Funding calamities: County Government supplementary budget over emergency funds

28 Mar, 2020 0 comments
Denis Muthuri Denis Muthuri

In the past years, Kenya has experienced several destructive natural disasters. In 2019 alone, furious landslides and flash floods killed 132 people in West Pokot; perennial droughts across 12 counties left over to one million people without food; locusts then invaded 17 counties ravaging Kenya’s bread basket, and then entered the Coronavirus pandemic (COVID-19) which has now slowed the economy to a grinding halt. This leads us to one burning question: how do County Governments prepare and respond to such calamities?

County Governmnets preparedness to calamities
Calamities experienced in Kenya over the last years

Through budget modalities as anchored in the legal frameworks – specifically the Public Finance Management Act 2012 – County Governments are required to raise funds for such unforeseen circumstances. There are two approaches to this. First is the reactive and frequently used approach – developing supplementary budgets to reallocate funds for emergencies; second is the proactive but seldom used approach of setting up emergency funds. 

A closer look at the Public Finance Management Act 2012 would help understand why the latter is less preferred over the former.

First, counties operate in the context of limited resources.

Section 110. (1) allows the County Executive Committee Member (CECM) for Finance to establish an emergency fund with the approval of the County Assembly. The fund consists of money appropriated from time to time by the County Assembly to the fund by an appropriation law.  

Because it is not a requirement, not many counties are willing to commit to setting up this fund because of funding constraints. In their minds, these funds would lay idle waiting for disaster to occur. This is a fallacy as year after year, emergencies continue to occur. The reactive approach of supplementary budgeting is a highly disruptive approach, interrupting for service delivery across sectors, and is a key reason for pending bills. 

Secondly, there are stringent rules in accessing the emergency funds.

Section 113. restricts the CECM Finance from making payments from the emergency fund exceeding 2% of the county governments revenues as indicated in the county’s audited financial statements for the previous financial year. 

This implies that, even if a county had accumulated a colossal sum of money in the fund and unexpectedly gets hit by a huge disaster, it can only access 2% of the audited revenues. On the other hand, the law does not cap the number of supplementary budgets – which is another reason they are preferred.

Thirdly, making a decision to access the funds is time consuming.

Under Section 49. (1) of the County PFM Regulations 2015, it states that before an accounting officer accesses the emergency fund, they must first identify resources within their vote, through identification of savings for re-allocation. Part two of the same section adds that if they are satisfied that there are no savings within their vote, and the need meets the criteria set under section 112 of the PFM Act 2012, they have to give reasons why they believe the need meets the criteria, issue a certificate confirming that the need meets the criteria, have a certificate countersigned by the CECM for that entity, and lastly submit the request to the CECM Finance for consideration. Part three of the same section says that the CECM shall consider the request and assess if the need meets the criteria set under section 112 of the Act and may approve it or reject it.

Clearly this very complicated and bureaucratic process that cannot be efficient in times of emergency. This is another reason why supplementary budgets are preferred. Many times supplementary budgets are used as an opportunity to make unmonitored reallocations – particularly on recurrent expenditures.

Lastly, accountability mechanisms of the funds seem thorough and improbable.

Section 115. (1) asserts that where an emergency fund has been established for a county government in accordance with section 110, the county treasury shall, not later than 3 months after the end of each financial year, prepare and submit to the Auditor General, financial statements in respect of the emergency fund for that year. Notably, the county treasury is expected to disclose the dates and amount made from the fund, details of the person to whom payment was made and its intended purpose and if the said person spent the monies for that purpose while indicating the reason for not having done so where applicable and finally highlight how the payments conform to Sec 112 of the PFM Act.

Some of the disclosed details on financial statements may not seem justifiable enough. For instance, if a county states that it made payments for unclogging culverts or clearing flooded roads then the following day it rains heavily, who would verify whether this was done or not? Again, this makes another case why supplementary budgets are preferred.

The practice of using supplementary estimates to address unforeseen circumstances is not new. In fact, the County Regulations 2015 Section 39. (1) & (3) indicates that each Accounting Officer is required to prepare revised budget estimates in a format to be issued by the Cabinet Secretary while following the guidelines of the supplementary budget circular. The main justification shall be unforeseen – in circumstances where no budget provision was made, or unavoidable – in circumstances where there is an existing budgetary provision which is inadequate

These key points demonstrate why counties prefer supplementary budgets over establishing emergency funds. This being the case, unless the legal framework is revisited, counties will not create emergency funds to mitigate against disasters. 

To address these shortcomings, we at EGCL propose the following:

  1. Revisit the legal process for accessing emergency funds, to make them easier to access but also maintain a reasonable level of accountability; this would encourage counties to create them.
  2. Incentivize the use of emergency funds so as to minimize disruptive supplementary budgeting by having the County Assembly should set a lower appropriation limit into the fund. 
  3. Exempt disaster management from supplementary budget criteria to enforce the usage and level of appropriation setting of the emergency fund – further to which the national emergency fund applies.
  4. Clarify procurement processes during emergencies to ensure both the National Government and County Governments appropriately use and account for funds used. 

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