Where do County Governments get their Money?

By George Githinji

For counties to run, they need resources and knowing the source of these resources is crucial to know how to run a county. Political analyst George Githinji shares the sources of these revenues. They are;

• Local Revenue

Article 209 (3) of the Constitution empowers the counties to impose two types of taxes and charges, that is, property rates and entertainment taxes. The counties may also impose charges for any services they provide in accordance with the stipulated laws. All these monies constitute the local revenue.

• Equitable Share

Article 202 (1) of the Constitution stipulates that the revenue raised nationally shall be shared equitably between the national and the county governments. This revenue raised nationally is referred to as the equitable share. In essence, this fund is given to the counties by the national government, since it is part of the revenue raised nationally by the national government.

The equitable share of revenue that goes to the counties should not be less than fifteen percent of all the revenue raised by the national government based on the most recent audited revenues approved by parliament.

The equitable share allocated to the counties is unconditional, meaning that the counties can spend the money without any restrictions from the national government.

• Conditional Grants

Article 202 (2) provides for additional allocations to the county governments from the national government’s equitable share of revenue, either conditionally or unconditionally. These additional allocations are known as grants. They are conditional when restrictions on their use are stipulated by the national government and unconditional when the restrictions are renounced.

The conditional grants include the Equalization Fund (Article 204) that is currently granted to 14 counties categorized as marginalized and the money for Level Five hospitals that are under the county governments.

• Loans

The county governments can, in accordance with Article 212, borrow or access loans from external sources or private lenders. This money should be repaid with interest. However, the counties must meet two conditions in order to access the loans. First, they can only access a loan if the national government guarantees the loan, that is, the national government should be willing to repay the loan in the instance where the county government is unable to repay. Second, the county assembly must approve any loan that the county executive intends to borrow.

Parliament is mandated to come up with legislation that shall prescribe how the national government should guarantee loans. However, parliament is yet to make the law. That essentially means counties cannot borrow money and do so illegally now.

• Donor Funding

Counties receive this money from international donors in form of aid. Such international donors include USAID and DFID. This money, however, is currently being sent to the counties through the national government in various forms of conditional grants. This is because the donors are unwilling to break the pre-devolution agreements made with the national government regarding the expenditure of the funds. They are also demanding for the counties to “match” their donations (i.e. raise a certain percentage of the money to receive the rest), increase accountability mechanisms or improve the capacity of county staff in monitoring and expenditure of donor aid.

The Writer comments on political issues in Kenya – blogs at Politics Kenya