allocation and use of resources

allocated but not always in optimal ways. Use of resources has been moderately satisfactory but could be much more effective and efficient. In all, the ways in which counties allocate and use their resources to provide services is deficient and could be greatly improved.

Table 4.4 provides a summary assessment for fiscal devolution and for county-level resource allocation and use. Roughly speaking, the performance has been neutral-to-negative, indicating considerable room for improvement— and thus scope for improving service delivery.

TABLE 4.4 Summary assessment of financing service delivery and county allocation and use of resources

AREA

Expenditure assignment and vertical sharing of resources

WHAT HAS WORKED

• Counties are being allocated resources for basic service delivery. • Functional assignments to counties are largely in line with subsidiarity.

Revenue assignments • Counties have been assigned ownsource revenue (OSR).

WHAT COULD BE WORKING BETTER

• The national share has been growing relative to the county share and may be disproportionately high. • A relatively high share of sector expenditure relative to functional assignments are made at the national level, especially in water and agriculture. • County efforts to mobilize OSR have been weak. • Counties have had limited incentives to mobilize

OSR.

Intergovernmental transfers • Allocations to counties are made ahead of the budget cycle. • Transfers to counties redistribute in favor of poorer and more disadvantaged areas. • Conditional grants have shown the potential to fill sector financing gaps and incentivize performance.

Alternative sources of finance • There is a prudent approach to borrowing. • Delayed release of equitable shares are due to poor national revenue projections and cash management. • Equitable share allocations do not sufficiently consider the service delivery needs of counties, especially those of larger and more urbanized counties. • There is limited reliance on conditional grants, which are fragmented, and a clear strategy for use of conditional grants is also lacking. • Counties lack access to mechanisms for financing large development investments in urban areas.

Allocation of resources at the county level • A comprehensive framework is established for planning and budgeting. • Counties are autonomous and exercise discretion in resource allocation. • Budgets are not sufficiently linked to the types and location of service delivery and results. • The budget process is overly focused on capital investment projects. • Some sector budgets allocate insufficient resources to frontline service delivery. • Compliance with development spending thresholds may be distorting resource allocation. • Populous, more urbanized counties cannot allocate enough for infrastructure, and their budget choices are squeezed by large payrolls. • Allocations to service delivery are undermined by high administrative allocations. • Participation by citizens is often poorly structured and prioritizes projects rather than service delivery.

Use of resources at the county level • IFMIS is operational in all counties. • OAG audit opinions of county finances are steadily improving. • Overall county budget execution rates average about 80 percent. • Counties in historically disadvantaged or marginalized regions are executing their budgets. • County budget execution rates are unstable. • Development budget execution rates are relatively weak. • Some counties are not releasing budgets to their service delivery departments or delegating spending responsibilities to frontline facilities.