County Governments are once again faced with a severe cash shortage as their 2020/21 calendar begins. This is as Senate ponders what formulae to use in allocating funds to devolved units.
With County Governments in desperate need for cash to pay salaries of employees, handle rising cases of coronavirus infections and meet recurrent expenditure obligations, a further delay in disbursements of June allocations from National Treasury, is making matters worse.
The Commission on Revenue Allocation(CRA), the body mandated by law to determine how much each County is allocated, has used the Third Basis for revenue sharing to determine each county’s equitable share for the 2020/21 Financial year.
It has already submitted its recommendations to Parliament and Senate on how the KSh 316.5 Billion will be shared. But Senate is yet to agree on the new formulae.
What this means is that County Allocation of Revenue Bill 2020, which gives Treasury the legal framework to dispatch money to counties in the 2020/21 financial year, is still on ice.
This notwithstanding, Treasury has put conditionalities before it can dispatch the KSh 4.6 Billion that was allocated in the 2019/20 budget for June 2020.
The Council of Governors will have to schedule a meeting to discuss this unfolding crisis, next week. Treasury has insisted that there are counties that must clear their pending bills before any fresh disbursements are made.
At present, a County is allocated funds from the National Government, based on its Population, Equal Share factor, Poverty Factor, Land Area Factor, Fiscal Effort and Development Factor.
Counties were entitled to KSh 362.8 billion from the Treasury, which comprised KSh 316.5 Billion equitable share and KSh 22.8 billion conditional grants.
Without the sharing formula, the KSh 316.5 billion allocated to counties in the current financial year cannot be shared among the 47 devolved units.
Article 217 (1) of the Constitution mandates the Senate to determine the formula once every five years.
The Formulae
In accordance with the requirements of Article 216 (1) of the Constitution of Kenya, the Commission on Revenue Allocation presents the recommendation on the third basis for equitable sharing of revenue among county governments.
The basis is expected to be used for sharing of revenues for financial years 2019/20 to 2023/24.
On implementation of the third basis, the Commission recommends a phasing-in of the formula to avoid disruption in service delivery and development programs.
The proposed approach is to set aside 15 percent of the equitable share increment to cushion counties which would see a reduction in their equitable share in a quantum in excess of 5 percent.
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