Settle row over additional funds to counties and unlock potential

The National Treasury and Planning offices, Nairobi. June 10, 2021. [Jonah Onyango, Standard]

When the Council of Governors filed petition 252 in the High Court in 2016 against the National Government concerning the Division of Revenue Act (DORA), at the heart of that petition was a fundamental aspect of sharing of resources between the national and county governments.

The Division of Revenue Act is a law that divides revenue raised by the national government among the national and county levels of government. In that year, DORA allocated funds for maternal healthcare, leasing of medical equipment and funding for level 5 hospitals to the the national government, yet the functions were in themselves set aside for county governments.

The allocation was thereafter camouflaged as conditional grants from the national government to the counties. In fact, DORA stated that the allocations to the three projects were to be sourced from the revenues collected nationally. This move was interpreted by the Council of Governors as an attempt by the national government to take over devolved functions by allocating funds to itself.

The court, in a judgement issued in 2020, made clear that any additional allocations to county governments, whether conditional or unconditional, could only be made from the equitable share of the national government and not from the revenue raised nationally. DORA 2016 was therefore declared unconstitutional. In addition, the court stated that the national government cannot allocate to itself funds meant for devolved functions or proceed to undertake devolved functions without first executing an intergovernmental agreement.

Arising from this judgement, the inclusion of conditional or unconditional allocations to the counties from the national government within the Division of Revenue Bill came to an end and thereafter necessitated the need for a separate legal framework to cater for them.

Without the legal framework in place, both conditional grants from the national government and other grants earmarked for county governments by development partners cannot be channelled by the National Treasury to the respective county treasuries. 

In the current financial year (2021/2022) for example, Sh7.53 billion in conditional grants from the national government meant to cater for the construction of county headquarters and leasing of medical equipment in counties is yet to be disbursed.

An additional Sh32.34 billion in loans and grants from development partners that was targeted at universal healthcare, agriculture, climate change, water and sanitation among other programmes is yet to be made available. This makes a total of Sh39 billion of much needed funds being denied to counties.

On July 6, 2021, the Chair of the Senate Committee on Finance and Budget Charles Kibiru tabled the County Governments Grants Bill that sought to remedy the lacuna in law. The bill was passed by the Senate on September 15, 2021 and forwarded to the National Assembly. The National Assembly considered the bill and passed it with amendments on December 2, 2021. The amendments however, were rejected in their totality by the Senate in its sitting on December 21, 2021 and thus requiring that the Bill be referred to a mediation committee comprising membership from the Senate and National Assembly.

At the heart of the stalemate are teething issues of the new legislation framework such as the title of the bill. The Senate had titled the bill as the County Governments Grants Bill while the National Assembly chose to change the title of the bill to the County Governments Additional Allocation Bill. In addition, the National Assembly went ahead to delete the proposed allocations for the various counties citing that the Bill was only meant to provide a framework of how conditional allocations from the National Government and development partners is to be made and not to initiate an actual disbursement schedule.

With the current financial year now in it’s seventh month of implementation, the stalemate in Parliament has significantly impeded the ability of counties to deliver services to the people.

In as much as there are credible positions being presented by both houses, any further delay in passing the Bill will mean much of the programme objectives set by the national government, counties and development partners targeting the common mwananchi might not be met. There are crucial health, food security programmes and water projects that have since ground to a halt owing to lack of funds. Additionally, the delayed release of funds further exacerbates the financial strains affecting contractors, their employees and in turn causing greater economic pressure on households within the counties.

It is imperative that Parliament makes every effort to dispense any agenda that touches on the availability of funds for the functioning of government at all levels. I, therefore, call on the Speakers of the National Assembly and the Senate to urgently work on establishing the mediation committee, have it consider the Bill and thereafter call both houses back to pass the mediated Bill in earnest. The zeal witnessed in passing the Political Parties Amendment Bill should be employed in the instance of this crucial piece of legislation.