World Bank Kenyan Devolution - Executive Summary

7/30/2019 World Bank Kenyan Devolution - Executive Summary

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DEVOLUTION WITHOUT DISRUPTION PATHWAYS

TO A SUCCESSFUL NEW KENYA

EXECUTIVE SUMMARY

June 2012


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1 Devoluon without disrupon Pathways to a successful new Kenya: Execuve Summary

1. Kenyas new Constuon marks a crical

juncture in the naons history. It is widely

perceived, by Kenyans from all walks of life, as

a new beginning. Indeed, many feel that post-Independence Kenya has been characterized by

centralizaon of polical and economic power

in the hands of a few, resulng in an uneven and

unfair distribuon of resources and corresponding

access to social services; the opposite of an

inclusive state. Born of the polical opportunity

created by the 2008 post-elecon violence,

the Constuon nally adopted, aer almost a

decade of unsuccessful reform aempts, presages

far-reaching changes. Its vision encompasses

a dramac transformaon of the Kenyan statethrough new accountable and transparent

instuons, inclusive approaches to government

and a rm focus on equitable service delivery for

all Kenyans through the newly established county

governments.

2. Devoluon is at the heart of the new

Constuon and a key vehicle for addressing

spaal inequies. A more decentralized

government makes eminent sense, given

Kenyas diversity and experience with policaluse of central power. Decentralizaon has been

increasingly seen and adopted worldwide as a

guarantee against discreonary use of power

by central elites as well as a way to enhance the

eciency of social service provision, by allowing

for a closer match between public policies and the

desires and needs of local constuencies. Kenyas

Constuon entrenches devolved government by

guaranteeing a minimum uncondional transfer

to countyies under the new dispensaon.

3. From a social and instuonal perspecve,

Kenyas devoluon makes a lot of sense.This isa very diverse country with ten major and more

than thirty minor ethnic groups. Needs are very

dierent between the arid and semi-arid North

and the highlands, between the rural Northern

Ri and the urban centers of Mombasa, Nairobi,

and Kisumu, and between the coast and western

Kenya. Kenyas fourty seven counes will soon

have an average populaon of one million people.

This means they will be relavely homogenous,

but not big enough to become strong regionalblocks. Counes will be beer placed than the

naonal government to deliver social services

because they have specic challenges and the

local knowledge to address them. For instance in

the case of health, lagging counes sll need to

catch-up in providing basic health services while

the leading urban counes will be faced with new

types of diseases (mostly non-communicable

such as diabetes and cancer). With these stark

dierences, it makes lile sense to provide the

same mix of services across the country. Andeven if there are no dramac improvements

in service delivery, people prefer to make

decisions themselves rather than following

direcons imposed by a central government.

With a constuonal guarantee of uncondional

transfers from the center, Kenyas counes will

have the means and the autonomy to begin to

address local needs, and their cizens will be able

to hold them accountable for their performance.

4. But Kenyas devoluon is incredibly ambious,and therefore commensurately risky. It is a

massive undertaking from a logiscal point

of view. In one go, on day one aer the next

general elecon, Kenyas system of government

will be profoundly remodeled and the transion

will inevitably encounter teething problems.

Moreover, there are diverging views on how far

and how fast it should go. Since Independence,

Kenyas leaders have held diverging views about

devoluon. From one perspecve, it oers the

potenal to redress perceived ethnic and policalbias by giving local communies far greater

control over resources and decisions about service

delivery. However, from another perspecve,

devoluon could potenally undermine naonal

unity by encouraging fragmentaon of the

state along parsan lines or by decentralizing

corrupon, leaving cizens worse o if local elites

are able to capture resources to the detriment of


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the majority or if newly established counes fail

to put in place the systems needed for eecve

and transparent service delivery.

5. In the short run, managing the transion

to the new system and peoples expectaons

will be crical. From a polical standpoint, thedevoluon process has generated tremendous

hope in the populaon and somemes unrealisc

expectaons of how quickly things can and will

change in the ordinary lives of Kenyans. From

a logiscal, technocrac standpoint, this is a

highly complex undertaking, which Kenya has

embarked upon in a context of polical division.

Going forward, the challenge will be to manage

expectaons of how much and how quickly

devoluon can deliver and to make sure that

the transion to devolved government causesas lile as possible disrupon (and ligaon) to

the delivery of services that are essenal for the

welfare of the people of Kenya as well as for the

health of its growing economy. Equal distribuon

of wealth across Kenya may be desirable polically

but it is impossible economically. With a few

excepons, counes will be too small to generate

the economies of scale, which companies need to

be successful. Firms will only come to Kenya and

expand if they can operate in the whole country

and beyond. Moreover, no maer what remotecounes do to aract them, most will chose to

locate their operaons in Kenyas big cies to

benet from the markets around them.

6. The next two years will be crical because the

foundaons of the devoluon architecture will

be laid then. Anyone who has ever built a house

knows that it is impossible to alter the foundaons

once the building is nished, at least not without

knocking it down and starng again. Kenyans

sense that a momentous restructuring of theircountry is underway. There are high expectaons

and much anxiety. Kenyas devoluon is not only

a crical milestone in this countrys history; it is

also remarkable in global terms. Many countries

both rich and poor have transferred power and

resources to lower levels of government. Few

have done so to enrely new sub-naonal units,

which they have had to establish from scratch.

Kenya will undergo a dual transion: a transfer of

power and resources from the center to the sub-

naonal level and a simultaneous reorganizaon

of local government, with the consolidaon of

exisng local structures into forty-seven newly-created county governments (Figure 1).

7. The devoluon train has already le the

staon: the challenge is to make sure it arrivesat desnaon, safely and on me. The polics

of devoluon explain the high intensity of hopes

and expectaons that have been pinned to it.

It also means there are high risks if they are

disappointed. There are great opportunies

and enormous challenges waing for Kenya, in a

crical elecon year, which will determine the fate

of the country, polically and economically for

years to come. This report takes a snapshot look

at the crical issues facing Kenyas policy makers

today. It does not argue for or against devoluon(a decision that belongs solely to Kenyans), but

presents suggesons and recommendaons on

how best to navigate the tough choices ahead. Its

main focus in on helping Kenya manage a delicate

transion.

8 Provincial Administraons

47 Counes

175 Local Authories

280 + De-concentrated

Administraons

280 + District

Administraons

Solid waste management, public health

parking and street lighng, markets,

slaughterhouses, water sewerage, storm

water drainage, billboards, noise control,

fire fighng, libraries, game parrks.

Health, agriculture, livestock, fisheries, planning,

housing, lands, transport, rural electricity, sports and

culture, plant and animal quaranne, environment

and conservaon.

Liquor licensing, disaster

management, control of

drugs and pornography.

Source: World Bank KEU, 5 edion.

Figure 1: Kenya's devoluon presents massivechallenges for polical and administrave restructuring

2Devoluon without disrupon Pathways to a successful new Kenya: Execuve Summary


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Table 1: A Phased Approach to Transferring Functions to Counties

Timing of transfer Readiness criteria Types of funcons Examples

Phase 1 Immediately aercounty formaon

None / automac Funcons not currentlybeing performed by

any naonal agency

Local government funcons County assemblies

Establishment of basic systemsPhase 2 Transfer when basic

county systems areoperaonal

Basic county HRand PFM systems inplace

Sectoral plans inplace

Basic operaon ofservice deliveryprograms

Operaon of rural and districthealth facilies, ambulanceservices etc.

Phase 3 Transfer only whenspecic readinesscriteria are met

Specic systemor capacityrequirements

More complexprograms and supplychain management

Purchasing and distribuon ofpharmaceucals (only aerstock control and orderingsystem in place)

Source: World Bank.

Financing county needs: Transferring the right amount withan appropriate mix of instruments


8. Decentralizing power requires transferringresources from the center to the local level: but

how much, how fast and to whom is not obvious.

Resourcing Kenyas future counes involves a two-

step process to fairly divide naonal resources.

First, it requires determining the opmal

aggregate vercal split between the naonal

and county governments, in such a way that each

is adequately resourced to carry out its mandated

funcons. Second, total county resources must

be split across the forty-seven counes in a way

that recognizes their dierent inherited needs

and also addresses historical inequalies between

them. This will be parcularly dicult in an

overall context of scal stress with limited scope

to increase public funding.

9. A golden rule of decentralizaon is funding

follows funcon, which is why the funcon

assignment process is so important. WhileKenyas Constuon provides high-level guidance

on the respecve responsibilies of the naonal

and the county governments, much more granular

work is needed to provide a basis for sharing

resources. A Transion Authority (TA) will be

set up with the mandate to carry out a detailed

assignment of funcons, but there are two major

constraints. First, the TA may simply take too long

to get established, with the result that detailed

funcon assignments will not be determined in

me adequately to inform the budget process.

Second, the asymmetric transfer of funcons

currently envisaged (with each county applying to

the TA for each funcon to be devolved to it on an

ad hoc basis) may be overly complex to manage

and may also lack transparency, potenally

undermining accountability at the local level. In

this report, we argue that the process of funcon

assignment should start now, possibly under the

aegis of the Commission on Revenue Allocaon

(CRA), unl the TA is fully operaonal. We also

propose three oponal frameworks for organizing

a phased bulk transfer of funcons to counes

in a way that minimizes ad hoc arrangements and

maximizes eciency and transparency (Table 1

shows one proposed opon).

10. By prescribing a minimum transfer to

counes, Kenyas Constuon has not pre-

empted the use for aggregate cosng of county

needs.This is essenally for two reasons: rst, theoverall cost of funcons to be devolved is likely to

be signicantly in excess of the constuonally

guaranteed share of 15.5 percent of naonal


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revenue; and second, funcons will be phased

in over me during the transion period and

therefore counes may not inially receive the full

amount guaranteed to them. Working out a fair

split of available resources in a context of limited

scal space as well as the most appropriate mix of

grant instruments will require detailed evidenceof how much counes will need and when.

11. In one moderate scenario, this report

costed aggregate county needs at Ksh170 billion,

just to maintain services at their exisng levels.

This is above the amount appropriated in the

2012 Budget Policy Statement (Ksh160 billion)

but below the CRA esmate (Ksh200 billion).

Moreover, the gure needs to be understood

with all its limitaons: it is based on a number of

assumpons which ulmately the TA / Parliamentwill need to determine, (such as the fate of CDF,

LATF etc); it only costs exisng services (and

does not provide for addional equalizaon, for

running the new administraons or nancing

urban services); and it does not account for the

transfer of funcons over me or the possibility

that seconded sta may remain on the naonal

governments payroll.

12. Because total county nancing needs will

be in excess of 15%, Kenyas policy makersshould consider together the full set of opons

for resourcing counes. Figure 2 shows the

various ways in which county governments will

be resourced, including the equitable share but

also own revenues, the Equalizaon Fund and

addional transfers from the naonal government

(condional or not).

13. It would be misguided to seek to meet all

of county needs through the equitable share.

The equitable share transfer, because it isuncondional, is crical in giving future counes

substanal autonomy, but it also imposes

signicant constraints. Because the equal share

transfer is uned and formula based, the central

government should consider using addional

condional instruments to (i) secure funding for

crical programs at the local level, (ii) reward

performance, and/or (iii) correct for imbalances

created by applying a crude formula to highly-

diverse counes. Given these constraints and

addional objecves, there may be a case for

liming the equitable share transfer at or close

to- the constuonal minimum of 15%.

14.Own-revenues will be crical for resourcing

county governments and also crically forfostering accountability at the local level. Yet the

Constuon only grants limited revenue-raising

powers to counes (broadly those currently

enjoyed by Local Authories), which will remain

highly transfer-dependent unless new revenue-

raising powers can be granted to them (Figure 3).

15. To maximize the own-revenue potenal of

Kenyas counes, exisng sources should be

reformed and new ones found. The collecon of

property taxes should be strengthened (as Kenya

under-collects by a wide margin by internaonal

standards) by updang revenue base informaon,

updang rates and minimizing applicable

exclusions. There is also scope to revisit the

Single Business Permit. However, increasing

county scal autonomy would almost certainly

require creang addional revenue sources suchas piggybacking county taxes on exisng naonal

taxes. In addion, it is likely that discussions

over the sharing of taxaon related to naonal

resources will be brought to the fore.

16. In the short term, the priority is to ensure

that county governments are legally entled to

collect revenues as they come into existence.This is because the constuonal base for county

Naonal Revenue

Figure 2: Flows of revenues from dierent sourcesfor county governments

Source: World Bank KEU, 5 edion.



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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Tharaka

Turkana

Mandera

Wajir

Nyamira

TanaRiver

Lamu

Pokot

HomaBay

Marakwet

Marsabit

Vihiga

Garissa

Bomet

Kwale

Makueni

Nandi

TransNzoia

Baringo

Samburu

Kirinyaga

Bungoma

Isiolo

Kitui

Siaya

Nyandarua

Meru

Kilifi

Busia

Migori

Murang'a

TaitaTaveta

Laikipia

Kericho

Kisumu

Embu

Kisii

Nyeri

Kakamega

Kajiado

Nakuru

UasinGishu

Kiambu

Narok

Mombasa

Machakos

Nairobi

Transfers Own Revenue

Figure 3: Vercal imbalance: applying the CRA formula, only two counes wouldreceive less than half of their resources from transfers


tax collecon has not been converted into legal

instruments to enable counes to collect revenues

on day one. In order to address the current legal

vacuum, two instruments could be adopted, one

to provide for the interim connuaon of LAs

structures aer the elecons and another to

allow counes to collect revenues through LAsexisng sta and systems. Over me a decision

will be needed on tax administraon at the county

level, possibly involving KRA acng as an agent of

counes.

17. There are powerful reasons to consider

condional grants to county governments,

although to date the debate has focused

exclusively on the equitable share. Condional

funding will be important in at least four ways

to support devoluon: to ensure that naonalpriories connue to be supported under

devoluon, to address region-specic needs

(including marginalizaon), to migate possible

shortcomings of the equitable share transfer

formula in specic counes and to support a sub-

naonal performance management system.

18. In the short term, Kenyas policy makers will

need to decide on the fate of three earmarked

programs, which -if maintained- would constute

condional grants. Alone, these three programs

the Road Maintenance Levy Fund (RMLF), the

Constuencies Development Fund (CDF) and the

Local Authories Transfer Fund (LATF)- accountedfor Ksh38 billion or 8% of 2010/11 naonal

revenues. Maintaining them, at their exisng

level, would greatly aect the space available

for uncondional funding through the equitable

share. Conversely, shiing the responsibility

over to counes (and channeling the funding

uncondionally) would require a substanal

increase above the minimum 15 percent.

19. A system of capital grants may be required

to protect development spending under thenew dispensaon. Worldwide, sub-naonal

governments tend to spend a high proporon of

their budgets on wages and salaries and relavely

lile on investment. In order to ensure minimum

standards of service delivery throughout Kenya

and promote catching up in capital-poor areas the

Source: World Bank calculaons.


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naonal government may consider implemenng

a capital grants scheme based on a transparent

formula.

20. Finally, condional grants could provide the

backbone of a county performance monitoring

system. As counes come into existence, thereis much uncertainty as to how well and how fast

they will be able to perform their missions. As part

of a sub-naonal performance monitoring system,

grants can (i) help spur healthy compeon

between counes, and provide the incenves for

county governments to (ii) regularly monitor and

report on their performance and (iii) address key

service delivery bolenecks.

Key Recommendaons on nancing county needs

The process of clarifying funcon assignments should begin now. The CRA could take the lead unl the

Transion Authority is operaonal

There should be a roadmap to streamline and simplify the inial asymmetric transfer of funcons, possibly

through a three-phase approach with funcons transferred in lumps

Cosng devolved funcons should begin with historical cosng, but a more detailed and thorough cosng

methodology will eventually need to take into account gaps peculiar to the Kenyan budget and any

equalizaon objecves, which would require signicant redistribuon or addional budget Resourcing counes should consider all possible sources of revenue available to them and the full range of

transfer instruments

The tradeo between uncondional and condional funding deserves parcular aenon as the scope for

one will constrain the use of the other. As a maer of urgency, the GoK should decide the fate of exisng

earmarked programs

In the immediate term, a decision should be made on nancing a number of key big cket items which will

greatly inuence the esmaon of total county needs, including provincial hospitals, CDF, construcon of

new roads and the remuneraon of seconded public servants

Legal instruments ought to be put in place to allow counes to connue collecng revenues and charges

currently collected by local authories unl taxaon laws can be passed by county assemblies

A new interim naonal law to govern county own-revenues could provide an opportunity to revise exisng

taxes, parcularly property rates and SBPs Addional local scal revenues should be sought among a range of possible opons, including PIT surcharges,

taxes on the use of motor vehicles, payroll taxes, etc.

Parcular consideraon should be given to the sharing of taxaon related to natural resources as their

potenal may increase vastly in years to come and this issue oen constutes a source of conict

Given the radical and experimental nature of Kenyas devoluon, it may make sense to maximize the scope for

condional funding (and minimize that of uncondional resourcing) if only to ensure that essenal programs

will remain funded

Condional grants programs could be considered specically for

- Capital projects, possibly folding together the current RMLF and CDF programs

- Supporng urban service delivery

- Providing temporary stop-gap support to counes at risk of experiencing severe scal shoralls during the

transion- Fostering inter-county performance and promong a system of performance monitoring at the local level.


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Promong greater equity while safeguardingservice delivery

Table 2: Components Source, Weights and Objectives in the CRA Consultation Formula

Components Populaon Poverty Equal Share Land Area Fiscal Discipline

Year / Source Census (2009) KIHBS (2005/06) TBD (allocatedequally inially)

Weight 60% 12% 20% 6% 2%Objecve Resource

counes todeliver servicesequally on aper capita basis

Promoteredistribuonin favour ofhistorically laggingareas

Provide each countywith resources tocover the xed costsof running countyadministraonsirrespecve ofpopulaon or size

Factor in thehigher costof deliveringservicesin remote,sparselypopulatedareas

Provideincenves forprudent scalmanagement

Source: World Bank based on CRA documentaon.

21.Promong greater equity in the allocaon ofspending and services is at the heart of Kenyas

new Constuon. Moreover, expectaons are

high that devoluon will rapidly bring about spaal

equalizaon, aer years of unequal development

across Kenya. And yet, seeking to equalize too

much too quickly would be a risky strategy. The

goal of equalizaon will need to be pursued in

a ght scal environment liming the scope to

increase spending- and without undermining

exisng service delivery, which is unequally

distributed to start with. This has two major

implicaons: rst, exisng imbalances may only

be tackled over me; and second, equalizaon

should target the people who will benet from

services, rather than trying to achieve equalizaon

across geographic locaons.

22. The CRA-proposed formula for allocang the

equitable share is highly redistribuve. While

the formula places heavy emphasis on county

populaon (60%), this is logical since populaon

is the main driver of service needs. Yet taken

together, all of the other components in the

formula (amounng to 40%) favor counes that

have been historically underserved. (Table 2).

23. The simulated county transfers, using thisformula, display a strong equalizaon bias. This

is not obvious at rst because, on an absolute

basis, the beer-o counes (such as Nairobi and

Kakamega) will be receiving the lions share of the

funds. However, the picture is almost enrely

reversed once one looks at allocaons on a per

capita basis, with Isiolo, Lamu, Marsabit and Tana

River coming out the big winners. In other words,

once populaon is need out the poorer and

smaller counes receive disproporonately big

allocaons. (Figure 4).

24. Because it promotes substanal re-

distribuon of resources across counes, the

CRA formula creates risks for both winners

and losers on day one. There are two twin

challenges. Those areas that were historically

privileged will inherit service delivery obligaons

that will require substanal funding (by denion

above and beyond what a strictly populaon-

based formula would provide). There, the

challenge will be to rapidly streamline service

delivery without interrupng key services or

making inecient reallocaons. By contrast,

those counes that were hitherto underserved


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0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Lamu

Isiolo

Marsabit

TanaRiver

Samburu

TaitaTaveta

Wajir

Turkana

Elgeyo

Marakwet

Garissa

Laikipia

TharakaNithi

W

estPokot

Busia

Baringo

Kwale

Embu

Mandera

Vihiga

Nyandarua

Nyamira

Kirinyaga

Kitui

Kajiado

Bomet

Makueni

Nandi

Narok

T

ransNzoia

Kilifi

Nyeri

Kericho

U

asinGishu

Migori

Siaya

Machakos

Kisii

Kisumu

HomaBay

Mombasa

Murang'a

Bungoma

Kakamega

Nakuru

Meru

Kiambu

Nairobi

KES

Figure 4: Per capita equitable share allocaons to counes (assuming 15% equitable share)

will receive substanal extra cash (relave to

their current service delivery obligaons) and

the challenge will be to manage these resources

well and to scale-up service delivery with limited

capacity. Unfortunately, alleviang one boleneck

(such as increasing the share of the equitable

transfers) would only exacerbate the other.

25. These likely imbalances call for three short-

term acons to phase in equalizaon over me.First, it is urgent to model inherited costs of service

delivery at the county level. This would require

compiling detailed geographically-disaggregated

spending data on services to be devolved from

which to esmate the future cost of service delivery

at the county level. Second, with this informaon,

the GoK may need to consider complemenng theCRA-formula based equitable transfers with hold-

harmless provisions that would be limited in me

and specically targeted to allow cash-strapped

counes to maintain exisng services at least at

their current level. Third, a strategy is needed, to

build capacity rapidly and systemacally in lagging

counes to develop adequate PFM, HR and service

delivery capacity. Addionally, this may require

only phasing-in the transfer of funcons over

me, following predened capacity benchmarks.

26. The Equalizaon Fund, provided for in the

Constuon, will be too small to address deep

spaal inequalies. At 0.5 percent of naonalrevenues (and even increased as per the current

BPS) the Equalizaon Fund will represent a fracon

of the resources currently channeled through the

CDF. Moreover, if the Fund crowds out exisng

funding for lagging areas, such as programs

currently under the Ministry for the Development

of Kenya and other Arid Lands or the Ministry of

Special Programs, its net impact could be nil or

negave. Therefore, as a maer of urgency, policymakers should clarify the Funds objecves and

target it as much as possible to specic areas or

communies and uses. Given its modest size it

might be beer used as seed money to leverage

addional resources into a bigger, more eecve

fund.



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Key Recommendaons on nancing county needs

It may make sense to limit the equitable share transfer at or close to- 15% during a transional period, given

the experimental nature of the CRA formula and lack of clear esmate of actual county needs and capacity

Unmet needs at county level could be lled via other uncondional or condional instruments

In counes that have been historically over-serviced (relavely) the key would be to avoid service delivery

interrupons by extending stop-gap funding to be phased out overme

In counes that have been historically under-serviced and marginalized, it will be vital to build up the capacityto handle vastly increased funding eciently and transparently

A priority should be to clarify the object of the Equalizaon Fund and parcularly

o the denion of marginalized areas

o the scope of intervenons which should be focused on alleviang key service bolenecks

It may not make sense to dedicate the Fund to nancing infrastructure. Instead catalyc intervenons could

consist in addressing:

o sta incenves problems in working in remote locaons

o capacity constraints in applying for capital funding (under a capital grants program) and for managing

capital projects


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Managing money eciently and transparentlyfor county development

27. For counes to make the most of theirresources sound PFM systems will need to be in

place. At county level, this may be parcularly

challenging as many PFM related funcons will

need to be established more or less from scratch.

In turn this raises the queson of the degree of

oversight that the naonal government should

be allowed to exert over counes - sucient to

lead capacity building and promote applicaon of

standards but limited enough to prevent abuse

and excessive control.

28. Kenyas new Constuon has provided the

basis for a more coherent PFM legal framework

but oversight remains contenous. As well as

replacing or consolidang a number of exisng

laws, the PFM Bill provides a framework for PFM

in the new county governments as well as urban

areas and cies: for the rst me in Kenya there

will be a single PFM legal framework for all levels

of government. However, the Constuon leaves

room for interpretaon regarding the extent

to which the naonal government has a role in

overseeing county PFM.

29. Budgeng for the transion will be dicult

given the asymmetric transfer of funcons.

The transion period during which funcons

will be gradually transferred to counes- raises

challenges for the annual budget process: the

new counes may simply not have the capacity

or the me to budget for 2013/14 and there is

the addional queson of how to budget for

devolved funcons temporarily executed at

the naonal level. To limit the confusion that a

fully asymmetric transfer of mulple devolved

funcons could cause in the budget process, the

GoK could consider some bundling of funcons

to simplify the funconal transfer process into

manageable chunks (Table 1).

30. While the naonal government wouldconnue to assume some devolved funcons

during the transion, allocaons to counes

could be clearly shown in the budget under

county votes. While counes may not have

responsibility inially for all devolved powers and

funcons, specic resource allocaons will be

made to counes on day one. During this transion

period there could be county votes clearly set out

in the naonal budget showing explicitly the total

funding allocated to each county and specifying

how much is to be spent directly by the county

and how much will be spent on its behalf through

naonal government systems. This may require a

short amendment to the transional provisions of

the PFM Bill.

31. The new Constuon greatly increases the

power of the legislature in the budget process,

creang risks of gridlock. In parcular, because

the Division of Revenue Bill (DoRB) is not dened

as a money bill (which must be passed or amended

by the Assembly only on the recommendaon of

the relevant commiee of the Assembly) there is

a risk that delays in approval of the DoRB could

derail the budget process at both naonal and

county levels. One approach adopted elsewhere is

a two-ered budget process in Parliament, where

the legislature at naonal and county levels bind

themselves to a scal framework for the duraon

of the scal year prior to the consideraon of the

DoRA, CARA and budget esmates.

32. Building-up the capacity to budget at

county level will be a tall order.Counes will becomprised of sta from Districts, who have very

limited experience of preparing and managing

budgets, and from former Local Authories,

who have only limited experience in budget

management. Therefore, in ancipaon of the


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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

TanaRiver

Wajir

Marsabit

Tharaka

Kajiado

TaitaTaveta

Kiambu

Kilifi

TransNzoia

UasinGishu

Meru

Garissa

Kericho

Kwale

Mandera

Migori

Busia

Nyandarua

Kakamega

Nyamira

Laikipia

Bomet

Nakuru

Turkana

Kisumu

Pokot

Murang'a

Nandi

Kitui

Narok

Bungoma

Samburu

Nairobi

Figure 5: Counes where local authories ran budget surpluses in 2008/09

diculty of establishing budgeng funcons from

scratch at county level, guidelines and associated

templates should be developed to guide the

formulaon of county budgets. This would also

provide an opportunity to integrate the planning

and budgeng funcons into a single process, to

be overseen ideally by a single county instuon.Lastly, it will also be essenal to ensure that county

budgets are prepared, executed and reported,

using a single country-wide chart of accounts.

33. Kenyas counes may not manage to spend

the funds available to them, without determined

capacity building and monitoring. Experience

among Kenyas local authories suggests that

this is an issue many counes parcularly

those historically marginalized- may face (Figure

5). Specic capacity needs to be developed forresource allocaon, cash management -in line

with the principle of a treasury single account-

and budgetary oversight through the Controller of

Budget. The naonal government will also have a

key role to play in seng standards and monitoring

performance, for instance through league tables

and rankings and a system of early warnings to

idenfy service delivery problems in devolved

funcons. One way of promong this would be

through a county performance assessment tool.

34. PFM is only one dimension of promong

accountability at the local level and there

would be important payos from seng up

accountability systems at the local level fromthe get-go. Contrary to the common expectaon

that decentralizaon enhances accountability and

eciency in service delivery, experience suggests

that the contrary oen holds true. Devoluon

presents a parcular challenge for service delivery

by breaking apart exisng more centralized

accountability relaonships and requiring new

ones to be established. This is also an opportunity

to start from a clean slate and Kenya has all the

assets to be a leader in Africa with respect to

transparency and local government accountability.

35.Transparency, parcipaon and accountability

are clear requirements in the Constuon but

laws alone are insucient. Instead a social

accountability system must be developed with

three core elements: (i) scal transparency, (ii)

parcipaon mechanisms and (iii) accountability

mechanisms. (Figure 6).



14/26


Source: World Bank.

Figure 6: Elements of Social Accountability Systems

36. Kenya can draw on its extensive experience

with devolved funds to reinforce both upward

and downward accountability. For instance theLATF system was largely successful in ensuring

reporng by local authories even though the

informaon they produced is not usually made

public. As for the CDF experience, it shows that

there is an important role for civil society in

auding projects. Building on LASDAP, county

governments could be required to involve cizens

in the budget and planning process.

37.For social accountability systems to funcon,

supporng instuons need to be put in place.

Key elements include accurate and mely

nancial and performance informaon and in

turn this would require both capacity building andenforcement mechanisms (such as penales for

failure to produce accurate informaon). A second

priority is to strengthen the relaon between

planning and the budget process, since public

parcipaon in planning will only be meaningful

if the choices made are translated into spending.

Lastly, county governors and administrators should

have easy access to social accountability toolkits

guiding them on the use of popular intervenons

such as parcipatory budgeng, scorecards, social

audits and procurement oversight commiees.

Key Recommendaons for promong sound and transparent nancial management in counes

During the transion period, the budget could include county votes showing total county allocaons even

if a poron remains executed by the naonal government on behalf of counes

A two-step budget process could be introduced with parliamentary votes at each stage to generate

consensus around the scal framework and migate the risk of execuve-legislave gridlock

Building county PFM systems from scratch will require central support to capacity building, monitoring of

county progress against clear benchmarks and standardized guidelines and templates developed naonally

Public nancial informaon (including results) should be made public in a way that allows cizens to assess

the eciency and eecveness of naonal and county spending

Cizens should be acvely involved in planning and budgeng at local level and equipped with the tools to

make signicant contribuons

Accounng systems at county level should allow to track spending on individual projects and by service

delivery unit

Social accountability toolkits should be developed for the benet of local administrators

Government

Citzens

Transparency:

informat

onfor citzens

Partcipaton

and Feedback:informaton

from citzens Accountability


15/26

38. Unless correcve acon is taken, Kenyascies may well be the big losers of the devoluon

process. This would be dramac as Kenyas

cies are growth engines for the enre country

and the main source of own scal revenues for

local administraons. Kenya is experiencing a

demographic transion that will see increasing

numbers moving to the cies seeking the

opportunies that urban areas have to oer, and

cies are also increasingly useful and meaningful

to rural residents as well: they are the main

source of local scal revenue and provide services

and infrastructure that reach well beyond city

boundaries.

39. Kenyas devoluon is unique in that it

involves simultaneous decentralizaon of key

services and resources from the naonal to

county governments but also recentralizaon of

urban management. Exisng arrangements willbe profoundly aected in the new dispensaon,

as the current system of local authories, with

elected management and signicant discreon

over resources and funcons, will be replaced by a

new system that gives much more power to county

execuves. In the new dispensaon, Kenyas

cies will be managed by appointed boards,

with far less power and autonomy than the local

authories they replace: most of their funcons

will be delegated by county governments and they

will have no guaranteed funding.

40. Moreover, only three urban centers will have

municipal or city boards. The Urban Areas andCies Act (UACA) sets the threshold for city status

at 500,000 and for a municipality at 250,000

and only cies and municipalies are entled to

boards. Yet at present there are only ve urban

areas in Kenya with a populaon over 250,000

(Nairobi, Mombasa, Kisumu, Nakuru and Eldoret),

two of which will eecvely be county-cies andwill be governed as county governments (without

city boards). In all other urban centers, a rather

uncertain arrangement for town commiees

will apply. A number of substanal urban centers

with viable exisng local governments, including

twenty-one urban centers each with more

than 80,000 residents will thus be eecvely

recentralized into the county administraon.

(Table 3).

Protecng the urban growth engine


Table 3: Twenty-one urban centres withmore than 80,000 residents will nothave municipal boards

Urban centre Populaon

Ruiru 240,000

Kikuyu 230,000

Kangundo-Tala 220,000

Naivasha 170,000

Machakos 150,000

Mavoko 137,000

Thika 135,000

Vihiga 120,000

Nyeri 120,000

Malindi 120,000

Ngong 110,000

Kitui 109,000

Karuri 107,000

Mumias 100,000

Kitale 100,000

Kericho 100,000

Kimilli 95,000

Awasi 93,000

Kakamega 90,000

Kiambu 85,000

Kisii 80,000

Source: World Bank based on KNBS 2009 census.


16/26

Figure 7: Despite rapid urbanizaon, most counes are sll predominantly rural


41. Looking forward, there are three ways in

which the management autonomy of cies could

be expanded. One is by lowering the thresholdfor the denion of municipalies. Alternavely,

the Act could deem all county capitals to be

municipalies (which would sll leave out

important towns like Riuru, Naivasha, Ngong,

etc.). A third opon would consist in enhancing

the managerial autonomy of town commiees to

make them funcon in the same way as municipal

boards.

42.With all urban funcons and resources vested

by the Constuon in county governments,

specic funcons and resources will need to

be delegated to city and municipal boards. Yet

there is no clear process or framework for such

delegaon and no transparency requirement

concerning the delegaon by county governments

to city and municipal boards. A useful measure

would be to require county governments to

publish the funcons and revenue streams

assigned to urban boards so that urban residents

understand what services they are entled to

receive as services from which level of authority.

43. Kenyas Constuon makes county

governments responsible for nancing urban

service delivery, and there is a risk that urban

services may be under-funded as a result.Because

rural residents will dominate most counes (Figure

7), county governments may chose to preference

rural services and to redistribute revenues raised

from urban residents to their rural constuencies.

This may jeopardize the economic development

potenal of Kenyas urban areas and violate

the scal federalism axiom that revenues and

expenditure responsibilies should be aligned to

the extent possible at the local level.

44. Urban service delivery will depend largely

on the priority which county assemblies give

them, but the naonal government could also

consider urban grants. The UACA envisages that

county governments will provide transfers to city

and municipal boards but not to town commiees

and it oers no guidance as to how these amounts

ought to be calculated. In this context, the

naonal government could help to ensure that

urban services are adequately provided through

earmarked urban services grants which could be

Source: World Bank calculaons based on KNBS Census.


17/26

Key Recommendaons on protecng urban areas under devoluon

More urban centers should have corporate bodies to manage them. This could be achieved either by

lowering the threshold for municipality status or by amending the powers and funcons of towns under

the current law

Funcons of city and municipal boards should be claried as well as the formal process for counes to

delegate addional funcons to them

Standards ought to be set for urban service delivery and urban boards should be required to report against

those to the county assembly

City and municipal boards should be given own revenue powers through delegaon of addional naonal

taxing power

Cost benchmarks are needed to monitor future resourcing of urban funcons. The current cost of urban

services should be calculated, based on past spending and monitor that funding is adequate to at least

maintain resourcing for services at current levels

The role and funcons of local authories should be extended during the transion unl their sta, funcons

and assets can be accommodated by the new counes


paid either to county governments or to the urban

boards directly. To ensure that counes maintain

their own levels of funding for urban services,

the transfer could include an addionality clause

binding the county to maintain a certain level of

funding.

45. However, even addional transfers may be

insucient to nance the type of infrastructure

that Kenyas cies need. While counes may be

able to borrow, this will be subject to naonal

government review and guarantee. This is helpful

to prevent the risk of uncontrolled borrowing

at the sub-naonal level. However, the ipside

may well be insucient access to capital for

infrastructure, parcularly in Kenyas larger cies,

as the naonal government may well be reluctantto encourage sub-naonal borrowing that would

end-up on its balance sheet.


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Decentralizing Public Service in a sustainable way


46. Kenyas exisng public service structure iscurrently highly centralized, so devoluon will

bring about major changes. Forty-seven new

county civil services will be created with two

immediate sets of challenges: to dene the overall

governance framework for county civil service

and to manage the HR transion implied by their

creaon.

47. The new devolved arrangements oer the

opportunity to raonalize the current highly

fragmented arrangements for service delivery,

but the legal framework for managing county

public services has important gaps. By contrast

to today, counes will have considerable

autonomy over public service management: the

county governments will be responsible within a

framework of uniform norms and standards, for

establishing and abolishing oces, appoinng

public servants and exercising disciplinary control

over them. In each county a public service board

whose members will be nominated by the

Governor- will exercise these powers on behalf of

the government.

48. The County Government Bill (CGB) provides

the regulatory framework for counes to engage

their own public servants but it leaves a number

of important gaps in the policy framework. In

parcular, while the Constuon provides clear

authority for the naonal government to set out

a framework of naonal standards, this could sll

leave room for counes to regulate some aspectsof civil service management. Going forward there

should be a clear decision as to which issues

naonal laws and policies should cover and which

should be le to counes. Also some interim

provisions will be needed before counes develop

their own laws (the Transion Authority could

usefully propose an approach to government). The

new framework should set naonal standards and

guide counes in their day-to-day management of

public servants by seng the general frameworkfor management, specifying who is responsible

for regulang the detail of how county public

servants should be managed and providing

statutory instruments to specify the detail of the

management arrangements.

49. It is unclear who should ll exisng

regulatory gaps. The most immediate issue is to

determine which agency in government should

be responsible for the making laws covering

county civil servants. From a legal perspecve,

the missing elements of the regulatory framework

could be provided in regulaons under the CGB,

or they could be in separate legislaon under

the auspices of the Ministry of State for Public

Service. Alternavely, individual counes could be

le to ll these gaps with their own laws. If the

former approach is adopted, two ministries will

regulate public service maers at dierent levels

of government (since the CGB is the responsibility

of the Minister responsible for intergovernmental

relaons). If the laer is chosen, the two ministries

will regulate county public service concurrently,

with scope for overlap and contradicon.

50.Devolving public service management involves

balancing the risks of too much central control

against excessive local autonomy. With too much

control, county autonomy and accountability may

be undermined. With too lile oversight, local

controls could be ineecve undermining service

delivery. This is a paradox of decentralizaon that eecve devoluon actually requires a

strong central government. Failing local controls

could result, for instance, in elite capture and

policizaon of appointments. Establishing

independent county public service boards has

the potenal to migate these risks but they have

been given too much power. In parcular, the

concentraon of human resource management

creates the potenal for scally unsustainable


19/26


recruitment and excludes direct supervisors and

other stakeholders from an appropriate role

in recruitment. In addion, the governor will

appoint board members with approval of the

county assembly but in the absence of a specic

process to ensure their integrity and competency.

Areas that may benet from a naonal frameworkinclude providing career development pathways

to encourage service in remote counes and

imposing limits on salary spending. In addion,

the CGB could set out the process for selecng

county public service board members and the

naonal government should provide support

(training mentoring, procedures) to the boards

as they come into existence.

51. Matching sub-county structures to polical

boundaries (constuencies and wards) couldexacerbate the risk of a dierent kind of-

polical capture. For instance, if the CDF is

maintained, this alignment could increase the

allegiance between sub-county administrators

and local policians (MPs). Moreover, while

polical boundaries are drawn up with regard to

demography, they may not make sense from the

point of view of managerial eciency.

52. Uncontrolled spending on personnel

expenditure is a common feature ofdecentralizaon and an issue for Kenya. The

reasons for excessive local spending on wages

are complex: they oen reect patronage but

also the fact that it is easier to spend money on

salaries than on investment projects. Spending

on personnel alone does not contribute to

beer services per se, if the recruited stas have

insucient access to funding for operang costs

and facilies. In Kenya, there is already anecdotal

evidence that uncontrolled salary spending is rife

in local authories despite naonal controls. Thepublic service provisions of the CGB emphasize

control over recruitment of public servants but

leaves employment of non-public-service sta

relavely unregulated.

53. Paradoxically, devoluon could widen

capacity gaps across Kenya. There is already

gross inequity in the distribuon of public service

skills across the country. For instance the rao of

doctors to populaon varies across counes by a

factor of ninety! Yet the counes that currently

have the lowest levels of public service skills are

also likely to be those which will have the hardest

me aracng skilled personnel, given their

overall remoteness, lack of mobility prospectsthey oer and weak systems for incenvizing sta.

In turn this could put undue upward pressure on

remuneraon, crowding out other important types

of expenditures. These risks call for incenves

especially non-nancial- within the framework of

a single public service where sta can be oered

greater access to training and promoon if they

serve in remote counes and where mobility from

one county to another can be guaranteed.

54. In coming months, managing the transferof stas to counes will be the number one

challenge. Most of the public servants needed

to run county funcons are already there but

the condions under which they will remain are

unclear and scal implicaons have not been

properly assessed.

55. Inially, naonal public servants will be

seconded to county governments but the

zero-basing approach is unusual and risky.

Most commonly, countries that establish a newlevel of government simply transfer exisng

sta performing devolved funcons to the new

governments. In Kenya, in order to maximize

county exibility, a secondment approach was

chosen. The secondment of naonal sta will

come to an end when the seconded ocer is either

appointed to the county public service or handed

back to the naonal government. Moreover, if

public servants feel they have the right of return

to the naonal government they may also opt ex

ante not to apply for a posion in the county civilservice. But if a large number of secondees are

returned to the naonal government, it may not

have the jobs or the funding to absorb them.

56. It is unclear how the salaries of the seconded

sta will be managed. The CGB provides for the

salaries of naonal ocers on secondment to

connue to be paid by the naonal government


20/26

Key Recommendaons for managing the public service transion

Naonal policy on county public services should be developed but rst a naonal law should make it clear

who is responsible for it

At the very least, the framework of regulaon should provide uniform procedures and a comprehensive

regulatory framework to apply unl the counes pass their own laws

Naonal regulaon of some aspects of county public service management is needed, in order to maximize

career progression opportunies and encourage public service mobility

Some naonal standardizaon of county pay policy would be benecial, but care needs to be taken not to

impose unaordable scal burdens on county governments

The naonal government should support the establishment of county public service boards to ensure that

they are fully independent and competent and a regulaon under the County Government Act should set out

the process and criteria for appoinng Board members

As a maer of urgency the fate of Local Authories employees should be claried through a law to deal

with transion issues involved in abolishing local authories

A priority should be to ghten the loopholes that may allow uncontrolled non public service employment at

the county level

As a maer of priority the GoK should decide which level will be responsible for paying the salaries of

seconded sta and if these will be deducted from the counes equitable share transfers

A plan should be developed to absorb redundant sta at the naonal level should a signicant number of

county secondees seek to return to the naonal civil service


unless there is an agreement to the contrary. But

it is not scally realisc to expect the naonal

government to transfer the full amount of the

county revenue share while connuing to pay

the salaries of seconded sta. Therefore, some

arrangement will need to be made to fund

salaries of county public servants from the countyequitable share (although no condions may be

aached to it) or the naonal government could

be le with an unsustainable scal burden.

57. The fate of local authories sta needs to

be addressed. Exisng public employees at the

county level include some 33,000 LA sta of whom

30,000 are not civil servants. They are employed

and managed by the LAs themselves outside of

the state civil service. But LAs will cease to exist

on the day of the next general elecons andfurther laws called for under the UACA to cover

what happens to the stas assets and liabilies of

the former LAs have not yet been prepared.


21/26

Promong intergovernmental coordinaon between naonaland county governments


58. Devoluon everywhere complicatesthe management of government, but

intergovernmental coordinaon will be

parcularly important in Kenya. Devoluon

potenally diuses accountability between levels

of government and introduces the possibility

of mismatched resources, responsibility and

authority. In Kenya, the Constuon mandate

shared responsibility for some important

aspects of service delivery, with the naonal

government generally responsible for policy

and counes in charge of implementaon. But

it gives the naonal government limited scal

or supervisory levers with which to inuence

the achievement of naonal policy priories. In

the absence of such levers, given Kenyas long

standing history of distrust between government

and local stakeholders and the fact that no level

of government is superior to the other, the

instuons of cooperave government become

all the more important.

59. The current framework for devoluon focuses

mainly on the relaons between governors and

around the budget process, overlooking issues

in sectors. Internaonal experience suggests

that fricons between levels of government

undermine service delivery. In Kenya, the main

devolved sector is health. Coordinaon and

decision making will be complicated by the sheer

number of counes and creave approaches will

be needed to ensure that the coordinaon bodies

can sll make decisions eecvely.

60. Eecve intergovernmental coordinaon will

require both a change of culture and capacity

building at both levels of government. Line

ministry sta will have to reorient from a service

delivery role to a policy role and understand how to

use new tools at their disposal to inuence policy

outcomes (like standards and expenditure norms).

At the county level also, sector sta will have toadapt to new roles including resource constrained

budgeng and independent formulaon of policy

or legislaon.

61. Two laws -one proposed and one

passed- establish the framework for future

relaons between levels of government. The

Intergovernmental relaons Act (IRA) establishes

intergovernmental mechanisms (such as the

Naonal and County Government Summit, the

Intergovernmental Relaons Technical Commiee

and the Council of Governors) and the Public

Financial Management Bill (PFMB) establishes a

Budget and Economic Council.

62. A parcular challenge will be to get the

system working with forty-seven counes and to

eecvely coordinate implementaon. Many of

the internaonal models for intergovernmental

coordinaon involve much smaller numbers of

sub-naonal units. Moreover, in some countries

the main objecve of coordinaon is joint policy

development. In Kenya the real challenge will

be to coordinate at the level of implementaon

in areas where both levels of government share

service delivery responsibilies. The rst area of

policy coordinaon that will be required is the

unbundling of the constuent elements of the

dierent funcons to ensure clarity as to who will

do what. As part of this exercise there should also

be a joint planning process to work out day-to-day

coordinaon around implementaon.

63. It is not yet clear how the exisng system

provincial and district administraon will

relate to county governments. The Constuon

requires the system of provincial administraon

to be restructured in line with devoluon within

ve years but how exactly remains to be worked

out. A key queson is how the remaining naonal


22/26

Key Recommendaons for promong intergovernmental coordinaon under devoluon

It is important to focus on geng intergovernmental relaons bodies funconing early on

The rst priority is to get sector bodies working on issues of funcon assignment, service delivery standards,

and performance monitoring

The second priority is to focus on intergovernmental relaonships at the county level, parcularly byresolving the role of provincial and district administraon sta, and designing the new arrangements for

remaining naonal sta at county level


funcons not devolved to county governments

will be organized: in some cases funcons that are

best performed at local level (like social welfare

or childrens and gender programs) have not

been devolved and in others, funcons of exisng

department heads might be split (like educaon).

Therefore it will be important to dene a newarchitecture both for day-to-day relaonships

between naonal and local agencies in each

county, and also for arranging the funcons that

remain naonal.

64. Given the resilience of provincial

administraon over the years, Kenya will need

to manage the risk that parallel and compeng

structures could undermine the eecveness of

county government. Administrave parallelism,

under which sta of central government either

connues to manage sub-naonal funconsor jointly administer them alongside naonal

sta, would weaken the accountability of county

governments.


23/26


65. Kenyas transion to devolved governmentwill be as complex as it is ambious. Managing

such dramac transion will be key since it will

set devoluon back or forward for years to come.

Immediate challenges include the movement

of public servants from line ministries to county

governments, seng up sound PFM systems in

counes and ensuring connuity of urban services.

66. For the transion to be as smooth as possible,

Kenya needs instuonal arrangements for

managing the transion itself. There is a clear

legal framework but much work remains to be

done. In February 2012, Parliament enacted

three laws to implement Chapter 11 of the

Constuon. Together with the provisions of the

Fih Schedule of the Constuon, they provide

a set of instuonal arrangements for managing

transion through a Transion Authority, an

independent body with broad membership and

powers to coordinate implementaon by the

various organs of government.

67. Irrespecve of when the elecon is held

ushering in the new counes, the Transion

Authority has a great deal to accomplish in a

very short me. The TA will need funding to be

eecve both under the current nancial year

and under the 2012/13 budget. The Commission

on Revenue Allocaon (CRA) and the Commission

on Implementaon of the Constuon (CIC)

were established in early 2011, and found their

operaons were constrained by not having their

own budget appropriaon unl July 2011, when

the 2011/12 scal year began.

68. It will need to command respect across

government. The TA cannot make devoluon

happen alone. Devoluon will occur through the

acons of line ministries in each sector, and the

Transion Authoritys job will be to ensure that

they all do their part. Although the Transion toDevolved Government Act (TTDG Act) gives the

Transion Authority power to make regulaons,

there is no clear sancon if they are not followed.

The best way the Transion Authority can ensure

that the rest of government follows its lead is by

(a) ensuring that it gets Cabinet sign o on its

strategic direcon; (b) meaningful involvement

of the implemenng ministries; and (c) using

transparent reporng of expectaons and progress

in meeng them, to create an environment in

which line ministries feel public pressure to meet

their planned obligaons.

69. A detailed planning process for the transion

should also be considered. Under the TTDG Act,

the CIC is responsible for requiring individual

ministries to submit implementaon plans and

for monitoring their implementaon, but the

TA issues the guidelines about what the plans

should contain. The guidelines issued by the TA

could play a crucial role in seng the agenda of

issues the line ministries should address, but

ideally it should be determined in dialogue with

line ministries. This is why it would be useful

to develop an overarching strategy as well. The

strategy should guide the decision about what to

do rst. It should highlight the respecve roles

of the TA and line ministries, and the relaonship

between the bureaucrac machinery and the

polical leadership.

70. The process of developing the detail of the

system of devoluon has so far not been well

integrated with line ministries. It is the line

ministries who are devolving their funcons,

seconding their sta, and reorienng their own

role to reect a new focus on policy, standards

and service delivery performance, and supporng

the development of county capacity. Ministries

are most likely to undertake eecve change

Managing the transion to hit the ground running


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Key Recommendaons to manage the transion process

The TA will need to be empowered nancially and statutorily to lead the transion process with clear

authority over other organs of government

The TA should develop an overarching strategy for implemenng devoluon and provide uniform guidelines

for line ministries to follow when preparing their implementaon plans

The TA should appoint teams in each county to help establish basic systems in a sequence priorizing the

rst decisions county governments will have to make

The TA should develop a strategy for lling major capacity gaps in Kenyas most disadvantaged counes so

as to pre-empt a widening of these gaps under devoluon


if they are acvely responsible for planning it.

Some further ways in which the TA can enhance

coordinaon could include: seconding an ocial

from each main ministry to the TA, providing line

ministries with standard toolkits that they can use

and holding regular structured discussions with

the Principal Secretaries (Permanent Secretaries)of the key ministries in devolved sectors.

71. The TA will also need to engage county

governments on day one. A great deal will be

expected of the forty-seven new governors, and

they should have the basic systems in place that

allow them to achieve some early wins. The TA

could appoint teams for each county to help get

these systems established. It is helpful to think

about what decisions the county governments

will want to make rst, and focus on pung in

place the systems they will need for those. For

example, the county assemblies will need clerks

and other sta to make the work of the assembly

and its commiees eecve. Those sta can only

be appointed by the County Public Service Board

and therefore appoinng the county public service

boards and establishing the systems to make themfunconally eecve are rst-order priories.

72. There will be big dierences in capacity

between weaker and stronger counes. One

of the main risks of devoluon is that it actually

exacerbates these gaps. The TA should develop

a strategy for ensuring that weaker counes

receive special assistance. This might involve

targeng donors to give priority to supporng

specic counes, or developing special programs

of assistance for them.


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Conclusion


73. Managing expectaons will be a bigchallenge because decentralizaon is no silver-

bullet. It will take me to balance resource

allocaons, let alone improve equity of access to

services. Many Kenyans believe that devoluon

will bring dramac change overnight: upgraded

infrastructure, more jobs and opportunies and

beer services (see Box 1). But they have dierent

and oen contradictory views of how this will

happen. For instance, lagging areas are counng

on redistribuon of naonal wealth to help them

catch-up, while leading regions see devoluon as

a chance to run their own aairs un-impeded.

74. The transion to devolved government will

be long, complex and risky but the potenal

payos are commensurately high. This execuve

summary provides a snapshot look at main

devoluon-related challenges and opportunies

in months ahead. A more detailed analysis will be

presented in the forthcoming full report, along

the following lines. Part I, sets the stage and

provides contextual elements. It retraces the

historical and polical-economy context against

which the devoluon project has been developed

(chapter 1) and emphasizes the ambious

character of the administrave reorganizaon it

implies in a country that remains highly unequal(chapters 2 and 3). Part II, focuses on the main

parameters of the devolved intergovernmental

scal architecture, starng with an esmaon of

future county needs (chapters 4 and 5) and laying

out the overall funding architecture through

which they will have to be addressed (chapter

6). Part III, examines one by one by one each of

the possible funding streams for decentralized

services including own revenue sources (chapter

7), the uncondional equitable share (chapter 8),

addional condional instruments (chapter 9), and

the Equalizaon Fund (chapter 10). Finally Part III,

tackles implementaon challenges in translang

into reality the vision of a more responsive and

accountable government through devoluon.

Chapter 11 addresses intergovernmental

coordinaon challenges while chapters 12 and 13

focus on the systems to put in place to ensure that

sound public nancial management and eecve

social accountability are eecvely promoted in

the new counes. The nal chapters relate to key

issues in the transion namely the management

of urban areas (chapter 14), the public service

implicaons of devoluon (chapter 15) and the

management of the transion itself (chapters 16).

Box 1: What Kenyans hope devolved government will do for them

Alice Vutage Housekeeper in Nairobi. Born in Western Kenya 32 years ago, Alice

Vutage migrated to Nairobi in 2000 in search of employment. With lile educaon and

great determinaon to support her family back home, she found a job as house-help.

Alice is not conversant with the new Constuon. All she knows is that it will improve

the livelihood of Kenyans, a fact gathered from her daily interacon with friends and

relaves. People say that the new Constuon will bring a lot of development in the

country, and this makes me happy, because I would like to see people in my village

leading a beer life, she said. Alice who is a single mother of a two year old daughter,

hopes that the new Constuon will help to create job opportunies in her rural area,

so that people can engage in economic acvies, and become less dependent on

nancial support from relaves who work in big cies. I am really eager to see how

life will improve for my daughter and me when the new Constuon is implemented,

she said, with a hint of apprehension in her voice.

Source: World Bank interview.


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World Bank Kenyan Devolution - Executive Summary

Documents