Counties eye Sh18bn in Equalisation Fund

7 months ago 103

Tuesday August 16 2022


The National Treasury building in Nairobi. PHOTO | SALATON NJAU | NMG

More than Sh18 billion meant for provision of basic services in marginalised areas has been lying idle at the Treasury for the past nine years due to delays in the formulation of guidelines, late project identification and legislative hurdles.

The billions of shillings, meant to provide basic services, including water, roads, health facilities and electricity in marginalised areas to the level generally enjoyed by the rest of the country, has not been deposited in the Equalisation Fund.

It is now up to the new administration to unlock the disbursement nightmare that has seen the money continue piling up nearly ten years on.

The Constitution requires that 0.5 percent of all revenue collected by the national government each year and calculated on the basis of the most recent audited accounts of revenue received as approved by the National Assembly be paid into the Equalisation Fund.

The Equalisation Fund runs for 20 years from August 2010 when the Constitution was promulgated.

The latest report of the Auditor-General shows that the total accumulated entitlement to the Equalisation Fund for the financial years 2011/12 to 2019/20 stood at Sh30.78 billion.

The report shows that the Treasury has only transferred Sh12.4 billion to the Equalisation Fund Account since 2011.

“A review of the financial statements for the Equalisation Fund for the year ended June 30, 2021, revealed that only an amount of Sh12.4 billion out of the expected Sh30,786,056,051 of the total entitlement had been transferred to the Equalisation Fund Account,” Nancy Gathungu says in the report tabled in Parliament.

“The national Treasury had not remitted the remaining balance of Sh18,386,056,051 to the Fund as at June 30, 2021, and is, therefore, in breach of the Constitution.”

The Commission on Revenue Allocation (CRA) 2014 developed the policy for identifying marginalised areas and sharing of the Equalisation Fund as mandated by Article 216(4) of the Constitution.

The CRA identified 14 counties including Turkana, Mandera, Wajir, Marsabit, Samburu, West Pokot, Tana River, Narok, Kwale, Garissa, Kilifi, Taita Taveta, Isiolo and Lamu as beneficiaries of the Fund.

The auditor says the Fund administration attributed the low level of disbursement to delayed formulation of policies, delayed project identification and legislative hurdles.

“Given the low level of disbursements as indicated, the country is not likely to achieve the objectives of the Equalisation Fund, which is to improve the quality of requisite services in the marginalised areas within the set timelines, as envisaged by the Constitution,” the audit report states.

The report shows that the amount transferred of Sh12.4 billion was done in two tranches of Sh6.4 billion during 2015/2016 financial year and a further Sh6 billion in the 2016/2017 financial year.

The Sh12.4 billion is only 40 percent of the total entitlements of Sh30,786,056,051 for the financial years 2011/2012 to 2019/2020.

The National Treasury did not transfer any allocation to the Fund during the financial years 2020/2021.

“This has been attributed to a High Court of Kenya ruling dated November 5, 2019, that declared the Guidelines on the Administration of the Equalisation Fund published on March 13, 2015, null and void,” Ms Gathungu said.

The report shows that out of the Sh12.4 billion so far transferred to the Equalisation Fund Account, only Sh10,188,821,952 or 82 percent had been disbursed for the approved projects, through the parent Ministries to the identified counties, leaving a balance of Sh2,211,178,048 still held in the Fund Account as at June 30, 2021.

“Further, out of the disbursed amount of Sh10,188,821,952, only Sh8,836,046,718 or 87 percent of the disbursed amount had been spent as of June 30, 2021, leaving a balance of Sh1,352,775,234 still held by the parent Ministries in their respective bank accounts,” the report states.

The auditor says comparison between the total entitlement of Sh30,786,056,051 and the disbursed amount of Sh10,188,821,952 represents a dismal overall performance of 33 percent for the nine years, since the inception of the Fund.

“The Fund administration had attributed the low level of disbursement to delayed formulation of policies, delayed project identification and legislative hurdles,” Ms Gathungu said.

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Source : Businessdaily Africa