This study examines Revenue and Expenditure performance of county governments during the financial years 2013/14 to 2015/16. Kenya began the fiscal decentralization journey at independence through the creation of regionalism commonly known as Majimboism. Since independence Kenya has experimented on various forms of decentralization such as the Special Rural Development programme of 1966 among others. In 2010 a new constitution was promulgation which paved way for decentralization reforms that saw the devolution of functions, Resources and creation of 47 county governments.
Key objectives of this study is to assess revenue performance by analyzing own revenue performance and the level transfer dependency of county governments. Expenditure performance was assessed by examining budget implementation at the county level, utilization of revenue, pending bills and compliance on 30% requirement on development expenditure. The absorptive capacity of counties is also analyzed to assess the extent to which counties are utilizing their resources. The study has used secondary data obtained from the reports of the Controller of Budget, The National Treasury and County Allocation Revenue Act. Data has been obtained for all the 47 county governments.
The findings of the study indicate that counties are dependent on national transfers at an average of 87% and have been performing dismally on mobilization of own revenue. On the expenditure side there are counties whose expenditure exceeds available revenue. Compliance with development expenditure found that on average over the three years there are 24 counties that have not met the 30% requirement on development expenditure. The study established that actual allocation of resources to devolved functions namely Agriculture, Health and Water and Environment is different from planned expenditure which means that resources on devolved functions are being reallocated after the budget has been approved.
The study concludes that revenue performance at the county level has been poor and several counties have not been able to achieve their revenue targets, hence making counties dependent on national transfers. On the expenditure, the study shows that fiscal discipline is lacking at the county level and compliance with 30% requirement on development expenditure is a challenge for at least 50% of the counties. On absorptive capacity the study concludes that a number of counties are not able to utilize or absorb the resources given to them which is an indication of poor implementation of programs and poor financial management practices because of large pending bills within counties. The study recommends a review of the legislative and policy framework to address the issue of fiscal discipline. The current framework gives guidelines on what should be done but does not provide sanctions on what happens when the stipulated requirements are violated.