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Ideas & Debate

Absorption of project funds key to unlocking devolution dividend

When the new constitution was promulgated, it was heralded as a positive for development for Kenyans as government would be brought closer to the people.

The idea was that county governments would facilitate higher levels of transparency particularly in use of allocated money.

Under the new constitution, there is an allocation for counties by National Government and the equitable share which is a single unconditional block grant to carry out devolved functions.

This amount is meant to increase year on year, and the Budget Policy Statement for 2016/17 proposes increasing the unconditional transfer to counties from Sh259.8 billion to Sh284.7 billion. Is this enough?

The World Bank has stated in the past that county governments have benefitted from an allocation of one-fifth of the total national expenditure, or an equivalent of four per cent of the Gross National Product, which is more than was negotiated under the August 2010 constitution.

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However, counties are always fighting for more money for “development” but let’s take a look at county level spending patterns.

The report by the Controller of Budget (COB) states that for the Financial Year (FY) 2015/16 aggregate approved county allocation, 55.3 per cent was for recurrent expenditure and 44.7 per cent for development.

However, as of the half-year review of expenditure, development expenditure stood at an average 26 per cent despite being allocated 44.1 per cent. Kwale had the highest use of development expenditure at 61.5 per cent and Taita Taveta the lowest at 0.1 per cent.

In terms of the major cities, Nairobi development expenditure stood at 20 per cent, Kisumu at 21.1 per cent and Mombasa at 25.6 per cent. All the major cities had development expenditure below the national average and well below the allocated 44.7 per cent.

An additional challenge is that counties seem to be having trouble absorbing funds allocated. Going by half-year review, counties had an absorption rate of 31.3 per cent of the total annual County Governments’ budgets.

The absorption of development funds was particularly low at 19.9 per cent, a decline from an absorption rate of 21.9 per cent reported in a similar period of the financial year 2014/15.

Thus we see a core spending pattern at county level where development expenditure is lower than was allocated in terms of percentages allocated and a very low absorption rate of development funds in particular.

This is a troubling trend as it is the development docket through which new services can be developed to make access to basic services easier to the citizenry as well as stimulate more economic activity at county level.

Poor absorption levels are a reflection of a basic lack of capacity in county governments. Even the COB notes that some counties do not have designated administrators for public funds, making administration and accounting for the funds difficult.

If managing public funds is challenging, clearly county governments need support in determining what development projects should be funded and the implementation thereof.

It would be useful for organisations active at county level to work with the devolved units to conduct a skills audit to see what talents are domiciled there. This should be followed by an audit of the skills required for projects so that skills gaps are clear and sealed.

What do development projects need? Quantity surveyors, accountants, engineers? The audits are crucial. This can then be followed by a more structured strategy to acquire the skills required.

It is time failure to use development funds stopped as this will translate into a general inability of devolution to generate the development dividends it was designed to create.

Were is a development economist; [email protected]

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