LEGAL BASIS

Treasury seeks AG nod for release of 50 per cent county cash

'A further increase in the county revenue share will be disastrous as we will be forced to borrow'

In Summary

• Senators vouch for a consent between parties in court over DoRB to enable the devolved units access funds.

• Treasury cannot rely on Sh314 billion as it was based on a falsified revenue projection.

Treasury buildings.
Treasury buildings.
Image: FILE

Counties might after tomorrow access up to 50 per cent of their last approved revenue t0 ease a cash crisis that has rendered them dysfunctional.

However, the proposal by the National Treasury for the advance transfer has attracted a split over what to cite as the basis for the emergency share.

Acting Treasury Secretary Ukur Yatani maintains they will work with Sh310 billion, but senators say the amount was revised upwards to Sh314 billion.

 

The Treasury is banking on an advisory from the Attorney General to determine how much money would be released from the exchequer.

Yatani said the ministry avoided the Sh314 billion as it was based on a falsified revenue projection, hence cannot be relied on.

Further, he told senators at the Finance committee that the Kenya Revenue Authority fell short of its target by Sh190 billion and, therefore, may have to borrow.

“A further increase in the county revenue share will be disastrous as we will be forced to borrow. This is not an option,” the CS said.

“We need to be pragmatic in dealing with this matter since the mediation process has no fixed timeline. We can work with any figure and adjust later when the laws are approved,” he said.

Yatani cautioned that the Treasury is considering budget cuts for ministries and other state agencies factoring the missed revenue targets.

Counties have been grappling with a cash-flow crisis since the beginning of the current financial year following a stalemate between the Senate and the National Assembly over the Division of Revenue Bill, 2019.

 

With the bill not yet approved, there is no legal basis for which the National Treasury can release all the funds to the devolved units.

At least 20 counties have not paid the July salaries.

To get out of the quagmire, the committee chaired by Mandera Senator Maalim Mahamud advised the Treasury to reach a consent with the parties in court to unlock the funds.

Makueni Senator Mutula Kilonzo asked: “What would be so difficult in reaching consent with the Council of Governors, Commission on Revenue Allocation, Controller of Budget, and Parliament to allow access to 50 per cent of the 2018/19 allocation?”

Yatani responded that it would be difficult as the legal framework which backed the previous financial year elapsed at the end of the said period, hence cannot be applied.

He said the Sh310 billion is based on the budget estimates approved by Parliament after the budget reading in June.

Mahamud noted that the path to amending the PFM Act would be long yet the counties are struggling to operate.

The committee asked the Treasury to apply the precedence set in 2014/15 when the Division of Revenue Bill was challenged in court.

At that time, counties received part of the national share of revenue while still awaiting the outcome of the court process.

However, the Controller of Budget said the County Allocation of Revenue Act had been passed at that time, hence, provided the legal basis for the advance transfers.