Commission on Revenue Allocation CRA

 

 

Open. Accountable. Responsible

 

Contents
Introduction

Authority

Unlike other Commissions, the Commission on Revenue Allocation CRA, appears not to have much authority under the Constitution of Kenya 2010 beyond recommending to Parliament and county governments on the formula to be used in the sharing and use of revenue.

Roles and Functions

The role of the CRA is one of a technical nature in which the Commission prepares the formulae that will guide the division of Public Funds.

Composition

The CRA is led by a Chair and seven Commissioners all of whom are financial and economic experts. The same skills are expected of its secretariat.

 

 Introduction

 

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The New Constitution provides for a limited form of devolution. This means that some of the functions  previously performed by the central government have been assigned to county governments and therefore, some revenue from the center must be allocated to the counties.

The key questions that must be addressed in revenue allocation are how much of national revenue will be allocated to the counties, and in what proportions. The determination of the formular to be used in the sharing of this revenue constitutes the main functions of the Commission on Revenue Allocation, CRA.

Although the recommendations of the CRA are majorly of a technical nature, they cannot not be made unilaterally or in ignorance of history or prevailing political discourse, given that the sharing of revenues is by its very nature, a major part of every political system the world over. Hence the Commission's proposals for allocation are guided by a legislative framework enacted mostly by (the Senators) politicians in their capacity as representatives of the people of the counties.

The CRA and the Senate must therefore maintain a close working relationship: 

217. (1) Once every five years, the Senate shall, by resolution, determine the basis for allocating among the counties the share of national revenue that is annually allocated to the county level of government.

(2) In determining the basis of revenue sharing under clause (1), the Senate shall (b) request and consider recommendations from the Commission on Revenue Allocation;

Indeed the CRA must also liaise with other political players, namely the members of the National Assembly, and all county authorities - through the regular submission of its reports and recommendations:  

216. (5) The Commission shall submit its recommendations to the Senate, the National Assembly, the national executive, county assemblies and county executives.

Not to be left out are National Budget technocrats including the Treasury and the National Assembly's Budget and Appropriations Committee who must build and maintain strong and transparent links with the CRA in order to deliver to the Kenyans, a thorough and acceptable Division of Revenue Bill, every financial year.

The Commission spent much of 2014 collecting fresh County data that it required to make an informed review of the revenue formula that had been in use since 2012/2013 financial year in order to fulfill the Constitution's requirement that the first review be undertaken after three years. Excerpt from the Sixth Schedule - Transitional and Consequential Provisions - Part 4 - Devolved Government:

16. Despite Article 217 (1), the first and second determinations of the basis of the division of revenue among the counties shall be made at three year intervals, rather than every five years as provided in that Article.

This review is important for two main reasons. The first is that it aids the learning process of the Commission and the Country as a whole. This reason informed a key change in the formula it proposed for the 2015/2016, 2016/2017, and the 2017/2018 financial year. In it, the CRA proposed in November 2014, a reduction of the shares previously allocated to Poverty and to Fiscal Responsibility, and instead to apportion two new measures it called Personnel Emoluments and Development Factor as given in the Figure 2 below. To aid the reader's understanding, I have included the first revenue sharing formula that was used for three financial years starting from 2012/2013.

 

Figure 1: The First Revenue Sharing Formula

 

 

 

 

Figure 2: The Second Revenue Sharing Formula

 

Source: CRA

 

The Commission explained that the Personnel Emolument share was to be given to those Counties that inherited bloated wage bills and personnel numbers from the defunct local authorities under the old constitution. On the other hand, the Development Factor was introduced in line with best practices where a sectoral approach to allocation is envisaged in future in order to balance between service delivery and the (politically hot potato) principal of wealth redistribution. This factor is expected to eat into the population and poverty allocations which the CRA admitted are not based on solid data within Counties.

The second reason necessitating a review of the allocation formula is that some of the data used in determining the equitable shares such as population, fiscal responsibility, and poverty levels is not a fixed amount and is bound to change with time. For instance with regard to population, the CRA relied on 2009 Census data for its computations during 2012/2013, 2013/2014 and 2014/2015 financial years - data that would obviously be in serious need of updating by 2015 and which cannot wait for the next population census scheduled for 2019. Similarly, old data dating as far back as 2005 was used to calculate poverty levels.


 Authority

 

The Commission on Revenue Allocation, CRA is a constitutional commission under the Constitution of Kenya 2010. Chapter 12 - Public Finance, Part 4 - Revenue Allocation:

215. (1) There is established the Commission on Revenue Allocation.

Excerpts from Article 248 of Chapter 15 - Commissions and Independent Offices:

248. (2) The commissions are— (f) the Commission on Revenue Allocation;

The CRA is authorised to set out the framework which defines marginalised areas as such and hence the formulae used to determine resource apportionment to those areas:

216. (4) The Comission shall determine, publish and regularly review a policy in which it sets out the criteria by which to identify the marginalised areas for purposes of Article 204 (2).

 

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