• County governments should strive to curb their direct personnel costs to the internationally acceptable standards.
• The development-recurrent ratio is always in favour of the recurrent.
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Counties should raise their development expenditure to 40 per cent of their budgets, the Senate’s Finance and Budget Committee heard on Wednesday.
The Institute of Certified Public Accountants of Kenya (ICPAK) said increasing the expenditure from the current 30 per cent would result in faster development.
The Public Finance Management Act, 2012 recommends that counties allocate at least 30 per cent of their budgets to development and 70 per cent or less to recurrent expenditure.
ICPAK public policy and research division manager Hillary Onami said county governments should strive to curb their direct personnel costs to the internationally acceptable standards.
“County governments have development expenditure problem where the development-recurrent ratio is always in favour of recurrent expenditure,” he said.
Onami made presentations to the Senate committee on the proposed revenue allocation formula by the Commission on Revenue Allocation.
He said ICPAK supports the new revenue sharing formula but with a few reservations.
The CRA has proposed disbursement of allocation funds based on devolved functions.
In the first and second formulas, population, basic equal share, poverty, land area, development, personnel emolument and fiscal responsibility were the key parameters.
In CRA’s new proposal health was assigned 17 per cent, agriculture (10 per cent), urbanisation levels ( 5 per cent), road network (4 per cent), land area (8 per cent).
Other considerations were poverty (14 per cent), fiscal effort (2 per cent), prudent use of public resources (2 per cent), all other services (18 per cent) and equal share (20 per cent).
Yesterday, Onami said counties in urban and arid and semi-arid counties stand to lose if the agriculture parameter is applied across the board.
“Losing out 10 per cent is huge. There is a need for clarity on gains that affected counties will get to compensate for possible loss of revenue through this parameter,” he explained.
He added that the institute supports the fiscal effort parameter to enhance county own source revenue collection.
“Counties that realise 80 per cent or above of their projected own revenue targets should be allocated 100 per cent of funds under this parameter.
“Those that realise between 50 and 80 per cent should be allocated 50 per cent of funds available under this parameter.
“Counties that get below 50 per cent should get nil allocation under this parameter,” he explained.
Machakos Senator Boniface Kabaka said proposals should encourage the distribution of national resources rather than allocation.
Governors from Northeastern have since rejected the proposed revenue sharing formula terming it anti-devolution.
They said the formula does not allow the flexibility required by the county governments to allocate resources to where they are needed most.
(edited by O. Owino)