KITUO CHA SHERIA BLOG

Devolution and Governance: Introduction to Devolution as a Governance Tool

The new constitution of Kenya 2010 entrenches devolution as a governance tool in Kenya. It states that, the sovereign power of the people is exercised at the national level and the county level.[1] By the above provision of the constitution, it is law that the counties shall have governments but under the national government.

Devolution may be defined as the process of transferring power to legal and elected local governments. In Kenya those are the county governments.[2] Devolution is therefore the actual transfer of administrative, political and also political power from the central government to the elected local governments which are constitutional and in tandem with the new constitution of Kenya 2010.[3]

Public participation, accountability and responsiveness of the county governments to the citizens at the local level has been realized to some level with the birth of devolution as it has also enhanced national unity by reducing corruption and economic stagnation.[4]

The effects of devolution on everything that pertains to national development cannot be ignored since from the time Kenya attained independence, the then government had the sole purpose of possessing all the power to those who formed the government and they ensured that this happened by coming up with countless amendments to the independence constitution. For example the 1964 amendment unified the head of state and the government. One can only imagine the kind of power such an amendment awarded to the head of state and other state officials dancing to the tune of the head of state.[5]

Decentralization of governance has for a long time been seen as a means to ensure that there is public participation and democracy and even accountability on the part of the government. This will see to it that even the marginalized communities that have not felt the closeness of the government feel like they have a voice, democratically and in all other aspects. That they will and are accommodated by the government and fully represented as Kenyans whose rights are covered under the constitution of Kenya 2010.[6]

The County Government Act was enacted to ensure that power is decentralized down to the people of Kenya who are sovereign by providing for example that any person has the power to petition the county assembly to consider any matter that is within its authority which includes enacting, amending and even repealing any of its legislation.[7] This provision by the County Government Act seeks to ensure that there is public participation in quite a number of areas with regard to governance at both the local and nation level.

The Act goes ahead to grant some powers to the people by providing that the electorate in a county ward have the power to recall a member, their member rather of the county assembly before the end of the term of the member on certain grounds. One of the grounds for example is that when a member is found to be in violation of the provisions of Chapter six of the constitution of Kenya 2010.[8]

The Act makes public participation mandatory and makes provision to ensure that the process is smooth under Part VIII and also provides that the process of planning shall be clear and not ambiguous. This ensures that the public within the territory of a local government are aware of the plans the county government has and participate in the whole process.[9]

This provision of the constitution of Kenya 2010 in Article 1 (4) gives authority to and also establishes county governments as a form of a governance tool in Kenya with an aim of bringing the government closer to the sovereign people of Kenya to realize transparency and quality leadership as well.

The constitution proceeds to provide that the territory of Kenya is divided into the counties specified in the First schedule.[10] The constitution also provides that the governments at the national and county levels are distinct and interdependent and shall conduct their mutual relations’ on the basis of consultations and cooperation.[11]

Devolution is a form of decentralization founded on the principle of subsidiarity.[12] It therefore refers to restructuring or re-organization of authority that there is a system of co-responsibility between institutions of governance at the central, regional and local levels according to the principle of subsidiarity.[13]

This clearly illustrates that devolution has become a governance tool in Kenya with the sole purpose or rather aim of decentralizing resources and contribute to the participation of the public in governance. Decentralization therefore involves the transfer of authority for specific decision-making, financial and management functions by administrative means to different levels under the same jurisdictional authority of the central government.

It is therefore the transfer of authorities to autonomous lower level units legally constituted as separate governance bodies. Transfer of functions, powers and authority to such units is often referred to as devolution and is the most common understanding of genuine decentralization.[14] The General elections of Kenya 2013 for the first time gave Kenyans the authority and power to elect chief executive officers and legislators for the newly formed county governments. These governments fall within Kenya’s devolved structure.

The cardinal rule of devolution is to decentralize administrative, financial and political power to the local level in order to enhance the efficiency and effectiveness of government. In effect, devolution is envisioned to provide opportunity for greater citizen participation in local developments and permits the government to respond quickly to local needs.[15]

Devolution is therefore a legal means through which power that was centralized in the old Kenyan regime of the old constitution is now legitimately brought down to the people through their locally elected government to ensure public participation, accountability, equitable development, responsive governance, representation and the wholesome development of the nation at large. This is the goal and aim of devolution of power otherwise known as decentralization.

Management of Public Finance

Public finance is a field of economics concerned with how a government raises money, how that money is spent and the effects of these activities on the economy and the society. It studies how governments at all levels, national, state and local, provide the public with desired services and how they secure the financial resources to pay for these services. Public finance deals with the finances of public bodies. The performance of these functions leads to expenditure.[16] Public finance is the study of the role of the government in the economy.[17] Public finance is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The purview of public finance is therefore considered to be threefold; efficient allocation of resources, distribution of income and macroeconomic stability.[18]

Public finance management basically deals with all aspects of resource mobilization and expenditure management in government. Just as managing finances is a critical role of management in any organization, similarly public finance management is an essential part of the governance process. Public financial management therefore includes resource mobilization, prioritization of programmes, the budgetary process, efficient management or resources and exercising controls.[19]

In Kenya, we have the Public Financial Management Act under which the Parliamentary Budget Officer is required to respect the principle of public participation at all times. [20] The cabinet secretary in charge of finance and also the county executive committee member for finance are also required to respect public participation in the process of coming up with the budget.[21]

When it comes to matters of public finance, the law is clear on its provisions and requires even the accounting officer of an urban area or city to ensure that the members of the public are given an opportunity to participate in the preparation process of the annual budget estimates.[22]

The Constituency Development Act also lays down rules to be followed with regard to the management of public finance. The public can participate in this as they can nominate a person to serve in the Constituency Development Fund Committee and a member of the public can even participate by submitting proposals for community development projects to the committee.[23]

Different authors have different definitions for public finance. Bastable for instance states that whether crude or highly developed, some provisions of the kind are necessary and there for supply and application of state resources constitute the subject matter of a study which is best entitled in English as Public Finance.[24]

Dalton however defines public finance as one of those subjects which lie on the border line between economics and politics. He says that it is concerned with the income and expenditure of public authorities and with the adjustment of one to the other.[25] Dalton’s definition uses the word public authorities to refer to the government or state at all levels.

Harold Groves also defines public finance as a field of enquiry that treats the income and out goes of the government’s federal states and even locals.[26] Harold Groves’ definition on the other hand outlines the types of governments whose finances are studied in public finance.

P.E Taylor defines public finance as the fiscal science, its policies are fiscal policies and that its problems are fiscal problems. According to Taylor, public finance studies the manner in which the state through its organ, the government, raises and spends the resources required.[27] Public finance is thus concerned with the operation and policies of the state treasury.

Mrs. Ursula Hicks states that the main content of public finance consists of the examination and appraisal of the methods by which governing bodies provide for the collective satisfaction of wants and secure the necessary funds to carry out this purpose.[28] Mrs. Hicks therefore highlights the satisfaction of collective wants which in turn leads to the need to secure necessary resources.

C.S Shoup also writes that the discipline of public finance describes and analyses the government services, subsidies and welfare payments and methods by which the expenditure to these ends are covered through taxation, borrowing, foreign aid and creation of new money.[29] This definition enlarges the scope of public finance for modern governments to include different types of expenditure and different types of revenue.

From the definitions of public finance above, it is therefore safe to conclude that public finance is an inquiry into the facts, techniques, principles, theories, rules and policies which shape, direct, influence and govern the use of scarce resources with the alternative uses of the government.

The Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource allocation, resource generation and expenditure management (resource utilization) are the essential components of a public financial management system.[30]

The constitution of Kenya 2010 ensures that public finances both at national level and county level (the county governments) shall be managed in accordance with the principles of public finance to ensure openness and accountability at all times by providing that there shall be openness and accountability, including public participation in financial matters.[31] This the constitution provides to ensure that the public is satisfied and informed on issues concerning public funds managed by both the national government and the county governments as well.

Due to the fact that some counties might produce more revenue than others, the constitution caters for that by ensuring equitable sharing as it provides that, revenue raised nationally shall be shared equitably among national and county governments[32] and that expenditure shall promote the equitable development of the country, including by making special provision for marginalized groups and areas.[33]

Without the above provisions of the constitution, various counties would develop at a higher rate and be advantaged to the detriment of the marginalized ones and as a result there would be unequal development in the country which is something the constitution tries to avoid.

Public finance is closely connected to issues of income distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high income and low income households differently.

Collection of sufficient resources from the economy along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation and expenditure management (resource utilization) are the essential components of a public financial management system.

Applicability of Fiscal Decentralization under the 2010 Constitution

Fiscal decentralization involves shifting some responsibilities for expenditures and/or revenues to lower levels of government. One of the important factors in determining the type of fiscal decentralization is the extent to which the sub national entities are given autonomy to determine the allocation of their expenditures. (The other important factor is their ability to raise revenue.)[34]

The constitution of Kenya 2010 makes provision for fiscal decentralization.[35] The constitution provides that one of the objects of the devolution of government is to facilitate the decentralization of state organs, their functions and services, from the capital of Kenya and to enhance checks and balances and the separation of powers.[36]

This provision shows the intention of devolution which is to decentralize power from the central government down to the people at local level through the county governments and as such promote the principle of separation of powers.

The constitution also provides under the principles of devolved government that the county governments established under this constitution shall have reliable sources of revenue to enable them to govern and deliver services effectively.[37] This will see to it that the county governments perform the functions that were previously controlled by the national government like tax collection and thereby making it a reality the decentralizing such functions is of benefit and will make it more efficient in terms of service delivery.

It’s also a provision of the constitution that every county government shall decentralize its functions and the provisions of its services to the extent that is sufficient and practicable to do so.[38] This will give sub-national government’s autonomy which is the key factors with regard to decentralization of functions from the national government to the sub-national governments. According to the constitutions provision, the county governments shall decentralize their functions and the provisions of their services to a point that is suitable for the needs of each specific county.

The constitution further provides that a function or power of government at one level may be transferred to a government at the other level by agreement between the governments.[39] Some local governments may be in a position to perform some functions way better than the others.[40] The constitution makes provision for this and facilitates a situation where this kind of power or function can be transferred to the other level of government in an effort to ensure better service delivery to the people.

The constitution also provides for cooperation between national and county governments.[41] It provides that government at either level shall perform its functions and exercise its powers in a manner that respects the functional and institutional integrity of government at the other level, and respects the constitutional status and institutions of government at the other level and, in the case of county government, within the county level.[42] This provision seeks to ensure the smooth operations between levels of government and even the national government and the county governments.

The constitution of Kenya 2010 in article 2 (1) provides that it is the supreme law of the republic and binds all persons and all state organs at both levels of government. This means that even the county governments which are the local governments are under the authority of the constitution. Fiscal decentralization as illustrated above is entrenched in the constitution of Kenya 2010 to see to it that the principles of fiscal decentralization are realized and respected.

The potential of Fiscal Decentralization for Responsive Governance, Equitable Development and Effective Service Delivery

The constitution of Kenya 2010 provides that all revenue raised both at the national and county level shall be shared equally.[43]The constitution also provides for openness and also accountability in financial matters.[44]This provision by the constitution will go a long way in ensuring that there is equality in terms of development in the country at large unlike the era of the old constitution where revenue was divided with the discretion of the president and thereby leaving some parts of the country with nothing.

Although fiscal decentralization has emerged as a focus of public sector reform in many less developed nations, the substantial body of theory and research on public finance in developing countries includes little substantive work on the fiscal role and performance of local government. Most analysis on this topic have been in the form of occasional case studies or chapters in study of national tax systems, usually conducted by special commissions or international development agencies.[45]

During the 1990s, fiscal decentralization and local government reform have become among the most widespread trends in development. Many of these wide-ranging and costly efforts, however, have made only modest progress towards meeting their stated goals. Given this uneven performance, there has been extensive debate about the desirability of fiscal decentralization and how to approach it.[46]

Decentralization has the potential to reduce accountability by breaking the links between the levels of taxation and expenditure. Major expenditure responsibilities are being transferred to the local or rather county governments in an effort to improve service delivery, but there are still few high revenue taxes which can be assigned to local governments without creating national economic distortions.[47]

The decentralization of the collection of revenue can serve to increase the costs of collection and compliance, both for the public sector and the private sector. There are usually fixed costs associated with collecting any tax and which have to be borne by the counties. Tax payers will also have to incur costs of compliance for all taxes levied and the possibilities for avoidance and evasion will increase with decentralization for some types of taxes.[48]

This will happen where the tax base is mobile or where also the tax base straddles more than one jurisdiction. In the latter case, there will need to be rules for allocating tax revenues among jurisdictions and therefore in their absence, a situation will arise where some tax bases may face either double taxation or not taxation at all. [49]

Prof. Musgrave argues that decentralization may improve governance in public service provision by improving the efficiency of resource allocation. He observes that sub-national governments are closer to the people than central governments and as a result have better knowledge about local preferences.

Local governments are therefore better placed to respond to the diverse needs of the local people. In addition, decentralization narrows down the social diversity and subsequently the variation in local preferences. As a result, countries are able to attain a higher level of efficiency in the allocation of public resources.[50]

It is however hard to achieve effective service delivery, responsive governance and equitable development when the national government is neglecting the county governments. The most important reason local governments have been neglected in developing countries like Kenya is that strong central governments often oppose decentralization. Some reasons for this reluctance are legitimate, such as the need for national building in ethically fragmented societies and central macroeconomic control in the fragile economies.[51]

In Kenya, the case is that there is no national building explanation advanced yet the national government is reluctant to release funds to the county governments and in such a situation there will be no equality in development, no effective service delivery and no responsive governance.

However, decentralization may stimulate equitable development and that local authorities have an important role to play in the management of development.[52] Some recent empirical evidence suggests that a negative effect of fiscal decentralization is on growth.[53]

The evidence on the improvement of service delivery due to fiscal decentralization is limited. Given the claims of service improvement are so central to the arguments of decentralization advocates that it is somewhat surprising that little research has been done to see if decentralization indeed increases the level of service delivered and their quality. Recent research has found that decentralization increased the total and subnational expenditures on public infrastructure.[54]

Decentralization also leads to effective service delivery. However, the extent to which decentralization improves accountability is mixed. There is certainly evidence that participation, in terms of elections and interactions between elections and local government officials, can be substantially increased by decentralization. This will in turn improve service delivery to an effective level.[55]

There is also some evidence that democratic decentralization can enhance the speed, quantity and quality of responsive actions from local governments.[56] The quality and distribution of participation however varies and it does not always result in improved accountability of the local government or the local residents. Several issues seem to matter here.

An enabling environment for fiscal decentralization can begin with constitutional or legal mandates for some minimum level of autonomy, rights and responsibilities for local governments. This provides a foundation on which to build decentralization, but it does not by any means guarantee successful fiscal decentralization.[57]

There are many countries with constitutional clauses and laws on local government that have not managed to decentralize successfully. A good example is Indonesia which became more fiscally centralized after a major decentralization law was passed in 1974.

Conclusion

Effective decentralization requires complementary adaptations in institutional arrangements for intergovernmental coordination, planning, budgeting, financial reporting and implementation. Such arrangements may encompass both specific rules and provision for regular intergovernmental meetings and periodic reviews of intergovernmental arrangements.

If the government has detailed central control over local use of funds, it is seldom appropriate. Instead, what is needed is transparency and accountability to local constituencies supported by strengthened higher level monitoring and reporting of local fiscal performance.

One can therefore conclude that decentralization guarantees neither local participation nor accountability of local governments to their constituents. Again, neither of these things comes about immediately or automatically as a result or decentralization. Some local benefits of decentralization can only be realized if the local governments are able to develop. Equitable development, responsive governance and effective service delivery should not be expected to occur rapidly. It typically requires a strategic, gradual implementation process of building trust between local government officials and their constituents.

BY:

Ephraim Kayere, Advocate

LAED-Kituo Cha Sheria

[1] See article 1 (4) of the constitution of Kenya 2010

[2] See ICJ Kenya, Handbook on Devolution

[3] See Peter Wanyande, ‘Devolution in Kenya, Challenges and the Future’ Series number 24

[4] See Cyprian Ouma Nyamwamu, From a Centralized System to a Devolved System: Past, Present and Future Dynamics, 2010

[5] See Kithure Kindiki, The Emerging Jurisprudence of Kenya’s Constitutional Law Review

[6] See Jan Erk (2006), Does Federalism Really Matter? Comparative Politics 39 (1)

[7] See Section 15 of the County Government Act

[8] See Section 27 of the County Government Act

[9] See Section 11 of the County Government Act

[10] See article 6 (1) of the constitution of Kenya 2010

[11] See article 6 (2) of the constitution of Kenya 2010

[12] See David .A. Bosnich: The principle of subsidiarity available at http//www.action.org/pub/religion-liberty/volume-6-number-4/principle-subsidiarity

[13] Onesimus Kipchumba Murkomen: Devolution and the Health System in Kenya

[14] Ibid

[15] See article by Transparency International Kenya, Understanding Devolved Governance

[16] See paper by Sri. Abdul Kareem, O.C, Public Finance

[17] See Gruber, Jonathan (2005): Public Finance and Public Policy

[18] See article: Public Finance, available at en.wikipedia.org/wiki/public-finance

[19] Ibid

[20] See Section 10 of the Public Financial Management Act

[21] See Section 35 and Section 125 of the Public Financial Management Act

[22] See Section 175 of the Public Financial Management Act

[23] See Section 24 of the Constituency Development Act

[24] See Charles F. Bastable (1892), Public Finance

[25] See Hugh Dalton (1992), Principles of Public Finance

[26] See Harold Groves, Principles of Public Finance

[27] See P E. Taylor, The Economics of Public Finance

[28] See Mrs. Ursula Hicks, Public Finance

[29] See C S. Shoup, Public Finance

[30] Supra n 19

[31] See article 201 (a) of the constitution of Kenya 2010

[32] See article 201 (b) (ii) of the constitution of Kenya 2010

[33] See article 201 (b) (iii) of the constitution of Kenya 2010

[34] See paper by The World Bank Group; Decentralization and Sub-national Regional Economics

[35] See chapter Eleven of the constitution of Kenya 2010

[36] See article 174 (h) and (I) of the constitution of Kenya 2010

[37] See article 175 (b) of the constitution of Kenya 2010

[38] See article 176 (2) of the constitution of Kenya 2010

[39] See article 187 (1) of the constitution of Kenya 2010

[40] See article 187 (1) (a) of the constitution of Kenya 2010

[41] See article 189 of the constitution of Kenya 2010

[42] See article 189 (1) (a) of the constitution of Kenya 2010

[43] See Article 201 of the Constitution of Kenya 2010

[44] Ibid

[45] See Ter-Minassian, T. (1997) Fiscal Federalism: Theory and Practice

[46] See Paul Smoke, Fiscal Decentralization in Developing Countries

[47] Supra n 34

[48] Ibid

[49] Ibid

[50] IEA research paper, Series No. 24, Devolution in Kenya: Prospects, challenges and the future

[51] See Cochrane, G. ‘Policies for Strengthening Local Government in Developing Countries’ World Bank Staff Working Paper No. 582, World Bank, Washington, DC, 1983

[52] See Kee W. “Fiscal decentralization and Economic Development”, Public Finance Quarterly, Vol. 5, No. 1, 1997

[53] See Zhang, T. and H. Zou, ‘Fiscal Decentralization, Public Spending and Economic Growth in China’, Journal of Public Economics, Vol 67, 1998

[54] See Estache, A. and S. Sinha “Does decentralization increase public infrastructure expenditure?’

[55] See Crook, R.  and J. Manor “Enhancing Participation and Institutional Performance: Democratic Decentralization in South Asia and West Africa

[56] Ibid

[57] See Smoke P.  “Fiscal decentralization in Indonesia. A New Approach to an Old idea.”