Cartels exploit internal leakages to deny counties revenue targets, says CRA

Report on 15 counties cites political interference, dubious vendors with powers to control the systems

In Summary

• Nairobi and Mombasa have the capacity to collect Sh77 billion and Sh13 billion respectively. 

•Parallel systems exploited to evade scrutiny as employees lack skills to operate and manage collection methods. 

Nairobi senator Mike Mbuvi Sonko. Photo/File
Nairobi senator Mike Mbuvi Sonko. Photo/File

Cartels exploit loopholes in the revenue collection system to loot billions of shillings from counties, a Commission of Revenue Allocation report shows.

The most affected counties are Nairobi, Mombasa, Kisumu and Nakuru. Their massive revenue shortfalls are occasioned by internal leakages, says the report.

The report on 15 counties says Nairobi and Mombasa have the capacity to collect Sh77 billion and Sh13 billion respectively.


The two collected Sh10.1 billion and Sh3.6 billion respectively in the 2017-18 financial year, a far cry from their potential.

The report cites political interference in the management of county revenue, poor and inaccurate revenue forecasting, amorphous target setting for revenue officers and poor enforcement.

"In a number of instances, enforcement officers double as revenue collectors,” the CRA says.

Nakuru and Kisumu have the capacity of collecting Sh10 billion and Sh7 billion. They collected Sh2.8 billion and Sh1 billion respectively in the year under review.

"Based on county revenue potential study undertaken by the National Treasury, all counties have significantly higher potential than what is being collected,” the report says.

It flags counties for utilising funds at the source.  This is against the law.

The loss of revenue collected is blamed on county employees and dubious vendors with powers to control the revenue systems at will.

“Real-time revenue information is only visible to the system vendors and not to the county executives. Revenue share models between the counties and vendors ranging from 1-6 per cent on the revenue collected," the report reads. 

There is a need for a regulatory framework on how vendors manage revenue systems as there was multiplicity with each functioning in silo mode, making it hard to track the funds, the CRA report notes.

Some counties had put in place parallel systems to evade scrutiny as county employees lack skills to operate and manage revenue collection systems, the report reveals.

“Most systems were operated and managed by vendors, thus making it difficult for counties to have access to valid data when required. The total cost of ownership of the systems is also very high based on the current revenue share models,” it says.

The study was conducted in Siaya, Kisumu, Vihiga, Meru, Murang'a, Garissa, Trans Nzoia and Isiolo.

The other counties surveyed were Lamu, Kwale, Machakos, Kiambu, Turkana, Nairobi and Kakamega.

The report notes that the cartels have created schemes that aid the swindling of public funds meant to strengthen the devolved units' financial muscle.

The study warns that governors and MCAs have remained rigid in pushing for laws that entrench accountability at the grassroots level because of their greed. 

“Counties are severely lagging behind in passage of relevant legislation and regulations to duly enable the collection of own-source revenue," the report says.

Most of the reviewed counties had automated revenue generation systems with as little as 20 per cent of the streams partially digitised.

“For instance, not all counties have automated their revenue collection or adopted policy and legislation to support efficient revenue management. Even counties that have automated systems have only done so at the headquarters towns and subcounty level,” the report reads.

The report was prepared by the inter-agency task force on integrated county revenue and presented to governors in Mombasa last Thursday.

 The committee includes members of the CoG, ICT ministry, National Treasury, Kenya Revenue Authority and Controller of Budget.

Others are the Attorney General, Central Bank and the Senate who will use CRA as the secretariat.

The national government led by ICT Cabinet Secretary Joe Mucheru was also present as was CoG's  Bungoma Governor Wycliffe Wangamati who chairs the Finance, Planning, Economic Affairs and ICT Committee.

“Anything that is not part of the automated revenues is clustered under Miscellaneous Revenue which is a major avenue for revenue leakage,” CoG said at the meeting.

The report follows President Uhuru Kenyatta's directive to the Treasury to establish a single County Revenue Management System (CRMS) to be used by all counties.

The digital system, according to the President, will plug revenue leakages, improve revenue collection and eliminate duplication and wastage of resources.

Counties also operated multiple bank accounts, which made it hard to track the end-to-end flow of funds.

County chiefs and MCAs were reluctant to implement reforms, automate the collection of funds and ensure professionalism.

(Edited by R.Wamochie)