Why counties’ Sh40 billion allocation remain unused

A decision by governors to go to court seeking to have the allocation of Sh39.9 billion conditional grants suspended pending the enactment of a law outlining how the money should be disbursed has now returned to haunt them.

Due to the court case, the money is being withheld by the National Treasury.

Governors had protested the disbursement of the money in tranches and wanted a law to be passed to make it clear how the grants should be allocated.

Chairperson of Commission on Revenue Allocation (CRA)Jane Kiringai said yesterday that the governors’ decision to move to court was counterproductive as the conditional grants billions continue to lie in “limbo” at the National Treasury.

“The move by the governors to go to court was self-undermining and self-defeating,” Kiringai told the National Assembly’s Public Accounts Committee yesterday.

She had appeared before the committee chaired by Ugunja MP Opiyo Wandayi over the report of the Auditor-General on the accounts of CRA for the 2019/20 financial year.

As a result of the governors’ move, Kiringai told the committee, Treasury cannot release the money pending the determination of the suit.

“Funds are lying idle and cannot be disbursed. This will evidently affect service delivery at the county governments,” Kiringai added.

The funds had been part of the Division of Revenue Bill (DoRB) 2021 that was passed by the National Assembly in March.

By the time the National Assembly was passing the DoRB, which allocates financial resource to the two levels of government, the court had not determined the case filed by the governors.

However, when DoRB was taken to the Senate for concurrence, it was amended to delete the inclusion of Sh39.9 billion conditional grants in line with the High Court ruling.

The court argued that conditional grants cannot be part of the shareable revenue between the national and the counties and that a policy framework needs to be established first.

Policy framework

The ruling meant that counties will only access the Sh370 billion in equitable sharable revenue for the 2021/22 financial year until there is a framework in place.

To implement the High Court ruling, the County Governments Grants Bill 2021 has been introduced in the Senate to have the grants channelled directly to the County Revenue Fund at the Central Bank of Kenya.

But Kiringai warns that until a policy framework is first approved by the Cabinet and adopted by Parliament, nothing moves.

This means that the counties will have to wait longer before they can access the funds.

While moving the report of the Budget and Appropriations Committee that considered the Senate amendments to DoRB, committee chairman Kanini Kega (Kieni) said there is need to establish a legal framework for the transfer of the conditional grants to the county revenue fund.

Medical equipment

The ruling affected Sh32 billion for conditional allocations from the national government and other development partners and the Sh7.21 billion that had been allocated to counties for the leasing of Medical Equipment Services (MES) in the current financial year.

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 project.

Others include Sh5 billion water and sanitation development project, Sh2.8 billion Kenya informal settlement improvement project II financing and Sh2.23 billion transforming health systems for universal care project.

Garissa Township MP Aden Duale, a member of PAC, said the court ruling now gives the National Assembly the powers to oversight the usage of the funds.