic Council and discussions are ongoing to resolve the current stalemate in revenue sharing.

2 The current stalemate between the two houses of Parliament on the revenue allocation Bill has left many wondering whether your commission has abdicated its duty or failed to advise accordingly. Indeed, your commission recommended a figure of Sh335 billion while the two Houses are now working on two other figures. How did we get here? And did you consider the rampant corruption in counties? Komen Moris, Eldoret

Revenue sharing is both technical and political. The Commission tables its recommendation to Senate and National Assembly and they debate and build consensus on the division of revenue.

On corruption, independent institutions such as the Office of the Auditor General, Ethics and Anti-Corruption Commission and the Director of Criminal Investigations investigate financial impropriety and take necessary action. The Commission has recommended a fiscal prudence parameter to incentivise prudent use of public resources by counties which takes into account the audit opinion of county finances.

3 Does CRA make independent recommendations on how allocations to the counties should be reviewed or is it guided by Parliament? Githuku Mungai

CRA is an independent Commission. The Public Finance Management Act (PFMA) Section 190(1) requires the Commission to make the annual recommendation on sharing of revenue between the national and county governments six months before the start of the financial year. The CRA recommendations in accordance with Article 216(5) are submitted to Senate, the National Assembly, the national executive, county assemblies and county executives.

In fulfilment of this mandate, CRA has made eight recommendations since financial year 2012/13. Further, the Constitution gives the mandate of determining the criteria for sharing revenue among counties after every five years to the Senate. The National Assembly can only change the resolution of the Senate with two thirds majority vote. Although the Commission makes a technical recommendation, revenue sharing is also a political process. At times the Commission may differ with parliament and the National Treasury and, to resolve these differences, the constitution has provided for a mediation process guided by Intergovernmental Budget and Economic Council.

4 It is one thing to allocate funds and another to ensure fiscal responsibility. How does CRA go about this? Francis Njuguna, Kibichoi

The Commission is mandated to make recommendations on the financing of and financial management by county governments. It does this by recommending prudent financial management practices in line with the Public Finance Management Act. The Commission has made recommendations containing recurrent costs for both the county assembly and the county executive through ceilings annually approved by the Senate, and infrastructure expenditures related to housing of county officials and building of county offices

5 Last year, CRA reviewed its parameters of revenue allocation to counties and resolved to allocate extra money to counties with challenges of massive and widespread slums — which are a manifestation of extreme poverty — in Nairobi, Mombasa, Kisumu and Nakuru. Some leaders opposed the proposal without good reason. What share of total national revenue do you plan to commit in this arrangement? Dan Murugu, Nakuru

In the Financial Year 2019/2020, a conditional grant for the five cities: Nairobi, Mombasa, Kisumu, Eldoret and Nakuru. This is not financed in the Division of Revenue Bill 2019 due to financial constraints. The Commission is still in discussion with the Ministry of transport, infrastructure, housing and urban development and with the donors for conditional financing of the unique services provided by the urban areas in the next financial year.

6 How is the CRA assisting counties to understand their revenue generation potential so as to seal fiscal gaps? Njenga, Juja

The Commission trains counties on how to estimate their Own Source Revenue potential, revenue streams and strategies that can be harnessed to enhance their revenue generation. Counties submit quarterly reports on revenue performance from which CRA can offer guidance. CRA also provides technical assistance through a shadow credit rating for a pilot number of counties so that they can borrow from the market to finance infrastructure projects. The commission has further recommended a fiscal effort parameter to incentivise counties to collect more revenue.

7 In light of the corruption scandals that have plagued some northern Kenyan counties this year, what steps has the CRA taken to guarantee fiscal management of the Equalization Fund at county level? Njenga, Juja

While CRA sets and reviews policy that sets out the criteria by which marginalised areas are identified for purposes of the Equalisation Fund, the management of the Fund is carried out by the Equalization Fund Board through the relevant line Ministries. Counties have no role in project implementation.

8 CRA’s mandate is to recommend a formula for the equitable sharing of revenues between both levels of government but we have witnessed stalemate among the Senate and National Assembly yet the budget has been read. Doesn’t it violate the law? Jeff Chepkwony, Chepalungu

Ideally, the Division of Revenue Bill should precede the reading of the budget and the appropriation Act, but is currently under mediation in the two houses. If they do not agree, a vote on account may be taken to allow the national government to draw not more than 50 per cent of the budget as provided under the previous year. The Controller of Budget might have to provide guidance on withdrawal of funds from the Consolidated Fund or Revenue Fund.