Why counties need a simplified planning and budgeting process

One suspects that the Treasury’s accelerated 2017/18 budget process — on account of the 2017 General Election — has caught many by surprise at the sheer pace at which it is progressing.  

First we had the Budget Review and Outlook Paper (BROP) by September 2016. 

As its name suggests, this brief document provides a review of budgetary performance in the most recently concluded fiscal year (2015/16) — a medium-term economic outlook.

It also offers insight into how the current year is panning out (2016/17) and a medium-term view of what is coming (2017/18 to 2019/20).
More recently, in November 2016, the Budget Policy Statement (BPS) was published.

The Treasury describes it as “a government policy document that sets out the broad strategic priorities and policy goals that will guide the national and the county governments in preparing their budgets both for the following financial year and over the medium term”. 

This year its theme is “Consolidating Economic Gains in an Environment of Subdued Global Demand”. So 2016 GDP growth is forecast at six per cent, with a 6.5 per cent medium-term forecast. 

At $1,105, Kenya has the highest GDP per capita in East Africa (though lower than Ghana or Zambia), so the BPS celebrates our diversified and resilient economy.

More important, however, the BPS is the key guide to the detailed budget estimates — now known as Programme-Based Budget (PBB) estimates — which this time will be passed by March, and not June, 2017. It’s also a review of 2016/17 progress to date, and expectations for the rest of the year. 

As of September 2016, it notes a revenue shortfall of Sh14 billion (Sh4 billion in ordinary revenues, basically taxes) and a spending shortfall of Sh139 billion explained by low absorption at national level, and slow disbursement to counties, the result of which is a lower than targeted fiscal deficit.

Looking forward to the rest of the 2016/17 fiscal year, the Treasury revises its tax projections downwards — lower import duty, PAYE income tax and import VAT against higher excise revenues.

And yet again, our much vaunted Sh2.2 trillion budget is slashed by Sh200 billion. Mid-year budget realism has returned. A lower budget deficit, at Sh517 billion rather than Sh703 billion is now projected in the revised estimates.

A few pages later, the BPS sets out targets for the 2017/18 fiscal year. The revenue projection is up again, this time to Sh1.7 trillion (from Sh1.5 trillion in 2016/17) driven mainly by a Sh200 billion “bump” in tax collections.

The spending estimate is also up, to almost Sh2.3 trillion. No wonder the Parliamentary Budget Office perennially speaks to budget over-optimism.

But that’s not my story today. Next year, we will also come to the end of the Second (National) Medium-Term Plan (2013-2017) on Vision 2030, and as the BPS notes, an evaluation of this plan — abbreviated as MTP II — is already under preparation with a view to feeding into MTP III (2018-2022).

As the BPS notes, MTP III will mainstream the Sustainable Development Goals (SDGs) based on “key thematic areas”.

Oh, and to close off this round of alphabet soup, one of the key systems that we are supposed to use to evaluate MTP II is the National Integrated Monitoring and Evaluation System (NIMES). And this is all just the national government stuff.

Now if you thought everything I just said is financially and bureaucratically complicated at national level, think that county governments — with less capacity in terms of processes, systems and technology on the one hand, and structures, staff and skills on the other — do all of this stuff too. 

So, for the national-level MTP, read County Integrated Development Plan (CIDP) for each county. Except that, by law, the CIDP needs to be aligned to a 10-year Spatial Plan and separate 10-year Sector Plans for each sector. That’s their medium-term planning cycle.

Every year, each county is required to produce an Annual Development Plan (ADP) — essentially the annual component of its CIDP, preferably adjusted for changed circumstances and conditions. For every national-level BROP, each county produces a County Budget Review and Outlook Paper — CBROP. 

For every national-level BPS, each county develops a County Fiscal Strategy Paper (CFSP).

Finally, there are the county-level PBB estimates. Other than the CBROP, these documents all require public participation on the one hand, and approval by often hostile county assemblies on the other.

At national level, we are now between the BPS and PBB stages. In theory, at county level we should be between their respective CFSP and PBB stages.

It would be fascinating to establish if this is actually the case, so that the sort of pre-budget analysis we do at national level we can replicate to some degree at county level. Many counties have a couple of fiscal analysts to support MCAs; the PBO is a fully fledged think-tank with a staff of 50.

From what I have observed, many of the problems highlighted by the Auditor-General at county level relate to these terribly complicated processes inherited from national government. 

Indeed, while one suspects that the great majority of malfeasance at national level is simply “bad behaviour”, there is a case to be made that some of the stuff we read about at county level is a function of low levels of capacity.

This is not to say that counties be held to a lower threshold of public participation and accountability than the national government.

But it seems to me that part of the honest evaluation of our first years of devolution needs to begin with planning, budgeting and performance monitoring tools that are “fit for purpose”. After all, counties are neither “ministries” nor “mini-replicas” of national government, one would think.

I haven’t even mentioned the further complication introduced by the manifestos we will be bombarded with by aspiring leaders of our 48 governments between now and next August.

Mr Kabaara is a management consultant. [email protected].