25 June 2014

Kenya: County Govts Perform Dismally in Revenue Collection

Several counties are generating less revenue than what the defunct local authorities that lay within their boundaries rake in collectively, according to a new survey. This has raised concerns over public finance management in the devolved units of government.

Weak revenue bases, absence of internal audits, poorly trained personnel, manual revenue collection systems and reluctance by some county revenue officers to embrace change are among challenges cited as causing the decline in revenue collection in counties.

The baseline survey on devolution released by the Institute of Certified Public Accountants in Kenya yesterday indicates that out of 17 counties sampled, 37 per cent rely on single business permits as the main source of revenue.

The report titled 'Public Finance Building Blocks for Devolution' shows that 32 per cent depend on user fees and charges, while 31 per cent are banking on property rates to generate revenues.

While all the counties sampled were found to have adopted the Integrated Financial Management System that was recently introduced by the national government, only half of them are using it proficiently.

"The national government needs to move with speed to ensure that counties have the capacity to carry out their duties," said Simeon Pkiyach, a member of the Transitional Authority.

The survey found that property rates are the main source of revenues in Nakuru, Mombasa and Trans Nzoia, while Elgeyo Marakwet and Turkana depend on single business permits.

Kisumu, Kakamega, Kilifi, Bomet, Vihiga, Meru, Isiolo and Homabay counties rely heavily on user fees and charges, according to the ICPAK report.

Majority of the counties, 43 per cent, attribute lack of operational capacity as the main constraint to effective public finance management, while 23 per cent blamed it on inadequate resources.

Fourteen per cent for the counties point to lack of manuals and guidelines as the culprit in declining revenue collection. Another 12 per cent cite lack of political will as the cause for poor public finance management and 11 per cent said it was due to weak internal control systems which results in leakage.

ICPAK, pointing a finger on county treasuries, said county public finance systems and infrastructure must be strengthened "to optimise use of the scarce resources available".

It said effort should be directed towards full usage of the IFMIS in county finances as well as tightening up the audit functions.

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