Counties fall back in development spending

The government’s quest to speed up economic growth has hit strong headwinds after counties failed to raise revenues and spend development funds as planned in the budget.

The Controller of Budget’s half-year spending review shows counties spent a paltry Sh4.8 billion out of the Sh112.7 billion earmarked for development expenditure in the financial year ending June.

This amounts to less than one tenth of the planned annual development budget spending in six months, a trend that could see them spend less than half the budget at the close of the year.

Economic growth is largely dependent on how much investment is made in key areas such as infrastructure. Less development spending, therefore, means less investment denying the economy the impetus it needs to grow.  

County governments will likely remain holding large amounts of money at the end of the financial year in June, pointing to the need to fix the capacity of the devolved units to absorb funds.

Controller of Budget Agnes Odhiambo says in her review that the counties were expected to have spent half of the development funds by end of December 2013 to put the economy on the road to achieving target growth.

“With only six months to the end of the financial year, there is concern that actual development expenditure will amount to only a small proportion of the 40.7 per cent total budget allocated to development activities,” she says.

The counties collectively allocated Sh112.7 billion or 40.7 per cent to development in the 2013/14 financial year from a total budget of Sh279 billion.

Ms Odhiambo suggests that counties may be having difficulties in executing their budgets and roots for harmonisation of each unit’s strategic plans as part of the solution.

“In order to improve the absorption of development funds, counties should harmonise their strategic plans with workable and realistic work plans, procurement plans, budget and cash flow projections,” the report says.

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Ms Odhiambo recommends that county planning efforts be supported by project implementation teams before procurement of such services begins.

The report shows that counties are blaming long procurement processes that take more than a year in the case of infrastructure for inability to spend on development.

Counties also underperformed in revenue generation raising only Sh9.0 billion out of the Sh67.8 billion targeted.

“This underperformance in local revenue collections can be attributed to the use of manual financial systems, revenues being spent at source as opposed to sweeping the same to the County Revenue Fund, lapses in internal control mechanisms and ambitious projections in the transition period,” Ms Odhiambo said, adding that weak internal controls led to huge revenue leakages.