•The court also said counties cannot undertake devolved functions without first executing inter-government agreements.
•Should Senators amend the bill, the same would be subjected to a lengthy mediation process hence may scuttle the 2021 budget process.
The Division of Revenue Bill, 2021, could run into a deadlock amid contention on the appropriation of the conditional grants to county governments.
A technical committee reviewing the bill told Senators that the monies should not be part of the bill which was passed by National Assembly recently.
The technical team cited the ruling by Justice Antony Makau which upheld prayers by governors that the national government cannot allocate itself funds.
The court also said counties cannot undertake devolved functions without first executing inter-government agreements.
It was further ruled that conditional and unconditional grants should be netted from the national government’s share of revenue and not from overall revenues raised nationally.
Following the decision, the technical committee sought that there be a legal instrument – a separate bill, to enable the allocations.
It argued that conditional grants cannot be contained in the bill, not even as a memo item adding that the ruling did not consider best practices globally.
The team thus recommended that the bill be amended to drop any reference to the conditional allocations by deleting the schedule in the bill.
The technical committee sought that a new schedule be slotted that provides for total sharable revenue, national government share, equalization fund and county share.
“We did not know whether there was an opportunity to appeal the court ruling as a long term option to address the gaps,” Albert Mwenda, National Treasury’s Director-General of Budget, Fiscal and Economic Affairs, said.
He made the remarks during a Senate Committee on Finance and Budget chaired by Senator Charles Kibiru of Kirinyaga county.
The meeting with the National Treasury, Commission on Revenue Allocation (CRA) and the Attorney-General (AG) was part of stakeholder engagement on the Division of Revenue Bill, 2021
Fred Machi, Senior Principal Counsel at the AG’s Office, said the office had issued a notice of appeal to counter the ruling.
“As we speak, the notice has been issued and we are waiting for the documents from the High Court to launch an appeal. The process has started,” he said.
The court said funds be disbursed to the county through the County Revenue Fund.
Laikipia Governor Nderitu Muriithi, chairman Council of Governors Finance Committee, said the question was how the funds would be expended if not contained in a budget.
“How would the money be withdrawn from the County Revenue Fund if there is no law underlying the process.”
He proposed that the bill be amended as proposed by the committee to exclude the conditional grants from the other provisions.
“The legal instrument could be an additional Act that could draw from the constitution in line with the decision of the court.”
Trouble is that proceeding with the allocation in disregard of the December 2020 ruling may amount to breach of the law.
Council of Governors CEO Jacqueline Mogeni said the matters referred to as the court judgement were an obita dictum – opinion of the judge.
But CRA chairperson Jane Kiriangai said it would be detrimental to proceed with the bill minus the conditional grants.
“The whole process of saying the conditional grants should not be in the division of revenue bill undermines the budget,” she said.
She urged Senators to pass the DORB and then the committee can work on the legislation to segregate the conditional grants in a separate bill.
Senator Ochillo Ayacko, the Finance Committee Vice chairperson, appreciated that an appeal was within the right of the parties, but noted that litigation would be time consuming and limited in scope.
“If we are to fix this matter in the long-term a legislative solution would address both ends,” the Migori Senator said. “We need to deal with this matter as it will claw back on the Senate mandate and undermine devolution.”
Others present at the meeting were Senators Aaron Cheruiyot, Mutula Kilonzo Jr, Rose Nyamunga, Governor Ndiritu Murithi (CoG Chair, Finance Committee), Dr Jane Kiringai (Chair, CRA) and Phyllis Makau (Director, Parliamentary Budget Office), among others.
Makau said there was more transparency when the numbers are reflected in the Division of Revenue Act, adding that MPs should just pass the bill since there is no framework for handling conditional grants.
Mutula Kilonzo Jr said the framework of conditional grants is opaque hence Senators don’t understand how they are used and negotiated.
“I agree with the judge that a proper legal framework be established to account for conditional grants. At what point does the Senate oversight the conditional grants?” he asked, saying the appeal of the ruling is outrageous.