Devolution ushered in and reinforced a new era of financial governance. This new reality brought about the need for bold reforms in how both levels of government manage and use public resources.
The Public Finance Management Reforms Secretariat is tasked with coordinating these reform initiatives. The measures currently being implemented will most certainly define devolution in the decades to come. I will however focus my attention on the four key areas that fall squarely under the Public Financial Management Reform Strategy 2018-2023.
In an assessment visit of three coastal counties—Mombasa, Tana River and Kilifi—I noted with pleasure the success these reforms have had on the fortunes of these counties, particularly in service delivery and revenue collection.
Firstly, we focused on assessing the element of financial reporting in counties. The Public Sector Accounting Standards Board established by the Public Finance Management Act is mandated to provide guidance as far as financial reporting is concerned. The PSASB has developed revised templates to be used by counties for their annual financial statements.
The information contained in financial reports made by counties is useful with respect to investment decision-making, monitoring and oversight. The three counties exhibited compliance to the reporting standards, greatly enhancing transparency and accountability.
Capacity building on financial reporting is necessary to ensure those financial reports are easily understood by ensuring the information is clearly presented, with additional information supplied in the supporting footnotes as needed to assist in clarification.
The second focal area is the audit functions in the counties. Reforms in these sectors have seen all three counties constitute audit committees. The committees provide an independent expert assessment of top management activities, quality of risk management and have become an important feature in good corporate governance.
The success in establishing these committees has given the coastal counties a valuable lead in transparency and accountability of public funds.
Reforms are also being undertaken at the procurement function. Governments are known to be the biggest spenders in any economy, and this is reflected in the county governments. The three counties have so far received extensive sensitisation on the new Public Procurement and Asset Disposal Regulations 2020.
End-to-end automation of the procurement processes has been well adopted in all three counties, with IFMIS supplier portal being the primary element of use. Mombasa has had tremendous success in automation, with tenders and quotations being processed online. The National Treasury is currently developing an electronic government procurement system to provide end-to-end automation of the procurement process.
Revenue collection remains an important area of reform attention. End-to-end automation of revenue processes is ongoing in all three counties. According to the Commission on Revenue Allocation, Taita Taveta and Mombasa are among 15 counties that have doubled their revenues in the past six years. This can be attributed to the revenue automation reforms.
To put this into perspective, Taita Taveta has seen a drastic increase in its own source revenue for 2020-21 where it collected Sh363 million against a target of Sh315 million. Mombasa collected approximately Sh3.1 billion against a target of Sh5.2 billion in own source revenue in 2020-21 despite the impact of Covid. This only goes to illustrate the potential impact automation has on revenue collection by counties.
A key area of reforms that requires attention is undertaking capacity building for counties to update their respective valuation rolls and land registers to efficiently maximise property taxes. The three counties inherited old valuation rolls used by the defunct municipalities and this has affected taxes charged on property, contributing to low revenues.
Efforts by counties to update valuation rolls has encountered resistance from stakeholders who have lodged court cases consequently derailing progress. Outdated valuation rolls undermine the property tax base and the legitimacy of the rates levied. Reform in the property rates area will empower counties such as Mombasa to drastically shore up their own source revenues.
On the up side, it’s encouraging to note that the counties are learning from each other’s success. Mombasa's E-portal has been a relative success with county payments now 100 per cent cashless. Payments for county services such as parking tickets can now be done from anywhere in the world.
In this regard, Mombasa has received benchmarking delegations from counties such as Kakamega, who are keen on replicating such successes. By rethinking the value of reforms, coastal counties can deliver services more efficiently and better serve their population.
Communication consultant, EU Governance Project
