• Meeting with Maa Community


    The exchange centered on the equitable share of resources in the country.
  • Meeting Delegation from Nepal


    Exchanging experiences and best practices on fiscal decentralization.
  • Meeting with Development Partners


    Partners from UNDP and UNICEF Kenya offices.
  • Own Source Revenue Training


    Training county assembly members on model laws
  • CRA hosts Controller of Budget


    Discussion with Dr. Margaret Nyakang’o centered on effective oversight
  • CRA Hosts Nairobi Speaker Hon. Beatrice Elachi.


    Discussion focused on Recurrent Expenditure ceilings for FY19/20
  • Equalization Fund Bill 2019


    Consultation on the Equalization Fund
  • Presentation By Dr. Albert G Zeufack


    Presentation on National Resource Management
  • Annual Congress 2019


    Deputy President and CRA Chairperson follow proceedings
  • CRA Visits Kericho Women Prison


    CSR Project Part of Annual Congress 2019
  • International Conference on Fiscal Federalism


    CRA presented on Fiscal Federalism in Kenya at the conference.
  • Mediation of County Budget


    CRA mediated an agreement between Elgeyo Marakwet Executive and Assembly.
  • LSK National Conference


    CRA Chairperson, Dr Jane Kiringai makes a presentation at the conference.
  • Division of Revenue Bill Mediation


    CRA Chairperson, Dr Jane Kiringai taking part in the mediation process.
  • Visit to Kericho County


    Preparation for Annual Congress of Constitutional Commission’s and Independent Office’s

RECOMMENDATION CONCERNING THE THIRD BASIS FOR REVENUE SHARING AMONG COUNTY GOVERNMENTS

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.

This recommendation builds on lessons learnt from a comprehensive review of the second basis, a comparative analysis of financing transfer systems from other countries, and extensive consultations with national government, county governments, public finance experts, and the public.

This recommendation seeks to address four primary objectives; to enhance service delivery, to promote balanced development, to incentivise counties to optimise capacity to raise revenue and to incentivise prudent use of public resources. These objectives are actualized through a framework that links revenue sharing to devolved functions using three components, namely; service delivery, balanced development and, incentive. In aggregate, the framework allocates 65 per cent of the revenue for enhancing delivery of public services, 31 per cent for promotion of balanced development, and 4 percent to incentivise revenue collection and fiscal prudence.

The service delivery component uses a health index constructed from data on health facility gaps, primary health care visits and in-patient days. The transfer variable for agriculture is based on a county’s proportion of rural households while that for other devolved functions is based on a county’s proportion of total population. Further, the service delivery component also incorporates a basic minimum allocation to each county.

The balanced development component has four variables; roads, urban services, land area and poverty. On roads, the framework uses a rural access index, urban service uses number of urban households while land area uses the proportion of the land size of a county. On poverty, the framework uses the proportion of poor people.

The incentive component of the framework has two measures; the fiscal effort and prudence indices. The fiscal effort index measures a county’s effort to raise own source revenues from the economic activities within the county. The fiscal prudence parameter is a composite index that measures county’s fiscal responsibility. It takes into account; Auditor General’s audit opinion on county utilisation of resources, average county expenditures on development, establishment of internal audit committee and the County Budget and Economic Forum by a county.

The specific weights assigned to the transfer variables in each revenue component were developed using information on existing policies, agreed conventions, actual county government expenditures and transfer shares for devolved functions.

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. This is in line with the provisions of Article 203(d) and (j) of the Constitution.

Proposed Basis of Revenue Sharing among the Counties for FY 2019/20, 2020/21, 2021/22, 2022/23, 2023/24

In accordance with the provisions of Article 217(1), the Commission hereby makes its recommendation on the third basis for revenue sharing for the next five financial years. The recommendation summarized below takes into account the need to align revenue sharing to functional assignment and the criteria provided in Article 203(1) to ensure equity in the sharing of revenues.

Parameters Percentage Weights
1 Health 17%
2 Agriculture 10%
3 Other county services 18%
4 Basic Minimum Share 20%
5 Land Area 8%
6 Roads 4%
7 Poverty 14%
8 Urban Services 5%
9 Fiscal Effort 2%
10 Fiscal Prudence 2%
 

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