Kenya: Revenues Bill - Counties Lose Sh40 Billion

County governments stand to lose Sh40 billion in the financial year that begins in July after MPs amended Division of Revenue Bill.

The Bill was revised to exclude conditional grants in compliance with a High Court ruling that the funds should not be part of shareable revenue between counties and the national government.

Counties will have to wait much longer for a new law to be passed to facilitate disbursement of the withheld funds directly to the County Revenue Fund (CRF) as advised by the court.

Yesterday, the National Assembly passed the Bill as amended by the Senate, meaning counties will receive Sh370 billion in equitable share in the 2021/22 financial year.

The conditional grants had been factored in the Bill passed by the National Assembly in March, which meant the total allocation was Sh410 billion.

But the Senate removed the schedule that included conditional grants from the national government amounting to Sh39.9 billion.

"There is need to establish a legal framework for transfer of the conditional grants to the county revenue fund," Budget and Appropriations Committee chairman Kanini Kega said. Out of the total shareable revenue of Sh1.775 trillion for the 2021/22 financial year, the national government has been allocated Sh1.3 trillion. The Sh370 billion allocated the 47 county governments is about 27 percent. The court said a framework needs to be established to have the funds channelled through the CRF at the Central Bank of Kenya (CBK).

This ruling affects the Sh7.21 billion that had been allocated for the leasing of medical equipment in the next financial year and Sh32 billion conditional allocations from the national government and other development partners.

The conditional allocations include Sh4.6 billion for devolution support programme, Sh6.4 billion for national agriculture and rural inclusive growth project and Sh7.84 billion to finance climate smart agriculture projects.

An additional Sh5 billion is for water and sanitation development project, Kenya informal settlement improvement project II financing (Sh2.8 billion) and Sh2.23 billion for transforming health systems for universal care project. Yesterday, Garissa Township MP Aden Duale said the court ruling now gives the National Assembly the powers to oversight the spending of the funds. The Bill has been sent to President Uhuru Kenyatta for signing into law before National Treasury Cabinet Secretary Ukur Yattani presents budgetary estimates to the National Assembly.

Article 221 of the constitution stipulates that budget estimates be presented to MPs at least two months before the end of each financial year. This means that the CS has to present the estimates by tomorrow. The estimates include expenditures from the Equalization Fund.

The National Assembly shall also consider the estimates from the executive together with those submitted by the Parliamentary Service Commission (PSC) and the Chief Registrar of the Judiciary. However, the estimates cannot be tabled before the Division of Revenue Bill has been signed into law by the President.

The High Court last year said the National Assembly cannot consider the Appropriations Bill before the Revenue Act is in place.

The implication of the delay to enact the Revenue Bill is, therefore, a possible shutdown of operations at the national and county governments.

On the other hand, the County Allocation of Revenue Bill, which divides the allocation among the 47 county governments, cannot be considered by parliament until the revenue Bill is enacted.

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