Q. What is the mandate of the commission on revenue allocation?
A: CRA’s mandate is to recommend a formula for the equitable sharing of nationally raised revenues between the national and county governments and among county governments; the recommendations are based on a statutory provision. It is the only constitutional commission that has a legal mandate to provide revenue sharing recommendations to parliament.
Q. What role will CRA be playing in budget allocation under a devolved government?
A: The commission’s principal mandate is to make recommendations on sharing of revenue collected nationally between the national and county governments. The commission is also required to make recommendations concerning financing and financial management by county governments. It is also required to make recommendations to Parliament on the appropriations of money from the Equalisation Fund.
Q. What are the major challenges faced by the commission while discharging its constitutional mandate?
A: This is a newly created constitutional commission that, like any other new initiative is likely to encounter a series of challenges. In any reform process there are losers and winners. The un certainties that comes alongside change attracts resistance and irresponsiveness. Losers try to obstruct change because they have genuine fear that reforms will destroy them. We expect that the new government will try to clean the laws to make them in tandem with the spirit of reforms as part of the genuine desire to bring effective reforms.
The Commission has so far received commendable support from the government, government agencies and other Commissions.
Ultimately, the success to the devolved system of government will depend on the collaborative team effort between:
- The relevant government departments,
- The various Commissions tasked with the implementation of the Constitution, and
- The Transitional Authority.
CRA anticipates that human resource capacity might be a challenge in the initial stages, but expects a quick pick by all counties.
The key issues that are outstanding in the preparation for arrival of county governments include:-
- Civil education
- Identification and training of key essential staff
- Locating appropriate office facilities
- Setting up an I.T based financial accounting system
- Recommendations on salary levels by the Salaries and Remuneration Commission
Q: How can the Government cut down expenditure to save money for devolution?
A: The Government will in future need to make major reductions in expenditure in order to save money for the devolved system of government. The savings will come from:
- Reduction of ministries from the current 42 to maximum of 22 set out in the new Constitution and generally maintains lean staffing structures to lower the wage bill.
- Reduction in salaries of elected and appointed public officers.
- Rationalisation of national institutions.
- Employing great measure of austerity in the expenditure of public money.
- Election and appointment of persons of high integrity will also mean reduced levels of corruption, which is known to cost Kenyan taxpayers lots of money.
Q: How has CRA prepared counties to prudently manage the resources to be allocated?
A: The commission, working in collaboration with the relevant arms of government, other independent commissions, the Transitional Authority and other stakeholders will be working to ensure that county governments manage the allocated resources prudently. Civic education is necessary to ensure people understand what it involves to allocate resources equitably.
Q: What measures are in place to ensure the smooth implementation of the constitution especially on devolution?
A: All efforts are being made to ensure that the constitution is implemented. A lot of work has gone into the implementation process in the last two years to prepare ground for county governments and to ensure that devolution becomes a reality. Bills have been enacted and we have had a series of and discussions and resolutions on revenue and county allocations.
Q; What is the effect of the third gender rule both at National and county government?
A: Kenyans must know that the County Assemblies must elect women. Kenyans must elect up to 500 women at the county assemblies’ failure to which the nation will have to nominate up to 750 women in those local parliaments.
It would cost up to Shs. 4.013 billion per year if the gender rule is not met via elections. It will jump to Sh20 billion in the five years that cover 2013 to 2017. The cost will get higher if we decide to nominate women instead of electing them. Besides, nominating women means that we may end up with individuals who are not politicians, and thus, cannot effectively represent their people. It is important that Kenyans elect women leaders.
Q: How was the formula for resource allocation that was recommended by CRA and adopted by parliament arrived at?
A: The Constitution created two levels of government with distinct functions. These functions are distributed under Schedule 4 of the Constitution. The revenue allocation formula is aimed at ensuring that each level of government has equitable resources to perform constitutionally assigned functions.
The recommended equitable revenue sharing formula is a product of a comprehensive process that involved;
- Costing of devolved functions jointly with the Treasury,
- Consultation with both local and international experts, and
- Consultative visits to all 47 counties.
Kenyans should therefore be aware that the recommended formula is a product of wide consultations and in-depth review of the devolved functions and in line with Article 203 of the Constitution.
Article 204 of the Constitution created an Equalization Fund that shall specifically target marginalized areas. The Commission is in the process of developing the policy criteria by which to identify marginalized areas for purposes of this Fund.
The revenue sharing formula that was recommended by CRA and adopted by parliament is in line with the equitable share principles set out in the Constitution. The following five parameters, with their weights were selected and are anchored in the Constitution:
- Population – 45%: this ensures equal allocation to every Kenyan.
- Equal share – 25%: This recognizes the fact that all county governments, irrespective of their size have fixed basic expenses such as running the county executive and county assembly.
- Levels of poverty – 20%: This allocates equal amount of money to the county for every person classified as poor in that county.
- Land area – 8%: Service delivery is more costly in those counties that have expanse land areas.
- Fiscal discipline – 2%: This will promote financial discipline and encourage counties to focus more on raising their own revenues.
Q: How equipped and well-resourced is CRA to monitor effective and transparent allocation of resources to all the areas?
A: The Commission’s principal mandate is to make recommendations on sharing of revenue collected nationally between the national and county governments. The commission is also required to make recommendations concerning financing and financial management by county governments. It is also required to make recommendations to Parliament on the appropriations of money from the Equalisation Fund.
CRA will work with the Auditor General, Controller of Budget, the County Assembly members and Civil Society to provide tight oversight on the County Governor and the Executive with regard to management of funds paid and collected by the County Treasuries.
Q: Who will be accountable for the distribution and monitoring of these funds – is it the central civil service or the county civil service?
A: Both the central civil service and county civil service have specific roles in budget execution and monitoring. The Public Financial Management Act makes specific provisions on this subject. In addition, other government agencies, particularly the Auditor General and the Controller of Budget will monitor the utilization of funds.
Q: What will be the functional and structural relationship between governors and County heads? Who will be in charge of whom?
A: The Governor will be the chief executive of the county and will be responsible for the appointment and performance of the County Executive. Ultimately, the Governor will be accountable to the County Assembly.
Q: What portion of revenue will be reinvested back into the county and what will be remitted to the central government e.g. from tourism in Maasai Mara?
A: Article 209 of the Constitution mandates county governments to collect their own revenues from property rates and entertainment taxes. Revenues generated from these sources will be retained and utilized by the county government. Nonetheless, revenue from national assets will be part of the nationally shareable revenue. Exceptions are envisages under the mining and mineral bill that provides for retention of 5% of revenues at the community level and 15 % at the county level.
Q; How will CRA and other government organs guard against corruption under the devolution governments?
A: The key factors that will guard against corruption in Kenya is first to elect and appoint persons of integrity to public offices. The other is for the Judiciary to move with speed and prosecute those found to have misused public funds. CRA will on its part receive and analyze reports from all counties on a regular basis, but will largely rely on other government agencies to fight corruption.
Q: What is the fate of the current devolved funds such as the Constituency Development Fund and the Local Authorities Transfer Funds?
A: Devolved funds such as CDF and LATF will in future be merged with the 15% allocation so that all monies will be channelled through the offices of the Governors. Members of Parliament under the new Constitution will be tasked with making legislation in Nairobi. The responsibility of spending money in the counties will be left to the County Government Executive, led by the Governor.
Q: What are the financial powers of the governor and county assembly? Does the latter approve use of funds as the National Assembly does after budget reading?
A: The Governor’s role is to prepare the budget and submit it for discussion and approval by the County Assembly. The County Assembly will be monitoring the expenditures by the County Executive on a regular basis.
Q: There are fears that county governments might have to raise the amount of levies they charge to cater for the great expectations residents have on them. What measures have you put in place to ensure this will not be the case?
A: The Constitution lists the taxes that county governments may impose. These include: property taxes, entertainment taxes and any other tax that is authorised to be imposed by an Act of Parliament. They are also permitted to impose charges for services.
The Constitution goes further to state that the taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or national mobility of goods, services, capital or labour. It should be borne in mind that every county government will be making every effort to attract local and foreign investors to their county. They will therefore be very careful not to be seen to imposing higher taxes than other counties.
Q: One of the contentious issues in the Finance Management Bill was the definition of what the 15 per cent of the revenue to be shared mean, with the Treasury insisting it is only what the Kenya Revenue Authority collects and does not include grants. Which definition have you adopted?
A: The revenue that has been raised nationally that shall be shared will include taxes collected by the Kenya Revenue Authority as well as all other revenues such as stamp duty, land rent, dividends and interest received. The major revenues that will not be shareable are loan proceeds such as receipts from Treasury Bills and Bonds including loans from foreign governments. There are no differences that we are aware of between our Commission and the Treasury regarding the revenue that will be shareable.
Q: Who will foot the bill for the construction of county headquarters? Is it the County government or the national exchequer?
A: It is generally agreed that there are enough buildings in the proposed county headquarters and therefore, there will be no requirement to allocate money for construction. The Transitional Authority, will work closely with the Ministry of Public Works to identify the current offices of Local Government and Provincial Administration that will be renovated to house the County Executive and County Assembly. In the exceptional cases that additional buildings will be necessary then the National Government will meet the bill for such construction.
Q: There have been conflicts in the past with local residents laying claim to national resources located in their areas. How will revenues from such resources be shared out?
A: Revenue arising from the national resources such as coal and oil, if and when discovered, is first collected by the national government and be shared out through the equitable formula. The draft Mineral Bill has rightly made a proposal that a certain percentage of the revenue from such national resources shall be paid to county in which the resource is located.