The Clerk Nairobi City County Assembly, P.O Box 45844-00100 City Hall Buildings Nairobi, Kenya REF: MEMORANDUM ON THE BUDGET ESTIMATES FOR THE FINANCIAL YEAR 2016/17 The County Fiscal and Strategy Paper 2016 set to focus the Nairobi City County Budget 2016/17 on improving absorption rate for development from the current 33% to above 90%, use of a balanced budget approach to ensure matching of resources to needs in the county and avoid off budget spending. However, local revenue enhancement, spending money at source, rising spending on salaries and wages, public debt and a lack of public engagement remain challenges to effective implementation of budgets and in light of these, we would like to make the following observations; 1. Public Participation funding in the 2016/17 budget In past budget documents, there have been disconnects between county priorities and priorities identified by Mwanachi during the Medium Term Expenditure Framework (MTEF) process. This financial year 2016/17 budget has not explicitly provided for public participation but has however proposed to allocate Kshs. 195.96 million towards Advertising, Awareness and Publicity Campaigns Table 1: Nairobi City county public participation allocations FY 2016/17 EXPENDITURE SUMMARY FOR FY 2016/2017 SECTOR NAME RECCURENT DEVELOPMENT TOTAL 2% AS PROVIDED FOR IN THE PUBLIC PARTICITAION BILL ACTUAL AMOUNT PROVIDED FOR IN THE FY 2016/17 PUBLIC SERVICE MANAGEMENT 87,000,000 28,000,000 115,000,000 2,300,000 7,000,000 1 P a g e
GOVERNORS OFFICE 1,345,000,000 115,000,000 1,460,000,000 29,200,000 - SECURITY AND DISATER MANAGEMENT 3,160,919,070 420,000,000 3,580,919,070 71,618,381 - FINANCE AND ECONOMIC PLANNING 2,407,913,036 100,000,000 2,507,913,036 50,158,261 - URBAN PLANNING AND LANDS 2,821,000,000 100,000,000 2,921,000,000 58,420,000 16,000,000 URBAN RENEWAL AND HOUSING 318,000,000 435,000,000 753,000,000 15,060,000 - PUBLIC WORKS AND INFRASTRUCTURE 210,000,000 188,000,000 398,000,000 7,960,000 - AGRICULTURE,LIVESTOCK DEVELOPMENT,FISHERIES AND FORESTRY 1,373,000,000 4,856,000,000 6,229,000,000 124,580,000 - ENVIROMENT WATER AND ENERGY 384,000,000 150,000,000 534,000,000 10,680,000 465,000 TRADE, INDUSTRIZATION,CO- OPERATIVES & TOURISM 1,560,000,000 970,000,000 2,530,000,000 50,600,000 4,000,000 EDUCATION, YOUTH AFFAIRS, CHILDREN, SPORTS, CULTURE & SOCIAL SERVICE 663,000,000 550,000,000 1,213,000,000 24,260,000 41,500,000 ICT, E-GOVT & PUBLIC COMMUNICATIONS 1,484,000,000 400,000,000 1,884,000,000 37,680,000 5,000,000 HEALTH 305,000,000 150,000,000 455,000,000 9,100,000 122,000,000 COUNTY ASSEMBLY 5,450,000,000 1,100,000,000 6,550,000,000 131,000,000 0 2 P a g e
WARD DEVELOPMENT FUND 1,553,000,000 150,000,000 1,703,000,000 EMERGENCY FUND 31,000,000 1,612,000,000 1,643,000,000 DONOR FUNDED PROJECTS 80,000,000 80,000,000 TOTAL 1,430,000,000 1,430,000,000 TOTAL 23,152,832,107 12,834,000,000 35,986,832,107 622,616,642 195,965,000 a. The public participation bill provided for a 2% of the budget to be allocated for public participation. The Kshs. 195.9 million provided is 69% less than what should have been budgeted for at Kshs. 622.6 million. What are the reasons for the deviation against what has been provided for in the law. b. A further look at the sector outputs indicate that this funding is not explicit to public participation - The ICT, E-govt & Public communications sector with the largest allocation of 122 million indicates the main focus would be to undertake County Stories and News Features Figure 1 : ICT sector programme outputs and performance indicators 3 P a g e
- Although the Public Service Management Board has identified public participation in policy formulation, planning and budgeting,provision of feedback on performance, general oversight and project identification and implementation as a high priority for the sector, there is no indication that the Kshs. 7 million provided for in the Public Service Management sector will go towards enhancing the public s role Figure 2: Public Service Management programme outputs and performance indicators - The trade and Enterprise sector allocated Kshs. 41 million towards Advertising, Awareness and Publicity Campaigns of which Kshs. 35 million the Tourism department. However this sector has provided for an information center and creating a website. However it is not clear if this is a tourism website and information centre and if not, how these will support all the public participation needs in the county 4 P a g e
Figure 3: Trade and Enterprise sector programme outputs and performance indicator It appears the public participation process is not being accorded due importance and this may lead to legal challenges. We recommend the county undertake deliberate action through policy guidelines on public participation in budgeting. TISA has developed proposed policy guidelines and subsequent necessary budget allocations that seek to remedy these challenges in public participation. 2. County Expenditure and sector priorities Table 2: Nairobi City county Sector shares of total sector budget, 2015/16 and 2016/17 % Share of Total Expenditure Change Bw Budget SECTOR Estimates 2015/2016 Supplementary CFSP Ceiling 2016/ Budget 2016/17 Supplementary County Assembly 5.5% 6.2% 5.2% 5.2% -1.1% County Public Service Board 0.3% 0.3% 0.4% 0.4% 0.1% Office of Governor and Deputy Governor 15.8% 16.4% 18.5% 10.9% -5.5% Security and Disaster Management 0.0% 0.0% 7.6% 7.6% ICT,EGOVT&PUBLIC COMMUNICATIONS 1.0% 1.7% 1.4% 1.4% -0.3% Finance and Economic Planning 9.4% 10.6% 8.9% 8.9% -1.7% Health Sector 22.1% 21.5% 19.9% 19.9% -1.6% Urban Planning & Lands 2.3% 1.8% 2.3% 2.3% 0.5% Urban Renewal & Housing 0.0% 0.0% 1.2% 1.2% 1.2% Public Works and Infrastructure 24.5% 19.1% 19.0% 19.0% -0.1% Education Youth Affairs, Sports, Culture & 6.4% 6.4% 5.7% 5.7% -0.7% Trade and Enterprise Development 3.2% 2.6% 3.7% 3.7% 1.1% Public Service Management 3.4% 5.0% 4.4% 4.4% -0.6% Agriculture and Livestock Development S 1.1% 1.2% 1.6% 1.6% 0.5% Water, Energy & Environment 5.1% 7.2% 7.7% 7.7% 0.5% 5 P a g e
From the table 2 above,we see that as a share of the total budget, the trade and enterprise development, urban planning/renewal, agriculture and water/energy sectors are increasing in priority while on the other hand health and education declining in priority 2.1 Trade and Enterprise development sector Figure 4: Trade and Enterprise sector summary of programmes and sub programmes a. Whereas all other sub-programmes are seeing budget increases, Markets subprogramme is seeing a decrease of 13.7 percent. This can be attributed to a decrease in development spending on markets of Kshs. 197 million (from Kshs. 639 million in 2015/16 to Kshs. 551 million in 2016/17). Is this due to completion of market projects last year in this sector? Why the shift in spending on Markets? b. We also see a 200% increase in funding for Corporative audits from Kshs. 4.9 million to Kshs. 15 million under goods and services. 6 P a g e
Figure 4: Cooperative sub programme economic classification However a look at the program indicators show that the substantial changes will be to hold an additional 20 AGMs from last year. Is this the reason for the 10 million shilling increase? Figure 5: Cooperative Audit sub programme outputs and performance indicator co-operative audit co-operative audit department Registered audited accounts No of audited accounts registered 1100 1300 co-operative audit department Revenue generation Amount of revenue collected 12.5m 15m 17m 19m co-operative audit department System Reports Audit No. of Systems Audit Reports done. 15 17 19 21 co-operative audit department Informed Clients. (New Programme) No. of Consultative Seminars/Worksho ps Held. 2 2 2 2 co-operative audit department Audit Investigation Reports. No. of Audit Investigation Reports Done. 12 14 16 18 (New Programme) co-operative audit department Open and Spacious Office Space. Renovated Office Space. (New Programme) 11 0 0 0 7 P a g e
co-operative audit department Adopted Annual Financial Reports No. of Annual General Meeting Attended. 650 670 690-710 Annual Report Audit No. of Annual Audits Reports done. 650 670 690 710 c. Tourism promotion has also see a 156% increase from Kshs. 46.6 million in 2015 to 119.5 million in 2016/17. This is largely attributed to a Kshs. 68 million increase in use of goods and services. However a look at the program outputs do not show any deviation from last year and hence why the 68 million shilling increase? Figure 6: Tourism Development sub-programme outputs and performance indicator d. Betting & Gaming control have also seen a Kshs. 51 million increase (83% increase from last year s allocation. This is majorly attributed to increases in compensation which grew by 41 million from Kshs. 61 million to Kshs. 110 million. This was also seen in the Supplementary Budget 2015/16 where betting and gaming control saw a Kes. 48 million increase due to late duty allowances. On what basis are these allowances provided? How many staff and which Job group? What is the maximum amount each staff can get? 8 P a g e
2.2 Health Sector a. The Health development spending is falling from 1.76 billion to 1.1 billion with budget cuts from County referral hospitals and health centres and dispensaries. Why the decline in development spending to hospitals? Figure 7: b. However despite the declining budget, we see an increase in sector outputs - Increase number of health facilities with diagnostic services from 2 to 3 - Fully equipping an additional 3 ambulances So will we able to do this work with the declining capital budget? Overall there is a lack of synchronicity in budgetary allocations and indicators and the increases and decreases in sector budgets without subsequent increases and/or decreases in sector outputs reveals numerous transparency gaps that create room for corruption. We therefore recommend that the budget for the respective sectors be reduced to match their envisioned outputs. 2.3 Garbage Collection and Management Several items budgeted in the present estimates were also budgeting in 2014/15 budget. This may result in double funding. For transparency purposes we urge the Assembly to itemize subactivities and capital investments since 2014/15 to ensure there is no double funding. 9 P a g e
Garbage Collection 2014/15 (ADP) 2015/16 (approved estimates) Supplementary budget 2016/17 5 Trucks 70,000,000 80,000,000 50,000,000 Dandora Dumpsite Improvement- 2015/16 allocated Civil Works (fencing) 30,000,000 285million to 170,700,000 garbage Construction Of John Osogo Rd 30,000,000 84,000,000 collection. This 170,000,000 was increased by 1no. Bulldozer 63,000,000 655million through the 35,000,000 1no. Backhoe 230,000,000 supplementary budget in April 12,000,000 2016. 1no. Excavator 19,000,000 1 No Compactor 53,000,000 45,000,000 3 Spending on Hospitality and travel versus development The Nairobi City County Budget 2016/17 proposes to spend a total of Kshs. 227.3 million on catering and hospitality and a further 126.1 million on travel costs (without accommodation or allowances). This combined amount of Kshs. 353.4 million is consistent with what the county has been spending previously on hospitality and travel. ln 2014/15 the county spent Kshs. 304 million on domestic and foreign travel 1. According to the Office of the Controller of Budget, during the first half of the 2015/16 budget, Nairobi City County spent Kshs. 357 million on hospitality and domestic and foreign travel. This compares unfavorably to the Kshs. 69 million spent to refurbish market stalls, Kshs. 131 million to construct open stalls and 180 million on other infrastructure and civil works over the same period. 1 COB annual budget implementation report 2014/15 10 P a g e
200 180 160 140 120 100 80 60 40 20 0 Domestic Travel Foreign Travel Hospitality Rehabilitation of Markets Construction of open stalls Other infrastructure and public works The 1 st supplementary budget for 2015/16 tabled to the Nairobi City County in May 2016 decreased the 2015/16 development budget by 26.3 % from Kshs. 11 billion to Kshs. 8.2 billion. However, recurrent estimates increased by Kshs. 1.4 billion (7% more than the printed recurrent estimates). These spending trends coupled with development budget cuts raises questions on where are the county priorities. Is the increase in the counties recurrent expenditure at the expense of development spending justifiable when areas such as hospitality and travel exceed the yearly spending on priority areas of street lights, equipping maternity theatres, maintenance of roads? 4 Other budgetary and economic concerns 4.1 Revenue Generation: The County continues to commit to enhance local revenue by widening the revenue base and updating the valuation roll. Of concern is the slow updating of the valuation roll and has been in implementation for the last 1 and a half years. What are the timelines for the completion? What are the timelines for the roll out? However as the county strengthens its revenue collection measures, revenue estimates should be based on what the county has actually been able to collect. The key policy issue to take into consideration is to not inflate revenue targets as has been done in the past. Therefore, the county should review revenue projections along the lines of a Kshs. 11 billion revenue target 4.2 Spending money at source: As cited by both the auditor general and the controller of Budget, there is a persistent lack of reporting on collections made on behalf of the Nairobi County Government. All funds raised on behalf of the county should be remitted into the 11 P a g e
county revenue fund and this should be a key policy that should be communicated and implemented by all county units. We further request a breakdown of parking fee collections both by location and collecting officer against estimated revenue collection 4.3 Allocations to sitting allowances: The County proposes to spend Kes. 7.4 billion (32%) on operations and maintenance in the coming 2016/17 financial year. The maximum take home monthly sitting allowance is Kes.48, 000 per month equating to Kes. 576,000 According to the SRC ceilings. Nairobi County with 128 members should have a maximum annual ceiling of Kes. 73.7m however FY 2014/15 last financial year the county assembly spent 205.2 million on sitting allowances. Although the Budget Policy Statement 2016 recommends austerity measures of curbing high expenditures on sitting allowances and travel, we emphasis the need for the county to adhere to the provisions provided in law and in turn revise the high spending on Operations and Maintenance previously attributed to allowances. 4.4 Rising spending on salaries and wages: The composition of the county s wage bill raises deep concern. According to the CBROP 2015 and CFSP 2016, spending on salaries and wages of Nairobi City County Government is increasing steadily by 5% from Kes.13.6 billion in 2014/15 to Kes. 14.3billion in 2016/17 and further projected to rise to Kes. 15.08 billion in FY 17/18. The county committed austerity measures in the CBROP 2015 to slow down recruitment on non essential manpower, outsourcing non-core services and despite these we see a continued growth in the budget. What are the solid proposals by the county government on maintaining the current wage bill and further reducing it in the long term? 4.5 County debt: Currently, county debt 223% of the county revenues, 203% above the PFM ceiling of 20%. For transparency and accountability, We recommend that in the county debt management strategy paper the county give in detail the debt position including the who, what for and time of accruing the debt for CBEF review prior to its tabling to the assembly 4.6 Questionable county assets: PFM 104(g) implores the County Treasury as the acting as custodian of the inventory of the county government's assets. Currently it is not known the status of the assets held by the county in addition to the public lands held. For transparency and accountability we recommend the publishing of the county assets and liabilities for discussion with both the county Budget and Economic Forum and the County Assembly 12 P a g e
5.0 Review of Nairobi City County Assembly Budget Estimates 5.1 County Assembly Service Board: Section 12 of the County Government Act 2012 provides for the establishment of the County Assembly service Board. The board is responsible for among other responsibilities preparing annual estimates of the county assembly service and submitting them to the county assembly for approval, and exercising budgetary control over the service. Membership of the CASB comprises the Speaker, Leader of Majority, Leader of Minority and one person resident in the county appointed by the county assembly from among persons who have knowledge and experience in public affairs but is not a member of the assembly. We request clarification from the Clerk on the composition of the CASB with respect to adherence to the CGA2012. We note that failure to adhere to the statutory composition may render is an offence and may render the decisions of the Board invalid and subject to court challenge. We also note that in appointing the resident the CA should make efforts to ensure the independence and impartiality of this member through an open and competitive process. 5.2 Opacity in Budget: The county assembly budget estimates are not itemised by activity/subitems undermining transparency and creating opportunities for waste and corruption. Examples of this include the other operating costs, equipment, refurbishment, furniture budget items. We request the Clerk ensure the budget is itemised by sub-activity for transparency purposes. 5.3 Actual expenditures not aligned to objectives: Whereas the budget outlines 5 objectives, a close analysis indicates that recurrent expenditure overshadows other objectives of the county as shown overleaf. NCC CA Budget 2016/17 Domestic Travel Foreign Travel Other Operating Printing/Advertisi Hospitality Costs ng/comms Training Speakers Office 2,892,500 7,00,000 0 550,000 0 0 Legislature (HQ) 62,853,200 18,929,481 22,560,000 1,000,000 0 4,188,000 Committee Services 71,413,600 38,945,622 0 7,000,000 0 25,500,000 CASB 5,000,000 14,000,000 0 0 96,000 0 Clerk 40,033,800 35,558,475 30,896,000 8,500,000 21,400,000 33,696,800 13 P a g e
NCC CA Budget 2016/17 Membership Rental Personal allowance Reimbusements Refubrishment Specialised Equipment Car loans /mort Office furniature Speakers Office 4,000,000 0 Legislature (HQ) 3,300,000 261,084,523 7,800,000 Committee Services 0 CASB 0 0 63,932,533 Clerk 60,000,000 17,250,000 200,000,000 65,740,000 There are no budget lines or low research, public participation (civic education, meetings, reporting, M&E), ICT, HR development, media/outreach. 5.4 Domestic Travel: It is not clear why domestic travel budgets are so high yet assembly members and staff operate within wards. One of the objects of devolution is to bring governance closer to the people and presumable reduce such expenses. At present domestic travel comprises the lion s share of the budget at Ksh 182,193,100. This translates to almost Ksh 500,000 per day in domestic travel expenses. This figure is unsustainable and must be slashed. Especially when considered that members of the public have been forced to foot hefty amounts to finance car loans with yet more proposals for the same. We propose that domestic travel be itemised and slashed to 200,000 per day. The balance of budget can be allocated to other objectives of the county budget. 5.5 Foreign Travel: Foreign travel is another high budget line at 107, 433, 578 which translates into 839,325 per month. Personal Allowances are the highest at 325,017,056 before factoring allowances paid to CASB 63,932,533 and reimbursements of 7,800,000. The personal allowances are the equivalent of 211,599 per month per MCA. It is not clear how much goes to MCAs and to legislative staff. Allowances to the CASB compute to almost 16million for each of the four members of the Board and equivalent of 1.3million per month. We propose that foreign travel be slashed to no more than 40,000,000 per year and the assembly prepare a travel protocol that ensures efficiency, accountability and direct outcomes of such travel. 5.6 There are risks of double drawing on personal and travel allowances by the CPSB members due to the provision of separation as it is not clear how the assembly ensures members don t draw on the budget in their capacities as MCA s and as CPSB officials. A clear policy on the CPBS members be developed to ensure no double drawing and clear reporting. The budgets be slashed and reallocated to other objectives of the budget. 5.7 Refurbishment: The assembly allocates Ksh 60,000,000 to refurbishment of the chamber without providing details. In FY 2015/16 the completion of chambers received a total of 14 P a g e
472,000,000. There is need to ensure there is no double funding by providing an itemized budget and indicating past allocations to the same activity. 5.8 The Budget estimates do not capture AIA. It appears the has county assembly has no development partners. Is this the case? 5.9 Salaries: The estimates do not disaggregate the salary lines to indicate what is spent on MCA s, Management and staff for the assembly to enable an assessment on whether the county is investing in building its internal capacity. Proposal to disaggregate salary lines. 5.10 Whereas the code of conduct has been passed by the County Assembly the budget does not make any indicates on how it intends to implement it. Proposal for budget to indicate how it plans to enforce the code of conduct. 5.11 The budget has not budget lines for public participation despite passing a public participation budget last year allocating 2% of all county budgets to public participation. Budget to be reviewed to allocate 2% to public participation. county assembly to adopt public participation guidelines in its operations. 6. 0 Ward Development Fund Both the executive and assembly budgets to not provide detailed information on the ward development fund projects and itemized budget. We request that this information be included to demonstrate projects of the previous year and project lists/estimates for the fund. Signed WANJIRU GIKONYO, NATIONAL COORDINATOR, THE INSTIUTE FOR SOCIAL ACCOUNTABILITY 15 P a g e