I had the chance to go through the Punguza Mzigo (Constitution of Kenya Amendment) Bill, 2019 sponsored by the Thirdway Alliance. The bill seeks to amend close to 32 Articles of the Constitution. They adopted the popular initiative under Article 257 of the Constitution which results in a referendum in the end.
However, I have found some quite problematic provisions of the bill. One thing I noted overall, especially under the memorandum of objects and reasons for the bill, is that the justifications for the proposed amendments are very simplistic.
It seems as if not much research was done when the bill was crafted, which in itself is pitiful. In this article, I am going to address some of the proposed amendments to Chapter 12 of the Kenyan Constitution on Public Finance (which also happens to be my field of work). The proposed amendment in the bill is in italics.
Amendment of Article 203 of the Constitution
Article 203 sub-article (1) of the Constitution is amended — (a) by deleting paragraph (f) and substituting therefor the following new paragraph- (f) development and other needs of wards in the counties;
(b) deleting paragraph (g) and substituting therefor the following new
paragraph- (g) economic disparities within and among wards in the counties
and the need to remedy them.
As stated, this amendment seeks to change Article 203 of the Constitution, specifically paragraph (f) and (g) of sub-article 1. Article 203 deals with the criteria that should be followed in determining the amount of money that the national and county governments should get from the ordinary (tax) revenue raised at the national level, which is referred to as the Equitable Share.
Article 203(1) deals specifically with the division of revenue between the two levels of government (national and county) and hence these two amendments do not make sense (substituting ‘county’ with ‘ward’). The Constitution also envisages the two levels of government as the base for revenue sharing at the national level, while a ward is a micro-unit at the local level.
The provisions above relate to the vertical sharing of national revenue (between national and county governments) and also horizontal sharing (among the 47 county governments) which makes the counties the centres of regional development and governance, and not the wards.
This provision on the wards comes from another proposed additional amendment to article 203 that states that (4) To attain optimal development and to take services to the peoples’ doorsteps, counties shall adopt and use the Ward as the primary unit of accelerated development which in itself does not make sense since its meaning is unclear.
Edit: (4) To attain optimal development and to take services to the peoples’ doorsteps, counties shall adopt and use the Ward as the primary unit of accelerated development. It seems the intent of this amendment is to replace the Constituency Development Fund (CDF) with the Ward Development Fund (WDF). However, since there exist the WDF guidelines from the Controller of Budget, which state that WDF should target priority projects identified by the public, this amendment is already catered for in the regulations since the guidelines specify the Ward as the primary unit for priority development.
Article 203 sub-article (1) of the Constitution is amended — (c) in sub-article (2) by deleting the word “fifteen” appearing immediately after the words “not less than” and substituting therefor the word “thirty-five”.
Article 203(2) of the Constitution states that “For every financial year, the equitable share of the revenue raised nationally that is allocated to county governments shall be not less than fifteen per cent of all revenue collected by the national government.”
This simply means that after the ordinary revenue is shared vertically between the national and the county governments (based on last audited accounts by the Auditor General that are approved by Parliament), the amount that the counties receive (in equitable share) should not be less than 15% of all the ordinary revenue.
There has been contention in the past that 15% is ‘too small” and that it is unfair for counties to get 15% while the national government remains with 85%. The former Coalition for Reforms and Democracy (CORD, now NASA) proposed an Okoa Kenya referendum bill in the past that also, like the Punguza Mzigo Bill, intended to increase this share from 15% to 45%.
However, the same proposal by CORD was questioned by experts, including the International Budget Partnership (IBP) Kenya. The questions that arise regarding these proposals to increase the 15% to whatever number is proposed are two-fold:
1. Is the proposal realistic?
2. What is the justification for the (huge) increase?
Unfortunately, the Punguza Mzigo Bill does not address these two fundamental questions. The justifications provided for the increase are very simplistic and do not mention the effect of how such an increase will affect both the national and the county governments and their ability to deliver services.
This provision in the bill ignores one fundamental principle in the division of revenue process: funds follow functions. That is, revenue allocations to both levels of government are dependent on the functions that both governments perform as per Schedule Four of the Kenyan Constitution. Hence, determining the cost of performing these functions is one of the criteria used in determining the equitable share that each level gets.
Therefore, like IBP says, “ an explanation for this massive shift must be provided in terms of the functions that the two levels of government perform”. This is important because such a shift can affect the ability of either level of government (especially the national government) to deliver services.
But just to be clear, there seems to be a general confusion that the 15% mentioned in Article 203(2) is the amount that counties (should) receive as equitable share. Hence the prevailing idea that this amount is ‘too small’.
However, this way of thinking is incorrect. The 15% is just a threshold, that is “when you give counties X amount of money from the equitable share, make sure it is above X per cent (in this case 15%) of the whole amount.” This means the amount should not go below the threshold of 15% and it should be increased if it does.
Furthermore, the counties’ equitable share has always been above this threshold which means that it is not dependent on it. Hence, the rationale behind this proposal to increase the 15% to 35% should have been well thought out.
Amendment of Article 229 of the Constitution
The bill proposes to amend Article 229 as follows.
Article 229 of the Constitution is amended by inserting the following new sub-articles immediately after sub-article (8)-
(9) There is established a forensic accounting department in the office of the Auditor-General to enhance capacity to produce credible evidence for purposes of prosecuting theft or failure to account for public resources including but not limited to money expended by government departments, as well as by other state organs.
(10) The Auditor-General shall forward the audit and forensic report to the Office of Director of Public Prosecutions and the Director of Criminal Investigations within five days of completion of the audit.
Article 229 of the Constitution establishes the Office of the Auditor-General in Kenya. Hence, the intention of this amendment seems to expand the role of the office.
However, the problem here is that this proposed amendment goes beyond the mandate of the office under the Constitution. Under Article 229 (6) “An audit report shall confirm whether or not public money has been applied lawfully and in an effective way.”
In itself, an audit report does not confirm the theft of public resources. Rather, the auditor general can only provide an opinion on how the public resources were utilized based on the evidence presented by the audited entities and whether this expenditure results in any loss of funds.
An adverse opinion, unsupported expenditure, non-surrender of imprests, etc. do not signify theft even if they may be associated with loss of funds. A forensic audit can determine if there are such issues as fraud, embezzlement, etc. and quantify the loss suffered from such activities. As such, more evidence would require to be gathered for a proper determination of the possibility and conviction of theft (in a court of law). This is where other bodies like the Ethics and Anti-Corruption Commission come in.
Therefore, to close in the words of Jill Cottrell Ghai, “ It is not that there is no grain of common sense in some of the proposals. But many are poorly drafted, hard to see the implications of, and show ignorance about how things work.”
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