Counties Overreliance On Gov’t Disbursement Paralyse Service Delivery, Says Report

The County governments continued reliance on the equitable share from the national government is derailing service delivery in the devolved units a new report has revealed.

The report by the Institute of Public Finance (IPF) has revealed that This overreliance on equitable share has negatively affected service delivery, especially whenever there are delays in disbursing funds from the exchequer.

The counties are still grappling with sub-optimal own-source revenue according to the Findings from the Macro-Fiscal Analytical Snapshot Kenya 2022/23.

John Nyangi, Senior Research Analyst at the Institute of Public Finance says that the health sector is the most affected by this over-dependence.

“This is evidenced by the recent dropping of 8 million Kenyans by the National Health Insurance Fund (NHIF) out of the approximated 15 million it covers due to default in payments,” reads the report.

This however stands out as an ironical outcome since the current government proposed to tap into the informal sector for revenue, yet a huge percentage of the fund are from the informal sector.

“Kenyans should be able to bring in more funds from taxes to the exchequer to support the health sector and be able to fill in gaps that will be left by the donors and foreign aid,” said said John Nyangi, Senior Research Analyst at the Institute of Public Finance.

According to a report by the Commission on Revenue Allocation (CRA), counties have the potential to collect Sh260.6 billion, up from the Sh35.9 billion collected in 2021/2022 financial year.

However, also problematic is the over-emphasis on public hospitals as a source of revenue, which contradicts the government’s policy of attaining universal health coverage. (UHC)

“Over the years, there has been a decline in ‘out of pocket spending’ on health but it has stagnated. About 24% of total health spending in Kenya is ‘out of pocket’ yet for any country to achieve universal health coverage ‘out of pocket’ expenditure should not exceed 20%,” added Mr. Nyangi.

“This is an indication that more Kenyans are being sent to poverty as a result of high costs they have to incur in order to access health services annually.”

According to the Snapshot, key revenue streams that could support enhanced revenue mobilisation by counties include property rates, parking fees, outdoor advertising and cess fees. Even with dismal performance in own source revenues, counties have consistently spent more than 35% of their revenue on salaries and wages, contrary to the provisions of the Public Finance Management (PMF) Act, 2022.

To increase own-source revenue collection, counties need to automate their revenue administration system and set revenue targets that are commensurate with their revenue potential, as recommended by the Commission on Revenue Allocation. (CRA)