• Gathungu says the Treasury did not transfer any allocation to the fund in 2020-21.
• She attributes the low disbursement rate to the delayed formulation of policies, late project identification and legislative hurdles.
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The office of the Auditor General has raised concerns that the objective of the Equalisation Fund may not be achieved due to poor disbursement of cash by the National Treasury.
In her report, Auditor General Nancy Gathungu says Sh30.78 billion had accumulated under the fund in the last 10 years, but only Sh12.4 billion had been transferred to the Equalisation Fund account as of June 30, 2021.
This means Sh18.38 billion has yet to be transferred to the fund's account.
“Further, the amount transferred was done in two tranches of Sh6.4 billion during the 2015-16, and Sh6 billion in 2016-17,” the auditor says.
This, she says, is only 40 per cent of the total entitlements for 2011-12 to 2019-20.
Gathungu says the Treasury did not transfer any allocation to the fund in 2020-21.
“This was attributed to a High Court ruling that declared the guidelines on the administration of the fund published on March 13, 2015, null and void,” she says.
Gathungu says out of the Sh12.4 billion, only Sh10.18 had been disbursed for the approved projects through the parent ministries to the identified counties, leaving a balance of Sh2.21 held in the account.
Additionally, out of the disbursed amount, only Sh8.83 billion had been spent as of June 30, 2021, hence a balance of Sh1.35 at the parent ministries in their respective bank accounts.
“The disbursed amount of Sh10.18 billion represents a dismal overall performance of 33 per cent since inception of the fund,” she says in her 2020-21 report.
She attributes the low disbursement rate to the delayed formulation of policies, late project identification and legislative hurdles.
Article 204 of the constitution provides for the establishment of the fund which shall be paid one-half per cent (0.5 per cent) of all the revenue collected by the national government each year.
The fund ceases to be operational after 20 years from the effective date.
It is calculated on the basis of the most recent audited accounts of revenue received, as approved by the National Assembly.
About 14 counties including Turkana, Mandera, Wajir, Marsabit, Samburu, West Pokot, Tana River, Narok, Kwale, Garissa, Kilifi, Taita Taveta, Isiolo and Lamu were identified as beneficiaries.
The fund is aimed at providing basic services such as water, roads, health facilities and electricity in specific counties so that the quality of the services in those areas are at a level generally enjoyed by the rest of the nation.
The Commission on Revenue Allocation developed a policy for identifying marginalised counties and formula for sharing of the fund.
The framework was also to guide on the planning, implementation, monitoring and evaluation of the fund.
This policy was presented and approved by Parliament in December 2014.
A guideline on the administration of the fund was developed the same year and a Senate Select Committee was set up to review it.
Parliament later approved the guidelines together with the policy.
The guidelines stipulated the sources, objectives, administration, and management and winding up of the fund and proposed that a framework be developed for how the cash would be disbursed.
In February this year, Parliament approved the nomination of Abdullahi Adan Khalif to its board, giving hope of the realisation of the prospects of the fund.