The Commission for Revenue Allocation

Phil

Is Billow Kerrow not at the KACC in one role or other - (I recall a controversy about his appointment) so he would have been ineligible.

As Mati, he would have struggled to get through for many reasons key among them being rather "loud mouthed" and also the reasons leading to his removal from TI.

Phil;

The CRA nominee list was out already. I will look for a link. Actually, the constitution provides that political parties would nominate most of them - not the president/ PM. ODM nominated 4 and PNU three. Then the principals nominated the chairperson.

It is clear that if you are outspoken, you hardly stand a chance in such appointment. This could be an important lesson those eyeing public appointments in future.

BTW - I might just take you up on that Tusker Malt offer - i dont know it was on which discussion.

Kamale,

I am sure by "loud mouthed" you mean Kenyan patriots with the guts and courage to stand up to the kind of power some of you worship.

I am also very sure you would prefer "silent lambs" like your buddy Ringera who cheered drug traffickers and racked in millions pretending to fight corruption.

I will talk about the other stuff.

adongo

In yesterday's session, I think there was an MP who had a question to one of the ministers to confirm what the government was doing to prepare the capacity of country governments in their new role as envisaged in the new constitution. I havent seen the answer but I will endeavour to post it here if I come across it.

But, yes, I think Kshs.3b is not lose change to most of our starved counties. This money must be well invested/spent and be accounted for. If what I have been seeing in the corruption infested CCN council meetings is what will happen in county government, the the CRA has its work cut out.

Does the constitution talk about accountability of the county government or these have been left to parliament to legislate, and hence the question by the MP?

its Kamale's intention to derail this and other threads simply because they are critical of some of the decisions reached by his BEST.

You can see the emotion and the anger. That does not add value to Jukwaa does it?

Adongo

Defence has been a concern I also had for sometimes considering the tender/procurement issues on-going in Parliament. We as a country have lost a lot of resources on defence and how I wished we could finally see the last of the mis-use or abuses of defence resource allocation.

However, I don’t think you are quite correct to say that the CRA will allocate resources, and even determine the expenditure matters like defence. That is the role of Parliament. I understand the CRA to be body, which only recommends. And that recommendation is solely on two issues, a) national vis-a-visa county govt and , b)among counties.

Check out sect. 216

216. (1) The principal function of the Commission on Revenue Allocation is to make recommendations concerning the basis for the equitable sharing of revenue raised by the national government––
(a) between the national and county governments; and
(b) among the county governments.


Recommendation is on very specific grounds only. So CRA could not therefore recommend expenditure, which is a general mandate for national government, like defence, nor can it recommend expenditure within counties. In cases of national expenditure, that role still remains that of the Parliament who have to pass annual financial bills, including the budgets. The Bills will originate from the Treasury who will have the mandate to formulate a national budget. And for the counties, it is their own county assemblies who will determine their expenditures having written their own budget. Of course the audit body will continue to audit expenditure after the events, as they do now. The bottom line the CRA will generally be a toothless dog who can do very little in terms of budgetary formulation and allocation but only recommend national/county and intra-county allocation. The only useful mandate that CRA will have will be to determine policy by which marginalised areas are classified and how much more do they need in resources in comparison with others.

Sadik.

I am back as promised and now I can give you my thinking on the role of the CRA-v- the ministry of finance which I suspect will be combined with national planning. The era of 40 ministries expires in 2012.

The supposition you make below is completely untrue if you look at the mandate of the CRA as stipulated in Sec 216 which you quoted.

This is what you said:

"The bottom line the CRA will generally be a toothless dog who can do very little in terms of budgetary formulation and allocation but only recommend national/county and intra-county allocation".

Nothing could be further from the truth. In fact the ministry of finance will not even know how much money is available for their budget until after the CRA has informed them of their budgetary allocation for the year in question. Of course this has to go through parliament, which will have no favours from and no fears of the government of the day.

If you think what is happening right now when M.Ps are making a mockery of the executive is scary, wait till you see what happens after 2012. It is going to be show time that will make what we see now, less than a child's play.

After the 2012 elections, the ministry of finance and the Treasury will provide the CRA with the revenue projections for each financial year and then they have to wait until the CRA tells them how much of that money will be available to the national government and in some cases with very specific instructions on where to spend it. I come back to that shortly.

But to illustrate my point let me use a simple example of a parent with two kids going to boarding school. Your kids present you with their budgets and each wants Kshs 10,000.00. You listen to their needs and tell them, "you know what I can only afford Kshs 6,000.00 for each of you". That is assuming you are not sonko or anybody like that. The kids ng'ung'unika but they know the budget is cast in stone.

So they take their money and they go to spend it. So each one of them will be adjusting their budgets depending on the money you gave them. They are doing the budget so to speak with your money and it was you who had to make the call on how much cash they would get. That is going to be the relationship between the CRA and the ministry of finance.

Now let's get to a few specifics. In the next two years the CRA will be working on funding modalities for funding arrangements consistent with the new constitution. The starting point is that 15% of the country's budget goes to the 47 counties. That is what is called mandatory transfer. In other words the Treasury will be asked to transfer that amount to the counties through specified methods and at specified intervals. The treasury has no say on the matter whatsoever.

Secondly the CRA has to figure out ratios in funding between the counties and the national government on areas where both levels of government have jurisdiction. They are many but let's take primary education for example. According to the constitution, primary education will be under the jurisdiction of the counties. As everybody knows that is the ministry that consumes the largest share of the country's budget. So what is going to happen under the new arrangement?

First the CRA has to figure out which specific responsibilities will be taken over by the counties and which responsibilities will be retained with the national government before they can decide on the budget numbers.

It would seem obvious to me that the national government would keep paying the teachers through the TSC which is now a constitutionally protected national institution. In this I would assume the CRA will consult with the treasury and the TSC and determine how much money is needed to cover the salaries and benefits for primary school teachers in each budgetary year. Once that number is determined the CRA will allocate the amount required and ask the Treasury to transfer the amount to the TSC for the teachers salaries and benefits.

Then the CRA will have to determine what the responsibilities of the counties are with regard to running and building primary schools according to the needs of each county and once that is determined the CRA will instruct the Treasury to issue funds according to the formal they have established.

In essence just with in this one ministry the CRA has the constitutional obligation to determine how much money goes to fund what specific services and give instructions on how that is dispensed and used. I don't know what else could qualify as a budgetary responsibility. May be you do. I would like to hear about it.

In the overall picture the national budget as we have in Kenya today is dead and gone under the new constitution. Even the very idea of "national budget" is changed forever. The days when a bunch of cabals may be from the same village would sit together at Treasury and look at the entire revenue of the country as their piggy bank money to use as they desire is gone. It won't be back.

Now going back to my example of you or me as a parent giving your school kids their pocket money. Both kids may have the same amount but each one of them can decide to spend it wisely or be foolish with their expenditures. That will be the difference between bad and good governments in the next hundred years or so that our current constitution may survive with amendments along the years in different generations and urgent demands require..

One kid may decide he or she is going to blow the money on one day on things they like with no regard to what happens next. A couple of days later they would be dead broke and cannot even meet their most basic needs like buying a bathing soap. Tough luck. That would be the example of a bad government.

The other kid may be more rational and decide to bling bling a little bit, buy other supplies they need and keep some money aside to make sure they can afford to sustain themselves. That would be the example of a good government.

It would be up to Kenyan voters to choose the kind of government they want. The constitution will never choose a government for citizens, the voters do. That fact remains unchanged.

So Kenyans can elect any government they want, but the treasury and the ministry will never again be able to spend the Kenyan tax payer money the way a few crooks at the Treasury did before. The rules of the game has changed significantly. For the most part it is for the better. We have to defend that as Kenyans. There will be battle along the way. That's fine. The nation will get where its people want it to be the Kenyan people have to control their money. The tools are there now.

A friend of mine told me some time back that those who control the guns and the money will run the country. Any country.

That is why we must embrace the CRA concept, forget its currently proposed membership (it can be better).

This thing (CRA) could last hundreds of years in our country. Who knows those who will sit on those chairs years and years from now. Let's keep the institution clean, shall we?

This (the concept of a functioning CRA) is a big deal for transforming the collection and use of the national revenue through taxes from all citizens and other sources. It is about time. The nation will navigate its way through it.

adongo

Chapter 12 of the constitution is what should guide us on this matter of Public Finance. The chapter is very clear how the funds will be raised and it makes a clear statement on how revenue will be shared between the national and county governments.

Section 201(c) the burdens and benefits of the use of resources and public borrowing shall be shared equitably between present and future generations;

The key word that I read here is "equitably". This term is repeated a couple of times and this is made very clear in:

Section202. (1) Revenue raised nationally shall be shared equitably among the national and county governments.

(2) County governments may be given additional allocations from the national government’s share of the revenue, either conditionally or unconditionally.

So how much will be given to the county governments? My understanding is that this is answered in the following section:

Section 203(2) For every financial year, the equitable share of the revenue raised nationally that is allocated to county governments shall be not less than fifteen per cent of all revenue collected by the national government

The other money availed to the county governments is the annual vote of 0.5% of all national revenue raised which shall go into an Equalisation Fund and whose expenditure can only be done on authorisation of Parliament with input from the CRA.

So exactly what are the functions of the CRA? These are clearly spelt out in Section 216 of the constitution. So for the sake of good order, we should read the entire sections so that it is clear:

216. (1) The principal function of the Commission on Revenue Allocation is to make recommendations concerning the basis for the equitable sharing of revenue raised by the national government––

(a) between the national and county governments; and

(b) among the county governments.

(2) The Commission shall also make recommendations on other matters concerning the financing of, and financial management by, county governments, as required by this Constitution and national legislation.

(3) In formulating recommendations, the Commission shall seek––

(a) to promote and give effect to the criteria mentioned in Article 203 (1);

(b) when appropriate, to define and enhance the revenue sources of the national and county governments; and

(c) to encourage fiscal responsibility.

(4) The Comission shall determine, publish and regularly review a policy in which it sets out the criteria by which to identify the marginalised areas for purposes of Article 204 (2).

(5) The Commission shall submit its recommendations to the Senate, the National Assembly, the national executive, county assemblies and county executives.

My reading of this section indicates that the CRA shall only manage the allocation of revenue on the basis of Section 203 in compliance with section 216 (1)(a), i.e between the National Government and the County Governments. Consequently, if the National Government says that it is allocating 20% of Revenue collected to the county government, then that is when the CRA enters the fray.

Indeed Section 218 deals with this appropriately when it deals with the Annual Division and Allocation of Revenue Bills which must be presented to Parliament.

218. (1) At least two months before the end of each financial year, there shall be introduced in Parliament––

(a) a Division of Revenue Bill, which shall divide revenue raised by the national government among the national and county levels of government in accordance with this Constitution; and

(b) a County Allocation of Revenue Bill, which shall divide among the counties the revenue allocated to the county level of government on the basis determined in accordance with the resolution in force under Article 217.

I understand Subsection 1(a) to mean the allocation done in accordance with Section 203(2). Any deviations to the law will require to be in a memorandum indicating any deviations from the recommendations of the CRA (again pursuant to their mandate).

To the extent that money raised as revenue is determined and the allocation to counties is authorised by parliament, the CRA does not seem to have another role as I read it.

There has been suggestions that the CRA will even determine how much would go to the Defence Budget. I have looked at Chapter 12 that deals with Public Finance and this does not seem to be so.

If one reads Section 221:

221. (1) At least two months before the end of each financial year, the Cabinet Secretary responsible for finance shall submit to the National Assembly estimates of the revenue and expenditure of the national government for the next financial year to be tabled in the National Assembly.

(2) The estimates mentioned in clause (1) shall––

(a) include estimates for expenditure from the Equalisation Fund; and

(b) be in the form, and according to the procedure, prescribed by an Act of Parliament

The mandate of presenting to parliament the revenue and expenditure of the National Government lies with the Top Treasury civil servant now called a Cabinet Secretary. In the determination of how much goes to say Defence or Education, the CRA does not seem to have a role and once again the Cabinet Secretary will be guided by Section 201.

At another time, I will address what I think happens to than monster previously called CDF and how it relates to government allocation of money to mashinani

RR,

Thank you! A little clarity on the criteria to be taken into account when determining the equitable share that shall not be less than 15%:

203. (1) The following criteria shall be taken into account in determining the equitable shares provided for under Article 202 and in all national legislation concerning county government enacted in terms of this Chapter—

(a) the national interest;

(b) any provision that must be made in respect of the public debt and other national obligations;

(c) the needs of the national government, determined by objective criteria;

(d) the need to ensure that county governments are able to perform the functions allocated to them;

(e) the fiscal capacity and efficiency of county governments;

(f) developmental and other needs of counties;

(g) economic disparities within and among counties and the need to remedy them;

(h) the need for affirmative action in respect of disadvantaged areas and groups;

(i) the need for economic optimisation of each county and to provide incentives for each county to optimise its capacity to raise revenue;

(j) the desirability of stable and predictable allocations of revenue; and

(k) the need for flexibility in responding to emergencies and other temporary needs, based on similar objective criteria.

(2) For every financial year, the equitable share of the revenue raised nationally that is allocated to county governments shall be not less than fifteen per cent of all revenue collected by the national government.

(3) The amount referred to in clause (2) shall be calculated on the basis of the most recent audited accounts of revenue received, as approved by the National Assembly.

In all this determination of the criteria, the role seems to belong to Parliament rather than the CRA.

If you look at Section 205 :

205. (1) When a Bill that includes provisions dealing with the sharing of revenue, or any financial matter concerning county governments is published, the Commission on Revenue Allocation shall consider those provisions and may make recommendations to the National Assembly and the Senate.

(2) Any recommendations made by the Commission shall be tabled in Parliament, and each House shall consider the recommendations before voting on the Bill.

it appears that the CRA only has a role in funds that are being allocated to county governments as opposed to the share split between the two levels of government. I am still not clear what the role of the CRA is in determining whether it will be 20% or 45% since Section 203 deals with this allocation criteria in rather abstract terms generally giving preference on the national interest above the county interest as long as the minimum amount of the revenue is granted to the counties.

Now the role of the CRA in making recommendation is only for the basis of allocation rather than the extent of allocation. This is well captured in the Division of Revenue bill where only a memorandum on deviations is required to be added to the bill.

FYI, all am doing is stating my understanding of the law rather than my preference of what should be happening! If I had my say, then it would miles different from what the law says...leave alone intends!

Adongo

I agree with you. My interpretation is the the CRA will recommend to parliament what proportion will be available to National government vis a vis the Counties. However, the presentation of the National budget will be a responsibility of the cabinet secretary in charge of finance and the CRA may have an input into that based on what proportion it already allocated to national budgets - this process will make the cabinet secretary more of an administrative figurehead.

Kamale;

I think your attempt to make a distinction between the basis and the actual division is just cheeky. We are not going to ask Micah Cheserem to literally count up the cash and dish it about! (there is a controller of budget whose work is to dole out the cash after making sure it is being requested legally). Also we are not contemplating allocations that disregard the basis and calculations of the CRA and approvals of parliament.

All that secretaries, the CRA etc do with regard to finance is to make proposals to either or both houses where elected representatives sit. The issue that we must agree on is that rather than the executive (read minister of finance) making proposals for the division of revenue between counties and the central government, the law explicitly provides that the CRA will do this and make its recommendations to parliament. Further, the constitution provides a basis for the CRA to do so and demands that the CRA to provide detailed recommendations on revenue allocation respecting this basis.

Nowhere in the katiba is the executive given any powers to say what will go to counties and what will remain at the center. and you have not shown it. But we have a section detailing the principal function of the CRA as this very division.

So while this basis for division is provided for, it must still be subject of a formula or an analysis especially when the said constitutional basis includes general provisions such as (c) the needs of the national government, determined by objective criteria.

My position, really, unless you can demonstrate otherwise, is that preparing proposals for 202(1) – the equitable sharing of funds between National and County governments is a function of the CRA not a cabinet secretary