The 2022 general elections and the subsequent mini polls in Mombasa and Kakamega resulted in 11 governors being reelected while 8 governors who served in the first term got reelected. However, 28 County Governments will have first time/new governors which represents 60% of the total counties. The governors together with their deputy governors are the Chief executive and deputy chief executive of the counties respectively and oversee the executive arm of the county governments as per Article 179 (4) of the constitution. The constitution under Article 179 also establishes the county executive committee (CEC) under which the executive authority of the counties is vested. As CEOs of the counties and in line with Sections 30 and 32 of the County Governments Act, Governors appoint members of the CEC with the county assembly approval and chairs CEC meetings which plays a critical role in the governance of counties.
There were significant improvements in establishment of the county governments in the immediate last term. However, there remains teething challenges that the incoming governors need to address as they embark on this critical task. Further, a number of operational challenges continue to bedevil the operations of county governments and thus ability to meet expectations of the electorates and residents of the respective counties. To surmount these, county governors will at a minimum have to device strategies around six critical areas of the county operations as outlined below:
1. Human resources
Regulation 25 (1) (b) of the Public Finance Management (County Governments) Regulations, 2015 sets a limit of the county government’s expenditure on wages and benefits at 35 per cent of the county’s total revenue. However, as per reports from the Office of the Controller of Budget (OCOB) for the 9-month period of FY 2021/22, county governments spent KES.139.57 billion on personnel emoluments, which accounted for 54.3 per cent of the total reported expenditure of KES.257.18 billion and 35.2 per cent of the total reported revenue of KES 396.41 billion. The expenditure increased from KES 117.19 billion incurred in a similar period of FY 2020/21. The personnel costs thus continue to exceed the budget ceilings, stifling the budget available for development activities.
This could be attributed mostly to more than required staff complement resulting in idle capacity. To excel, counties will undoubtedly need to attract and retain the best talent. As a result, a critical assessment of the staff complement will be necessary to weed out any idle capacity and/or ensure the right deployment of talent with an efficient and service oriented organizational structure. It will also be necessary for the new counties leadership to carry out staff verification and assessment to rule out any instances of non-existent staff and to ensure that the counties have the required skills and competencies to deliver their service delivery mandate to the citizenry.
Additionally, the use of online payroll systems is key in ensuring leakages witnessed through payment of fictitious staff are sealed. In particular, the Integrated Payroll & Personnel Database (IPPD) is a requirement for payroll preparation by counties as well as management of personnel records. More recently, the Government Human Resource Information System (GHRIS) which entails more functionalities cutting across recruitment and selection, employee management, training and development, career management and performance management has also been launched and counties should make efforts to utilize the system.
2. Own source revenue (OSR) generation and collection at County level
County governments are expected to spend within the available budget (both exchequer disbursements and own source revenue) with a flexibility of up to 30% of approved annual budget (Article 212 of the Constitution). The deficit can be plugged in through borrowings strictly used to finance development expenditure and maintained at a sustainable level approved by the County Assembly. The County Treasury thus faces a daunting task to manage fiscal risks and ensure expenditure ceilings are not exceeded for recurrent expenditure while development expenditure meet the required 30% threshold.
Increasing OSR is thus an imperative for all counties as this has a bearing on ability to scale up implementation of activities and managing cashflows. Critically, this also reduces dependency on exchequer releases and thus raises ability to pay bills as and when they fall due. Whilst this is the expectation, most counties continue to lag behind in collection of OSR. As per the Office of the Controller of Budget, 21 counties in the 9-months of FY2021/22 collected less than 50% of the target collections, while an average of 17.2% of the total budget was spent on developmental activities.
Articles 175 and 209 (3) of the constitution envisage the roles the counties play and empower counties to impose levies and taxes. There has however been continued underperformance in OSR collections due to small tax base, default and pilferage of the revenue. Increased accountability and use of technology will enable counties circumvent these challenges. Further, clarity in the licenses and fees paid for business operations will enhance willingness to comply with payment of such fees and levies.
Strengthening internal controls in the revenue collection process at the County level can help address any chances of loss or misuse of revenue at the collection level.
3. Pending bills
The incoming county leadership will invariably inherit outstanding bills from their predecessors. Continuing county governors are also faced with outstanding bills from their immediate prior terms. The significant proportion (up to 90% as per OCOB) of the outstanding bills relate to development related expenditure and thus need to fast-track settlement to pave way for legacy projects of the new regimes. The overarching need in respect of all pending bills will be to first ensure they are genuine and represent value for money realized. The Inter-governmental Budget and Economic Council (IBEC) had instructed counties to come up with Eligible Pending Bills Resolution Committee to verify and prioritize the payment of eligible pending bills. Further, a review and prioritization of stalled projects will have to be undertaken to ensure funds are channeled to the most strategic projects.
Counties can consider ways of acquiring syndicated government guaranteed loans to clear pending bills and prevent further accumulation. There is also a need to train the relevant County staff on accounts payable management which will ensure that accuracy and completeness of unpaid bills in the future.
County Governors will need to set the tone at the top in the pending bills agenda to ensure that pending bills are dealt with conclusively as the effects are felt nationally through crowding out of private sector investments as a result of liquidity constraints leading to a vicious cycle that reduces overall economic GDP.
4. Assets management
Counties possess a significant amount of assets ranging from land, buildings and vehicles among others. Prudent management of assets is a catalyst for accelerating development and expanding services while poor assets management generates enormous losses, including inadequate service delivery, lost opportunities to build wealth and incurring of unnecessary expenditure.
It is best assets management practice to maintain accurate and complete asset registers and assets records in order to safeguard them from loss and misappropriation. Counties have a long way to go in terms of maintaining such registers, verification and valuation of assets, strategic use of assets and resolving issues around inherited assets from one regime to another.
As a matter of urgency, county governments need to conduct asset verification to establish what they own and to which county employees the said assets are in possession. As per section 33 of the Public Procurement and Asset Disposal Act, 2015, the County Treasury shall be the organ responsible for the implementation of public procurement and asset disposal policy in the county. Further, sections 159-162 outline the prescribed ways of inventory control, asset and stores management and distribution and sections 163-166 on disposal of assets.
There is need to train the relevant County staff on the requirements of the PPDA and the need to maintain accurate and up to date records of County assets.
5. Governance – Setting the right tone at the top
With the new dispensation of new governors coming in as well as the incumbents who retained their seats for a second term, one key area they need to get spot on is getting the right people on the bus.
Article 175 of the constitution states that the executive authority of the county is vested in, and exercised by, a County Executive Committee (CEC).
The CEC essentially forms the management team for purposes of effective governance. From a devolution perspective, they can be seen to mimic the Cabinet Secretaries at national government level. It is imperative that Governors choose competent professionals to lend impetus to the county development agenda. While emphasis has been rightly put on credentials and/or political interest alignments, suffice it to say, the real issue has been around integrity and professionalism. Indeed, there is need to have men and women who can offer honest hard work and service if our counties are to reach their truest ideals.
Additionally, Governors and their deputies set the tone at the top at the County, and this causes a multiplier effect – for better or worse. The tone set at the top affects the behavior and culture of the people throughout an entity. If effective, their style will be a powerful factor in building great public entities. If ineffective or negative, it will be like a heavy wet blanket hanging over the county and weighing it down.
6. County Integrated Development Plans (CIDPs)
The County Governments Act, 2012 requires county governments to develop plans including: Five-year County Integrated Development Plan (CIDP), ten-year programme-based county sectoral plan as parts of the CIDP, county spatial plans and cities and urban areas plans. The county planning facilitates the development of a well-balanced system of settlements and ensures productive use of resources (Section 103 (b)). It also ensures meaningful engagement of citizens in the planning process (Section 105 (d)) and mandatory public participation in the county planning process (Section 115) [3].
At the county level, budgeting begins with the integrated development planning process which involves planning and establishment of financial and economic priorities for the county over the medium term. All stakeholders involved in budget preparation issue guidelines then make estimates of the county government’s revenues and expenditures. It is at this stage that governors need to be hands on to ensure their development agenda is well articulated.
The integrated development planning process should be a broad consultative process that incorporates the relevant departments as well as skilled professionals who bring in an independent view. The basic principles that should guide the planning process are:
- The plans must descend directly from the county’s overall vision. It is impossible to set clear strategies unless there is a crystal-clear idea of what the counties are trying to achieve in the first place
- The plan must leverage off the strengths and unique capabilities of the county with the end game being focusing on comparative advantage – what the counties are good at
- The plans must be realistic considering internal constraints and external factors
- The plans should be set with the participation of those who are going to be on the line to make it happen
While it is prudent to set multi-year rolling strategies/plans, the plans should be viewed as dynamic rather than static since they could change and evolve as the internal situation and external environment changes. It is also essential to set strategic priorities for every new year with a specific County Executive in charge of a single priority.
While developing the plans is the easy part, the day-to-day and month-to-month decisions required to manage a county are hard. It is therefore important that counties have in place performance monitoring systems to ensure progressive assessment of implementation of the plans. Governors have their work cut out in ensuring tactical excellence in implementation of the plans by being Specific, Methodical and Consistent.
Conclusion
Ultimately, developing a winning formula for counties is a delicate balance that calls for professionalism and integrity; and strict compliance with laws and regulations. More importantly, Governors play the critical role of piecing the entire puzzle together through setting the correct tone and inspiring people to action by giving them a sense of purpose or belonging that has little to do with any incentives to be gained. For inspired people, the motivation to act is deeply personal.
“A leader is one who knows the way, goes the way, and shows the way.” ~ John C. Maxwell
Authors:
CPA Francis Nzau, FCCA – Associate Director at PwC
CPA Titus Rotich – Senior Manager at PwC
CPA Moenga Elvis – Assistant Manager at PwC
