- The breach was flagged by the technical committee reviewing the Division of Revenue Bill, 2021, during a Senate Finance Committee meeting on Friday.
- Should senators change the Bill, it would have to be subjected to a lengthy mediation process.
Image: FAITH MUTEGI
Lawmakers could have ignored court orders barring the inclusion of conditional grants in the Division of Revenue Bill.
MPs passed the Bill, which determines the share of revenue between the national and county governments, before proceeding to the recess caused by a spike in Covid-19 infections.
Should senators change the Bill, it would have to be subjected to a lengthy mediation process hence may delay the passage of the next financial year’s budget.
The courts, in a petition by governors, ordered that the national government cannot allocate itself funds for and execute devolved functions without executing intergovernmental agreements.
Judge Aaron Makau, in the December 2020 decision, held that all funds earmarked in the Division of Revenue Act as conditional grants should be netted from the national government’s share of revenue.
At the moment, the allocations are netted from the overall revenues raised nationally – currently pegged on the audited accounts of financial year 2016-17.
The judge also issued a declaration that such funds be disbursed to the counties through the County Revenue Fund as provided for in Article 202 of the Constitution.
The courts further said that national interest – under which some county funds are allocated - does not necessarily connote functions of the national government.
In the case where governors challenged the Division of Revenue Act, 2016, Makau said the inclusion of the conditional and unconditional grants in the Revenue Bill was unconstitutional.
The matter was flagged by the technical committee reviewing the Division of Revenue Bill, 2021, during a Senate Finance Committee meeting on Friday.
The team headed by Albert Mwenda, who is the National Treasury’s director general of Budget, Fiscal and Economic Affairs, has recommended that the monies be excluded from the current Bill.
The technical team thus wants the references to the conditional grants, among them donor funds and funds allocated under medical equipment scheme.
They said the provision that such allocations cannot be appropriated by the county assembly present challenges of accountability of the funds.
Mwenda, however, said they may not want the process to delay citing the earlier decision that the bill be passed before the Finance Bill is introduced.
The technical team said the conditional grants cannot be contained in the Division of Revenue Bill, not even as an item in the bill’s memorandum.
It thus sought that a special legal instrument be crafted to solve the debacle, further citing the ruling for inconsistency with other laws – and other jurisdictions.
Mwenda’s team recommended that the bill be amended to drop any reference to conditional and unconditional allocation by deleting the existing schedule.
It wants a new schedule slotted that provides for total sharable revenue, national government share, equalization fund and county share.
The committee was briefing senators during a meeting with the National Treasury, Commission on Revenue Allocation and the Attorney-General.
Senate Finance committee chairman Charles Kibiru (Kirinyaga) said the issues pointed out show the importance of having checks and balances on the bill.
“One can see the benefits of having checks and balances. If it were not for the Senate we would have just passed the bill as a conveyor belt and people would have gone to court,” he said.
Fred Machi, senior principal counsel at the Office of the Attorney General, 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 formally launch an appeal. The process has started,” he said.
Commission on Revenue Allocation 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.”
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.