Devolved units have underperformed by about 75%, resulting in poor service delivery, stalling of development projects and a failure to deliver on essential services
County governments have for the seventh year running failed to meet their targets in the collection of their own source revenue, leading to poor service delivery and the collapse of some key development projects.
An analysis of a report released by the office of the Controller of Budget shows that governors have year after year failed to meet the set target of about 75% in collecting revenues in counties.
This in the end, has resulted in poor service delivery, the stalling of certain development projects and in most cases, the failure by governors to deliver on essential services to residents.
The report argues that while Article 209 (3) of the Constitution allows county governments to impose various rates with the aim of generating revenues, many counties are grossly underperforming in the area.
In the just ended 2022/23 financial year for instance, the 47 county governments collected about Sh28.77 billion from their own source revenue in the first nine months, representing 46.6% of the annual target of Sh62.10 billion.
The report notes that while the collection was a slight improvement of what the counties generated in a similar period in the previous financial year, it was still below the target.
The devolved units, according to the Constitution, are authorized to collect taxes from areas such as property rates, entertainment taxes and any other tax that a county is authorised to charge by an Act of Parliament.
During the reporting period, the Controller of Budget argues, almost a half of the 47 counties recorded below 50% performance in revenue collection, signaling the enormous task that the devolved units have to improve their collections.
Of the 47 counties, the 22 that failed to hit the 50% performance target were Nairobi City, Kwale, Embu, Kisumu, Kakamega, Taita-Taveta, Tharaka-Nithi, Busia and Garissa.
Others were Tana River, Nandi, Mandera, Wajir, Makueni, Homa Bay, Kisii, Kajiado, Nakuru, Murang’a, Kericho, Vihiga, and Nyamira.
A further analysis of own source revenue as a proportion of the annual revenue target indicates that Kitui, Kirinyaga and Vihiga counties achieved the highest performance of 84.6%, 80% and 77.2% respectively.
“The underperformance of own-source revenue collection implies that the counties could not implement some planned activities due to budget deficits,” Controller of Budget Margaret Nyakang’o says in the report.
“The Controller of Budget advises county governments to enhance revenue collection strategies to realise the OSR targets and fully implement the approved programmes,” she adds.
Equally, an analysis of the trend in performance of own source revenue collection previous years, also shows that performance has always been below the set targets.
For instance, a report published by the Commission on Revenue Allocation in conjunction with the World Bank estimates that the revenue potential of all 47 county governments is at least Sh215.6 billion against their current own source revenue collections of Sh35.9 billion in FY 2021/22.
The CRA, in their report on the status of own source revenue in counties, further argues that a look at the past trend shows that more work still needs to be done to boost the numbers and improve collections for proper service delivery.
The collection in counties in the past have been at about Sh32 billion in 2017/18 financial year, Sh41 billion in 2018/19 financial year, Sh35.9 billion in 2019/20 financial year and Sh34.4 billion in the 2020/21 financial year.
And to address this underperformance, the Controller of Budget recommends that counties must now develop and implement alternative measures to ensure the improved generation of revenue for the budget to be fully financed.
The devolved units, Ms Nyankang’o argues, must also do this to help improve the absorption of development budget expenditure.
CRA, had in their previous recommendations, also suggested a raft of measures, including developing policies to help the devolved units boost their collections.
Some of these policies include the National Policy to Support Enhancement of County Government’s Own Source Revenue by an Inter-Agency team which was approved by Cabinet in August 2018.
Other efforts to enhance county governments own source revenue by CRA include the development of the National Rating Bill which aims to unlock more revenues for counties from property taxes and the County Governments’ (Revenue Raising Process) Bill.
The Bill outlines the process to be followed by counties in exercising their constitutional power to impose, vary or waive taxes, fees, levies and other charges.
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