VIHIGACOUNTYGOVERNMENT
COUNTYBUDGETREVIEWANDOUTLOOK
(CBROP)
SEPTEMBER2018
KENYA
TowardsaGlobalyCompetitiveandProsperousNation
1
1
FOREWARD
TheCountyBudgetReviewandOutlookPaper(CBROP)2018hasbeen
preparedinlinewithsection118ofthePublicFinanceManagement(PFM)
Act2012toprepareCountyBudgetReviewandOutlookPaper(C-BROP)for
theCounty,inrespectforeachfinancialyear;andsubmitittotheCounty
ExecutiveCommiteeby30thSeptember.
ThepaperreviewsfiscalperformanceoftheCountyforthe2017/18
financialyearwhilecomparingitwiththebudgetappropriation.Inaddition,it
providesinformationonchangesinforecastsasindicatedintheCounty
FiscalStrategyPaper(CFSP)2017;andhowactualfinancialperformance
forthepreviousfinancialyearmayhaveaffectedcompliancewiththefiscal
responsibilityprinciples,ortheCountyfinancialobjectivesforthatyear.It
furthergivesreasonsforanydeviationfromtheCountyfinancialobjectives
inthefiscalstrategypapertogetherwithproposalstoaddressthe
deviations.
Theupdatedeconomicandfinancialoutlookpresentedinthispaperwilset
outthebroadfiscalparametersforpreparationofthenextbudget.In
particular,theprovisionalceilingspresentedareintendedtoactasaguide
tosectorworkinggroupsinpreparingtheirbudgets.
Itisthereforemyexpectationthatthepolicypaperwilbeusefulin
enhancingfinancialdisciplineandfiscalresponsibilitiesoutlinedinsection
107ofthePFM Act2012thatwilcontributetowardstherealizationof
aspirationoftheresidentsoftheCounty.
HON.ALFREDINDECHE
CECM-FINANCEANDECONOMICPLANNING
2
ACKNOWLEDGEMENT
Thepreparationofthe2018CBROPwasaconcertedandconsultativeeffortamong
variousdepartmentsandstakeholderswhichprovidedusefulinformationrequiredin
preparingthisdocument.Weareindebtedtothem.Weowespecialthankstoour
respectiveCountyExecutiveCommiteeMembers(CECs)andtheChiefOfficers(CO)
fortheirleadershipandguidance.
WeareparticularlyappreciativetotheteamfromtheFinanceandEconomicPlanning
fortheirtirelesseffortstowardsensuringthatthisdocumentwascompletedingood
time.
LIVINGTONEIMBAYI
CHIEFOFFICER–FINANCEANDECONOMICPLANNING
3
ABBREVIATIONSANDACRONYMS
CRA : CommissionofRevenueAlocation
CBROP : CountyBudgetReviewandOutlookPaper
CFSP : CountyFiscalStrategyPaper
GDP : GrossDomesticProduct
FY : FinancialYear
IFMIS : IntegratedFinancialManagementInformation
System
KNBS : KenyaNationalBureauofStatistics
MTEF : MediumTermExpenditureFramework
ORS : OwnRevenueSource
PE : PersonnelEmoluments
PFM : PublicFinanceManagement
4
SBP : SingleBusinessPermit
SWG : SectorWorkingGroup
TABLEOFCONTENTS
FOREWARD 2
ACKNOWLEDGEMENT 3
ABBREVIATIONSANDACRONYMS 4
LISTOFTABLESANDFIGURES 6
LISTOFFIGURES 6
PREAMBLE ….7
1.0INTRODUCTION................................................................
11
1.1 Objectives of CBROP
............................................................11
1.2 Significance of CBROP
..........................................................11
1.3 Structure of CBROP
.............................................................12
2.0REVIEWOFCOUNTYFISCALPERFORMANCEIN2016/17FY.........................13
2.1 Overview
......................................................................13
2.2 Fiscal Performance
..............................................................13
2.2.1 ORS Performance
..............................................................14
2.2.2Disbursements…………………………………………………………………………………….22
2.2.3 Expenditure Performance
.......................................................23
2.2.3Implicationof2016/17FYFiscalPerformance....................................
….28
3.0RECENTECONOMICDEVELOPMENTSANDOUTLOOK.......................….29
5
3.1RecentEconomicDevelopments................................................
…29
3.2.MediumTermFiscalFramework..............................................
…32
3.4RiskstotheOutlook...........................................................
…33
4.0RESOURCEALLOCATIONFRAMEWORK........................................…34
4.1AdjustmenttotheFY2018/19Budget.............................................
…34
4.2 Medium Term Expenditure Framework
..............................................35
4.3The Proposed 2019/20 Budget Framework
............................................35
4. 3.1 Revenue
Projections……………..…..............................................35
4.3.2ExpenditureForecasts…………..…………………………………………………………..…..36
5.0 CONCLUSION
................................................................37
LISTOFTABLESANDFIGURES
LISTOFTABLES
Table1:Table1:SummaryofCountyFiscalPerformance……………………………………15
Table2:VihigaCounty,TrendinORSColectionbyQuarterfromFY2013/14tothe
FY2017/18…………………………………………….………………………………………16
Table3ORSPerformanceperstream2017/18………………………………………………..18
Table4ORSComparisonTable2016/17&2017/18………………………………………….19
Table 5 Analysis ofConditionalGrants Released forthe FY 2017/18 FY
2017/18……….….22
Table 6. Absorption
6
Rates.....................................................23
Table7:VihigaCounty,BudgetPerformancebyDepartmentinFY2017/18……………….25
Table8.AbsorptionratecomparedtoCFSP201andFY2017/18Budget……………………28
Table9.ShowingExpenditurebyEconomicClassification…………………………………..26
Table 10.County GovernmentFiscalProjections in Ksh.in the Medium
Term……….……..34
Table11.RevenueProjectionsforFY2019/20and2020/21……………………………………35
Table11.SummaryofExpenditureProjectionsinKSh.Milions2018/19FYand
MTEF……36
LISTOFFIGURES
Figure 1 Shows the expected sources of budget financing in the FY
2017/18……………….13
Figure2.YearlytrendinOSRcolectionfrom the2013/14FYtothe 2017/18
FY........15
Figure3QuarterlytrendinOSRfromthe2013/15FYtothe2017/18FY………………….16
Figure4.ShowingExpenditurebyEconomicClassification………………………………….27
Figure5.KenyaGDPannualgrowthrate……………………………………………….……29
PREAMBLE
TheCountyTreasuryismandatedbySection118ofthePublicFinanceManagement
(PFM)Act2012toprepareCountyBudgetReviewandOutlookPaper(C-BROP)forthe
County,whichistobesubmitedtotheCountyExecutiveCommiteeby30th
Septemberoftheyear.Section118(1)ofthePFMA2012statesthat;theCounty
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treasuryshal;
• PrepareaCountyBudgetReviewandOutlookPaperinrespectoftheCountyfor
eachfinancialyear;and
• SubmitthepapertotheCountyExecutiveCommiteeby30thSeptemberofthat
year.Section118(2)oftheActprovidesdetailsofissuespresentedintheCounty
BudgetReviewandOutlookPaper.Thesectionstatesthat:InpreparingitsCounty
BudgetReviewandOutlookPaper,theCountyTreasuryshalspecify–
i. Thedetailsoftheactualfiscalperformanceinthepreviousyearcomparedto
thebudgetappropriationforthatyear;
i. Theupdatedeconomicandfinancialforecastsinrelationtothechangesfrom
theforecastsinthemostrecentCountyFiscalStrategyPaper(CFSP);
ii. AnychangesintheforecastscomparedwiththeCFSP;
iv. Howactualfinancialperformanceforthepreviousfinancialyearmayhave
affectedcompliancewiththefiscalresponsibilityprinciples,orthefinancial
objectivesinthe
CFSPforthatfinancialyear;and
v. Reasonsforanydeviationfrom thefinancialobjectivesintheCFSPtogether
withproposedmeasurestoaddressthedeviationandthetimeestimatedfor
doingso.
This2018C-BROPwasthereforepreparedbytheCountyTreasurypursuantto
provisionofPFMA2012section118(1).Bylaw,theCountyGovernmentisrequiredby
Section107ofPFMA2012tomanagepublicfinancesinlinewiththeprinciplesof
fiscalresponsibility.Thesectionstatesthat:
1)TheCountyTreasuryshalmanageitspublicfinancesinaccordancewiththe
principlesoffiscalresponsibilitysetoutinsubsection(2),andshalnotexceed
thelimitsstatedintheregulations.
ThelimitsintheregulationsLegalnoticenumber35section25(1)areasquoted:
…….”25.(1)Inadditiontothefiscalresponsibility
principlessetoutinsection107oftheAct,the
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folowingfiscalresponsibilityprinciplesshalapplyin
themanagementofpublicfinances—
(a)theCountyExecutiveCommiteeMember
withtheapprovaloftheCountyAssembly
shalsetalimitonthecountygovernment’s
expenditureonwagesandbenefitsforits
publicofficerspursuanttosection107(2)of
theAct;
(b)thelimitsetunderparagraph(a)above,shal
notexceedthirty-five(35)percentofthe
countygovernment’stotalrevenue;
(c)fortheavoidanceofdoubt,therevenue
referredtoinparagraph(b)shalnotinclude
revenuesthataccruefromextractivenatural
resourcesincludingasoilandcoal;
(d)thecountypublicdebtshalneverexceed
twenty (20%) percent of the county
governmentstotalrevenueatanyonetime;
(e)thecountyannualfiscalprimarybalanceshal
be consistent with the debt target in
paragraph(d);
(f)the approved expenditures ofa county
assemblyshalnotexceedsevenpercentof
thetotalrevenuesofthecountygovernment
ortwicethepersonnelemolumentsofthat
countyassembly,whicheverislower;
(g)pursuanttosection107(5)oftheAct,ifthe
countygovernmentactualexpenditureon
developmentshalbeatleastthirtypercentin
conformity with the requirement under
section107(2)(a)oftheAct;
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(h)ifthecountygovernmentdoesnotachieve
therequirementofregulation25(1)(f)above
attheendofthefinancialyear,thecounty
executivecommiteememberforfinance
shalsubmitaresponsibilitystatementto
countyassemblyexplainingthereasonsfor
thedeviationand
provideaplanonhowtoensureannualactualexpenditureouturnsas
welasmediumtermalocationcomplywiththeprovisionsofSection
107(2)(a)oftheActandtheseregulationsinthesubsequentyears;
and
(i)thecomplianceplanaboveshalbebindingandthecountyexecutive
commiteememberforfinanceshalensureimplementation“
2)InmanagingtheCountyGovernment’spublicfinances,theCountyTreasuryshal
adheretothefolowingfiscalresponsibilityprinciples–
(a)theCountyGovernment’srecurrentexpenditureshalnotexceedtheCounty
Government’stotalrevenue;
(b)overthemedium term planaminimum ofThirtypercentoftheCounty
Government’sbudgetshalbealocatedtothedevelopmentexpenditure;
(c)theCountyGovernment’sexpenditureonwagesandbenefitsforitspublic
officersshalnotexceedapercentageoftheCountyGovernment’stotal
revenueasprescribedbytheCountyExecutiveMemberforfinancein
regulationsandapprovedbytheCountyAssembly;
(d)overthemediumterm,theGovernment’sborrowingsshalbeusedonlyfor
thepurposeoffinancingdevelopmentexpenditureandnotforrecurrent
expenditure;
(e)theCountydebtshalbemaintainedatasustainablelevelasapprovedby
Countyassembly;
(f)thefiscalrisksshalbemanagedprudently;and
(g)areasonabledegreeofpredictabilitywithrespecttotheleveloftaxrates
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andtaxbasesshalbemaintained,consideringanytaxreformsthatmaybe
madeinthefuture.
3)Forthepurposesofsubsection(2)(d),shorttermborrowingshalberestrictedto
managementofcashflowsandshalnotexceedfivepercentofthemostrecent
auditedCountyGovernmentrevenue.
4)EveryCountyGovernmentshalensurethatitslevelofdebtatanyparticulartime
doesnotexceedapercentageofitsannualrevenuespecifiedinrespectofeach
financialyearbyaresolutionoftheCountyassembly.
5)Theregulationsmayaddtothelistoffiscalresponsibilityprinciplessetoutin
subsection(2).
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1.0INTRODUCTION
Thissectionhighlightsobjectivesofthepaper,itssignificanceinthebudgetmaking
processandabriefdescriptionofthestructure.
TheCountyBudgetReviewandOutlookPaper(CBROP)ispreparedinlinesection118
ofthePublicFinanceManagement(PFM)Act,2012.Thepaperreviewsthefiscal
performanceoftheCountyforthefinancialyear2017/2018;theupdatedmacro-
economicandfinancialforecasts;anddeviationsfrom theapprovedCountyFiscal
StrategyPaper(CFSP)2017andreasonsforsuchdeviations.
1.1ObjectivesofCBROP
Theobjectiveofthepaperistoprovideareviewofthepreviousfiscalperformanceof
theCountyandhow thisimpactsthemacro-economicoutlook.Specificaly,the
CBROPprovides:
i. Updatedeconomicandfinancialforecastsinrelationtothechangesfromthe
forecastsinthemostrecentCountyFiscalStrategyPaper(CFSP);
i. Detailsoftheactualfiscalperformanceinthepreviousyearcomparedtothe
budgetappropriationforthatparticularyear;
ii. AnychangesintheforecastscomparedwiththeCFSP;
iv. Indicationonhowactualfinancialperformanceforthepreviousfinancialyear
mayhaveaffectedcompliancewiththefiscalresponsibilityprinciples,orthe
financialobjectivesintheCFSPforthatfinancialyear;and
v. Reasonsforanydeviationfrom thefinancialobjectivesintheCFSPtogether
withproposedmeasurestoaddressthedeviationandthetimeestimatedfor
doingso.
1.2SignificanceofCBROP
Thepaperisapolicydocumentandlinksplanningwithbudgeting.Itissignificantin
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thebudgetmakingprocesswithintheMedium-TermExpenditureFramework(MTEF)
asitreviewspreviousfiscalperformancefortheyearandidentifiesanydeviations
fromthebudgetwiththeaimofprovidingrealisticforecastsforthecomingyear.It
alsoassesseshowfiscalresponsibilityprincipleswereadheredasprovidedinsection
107ofthePFM Act2012.Inaddition,theupdatedmacroeconomicandfinancial
outlookprovidesabasisforanybudgetrevisionandsetsoutbroadfiscalparameters
forthenextbudget.
1.3StructureofCBROP
Thispaperhasfourothersections.SectionTworeviewstheCounty’sfiscal
performanceforthepreviousyear.Itisdividedintothreesub-sections,namely,The
Overview,FiscalPerformanceandImplicationsofFiscalPerformance.Sectionthree
reviewsrecenteconomicdevelopmentsandhasfoursubsectionsofRecentEconomic
Developments,EconomicOutlook&Policies,Medium Term FiscalFrameworkand
RiskstotheOutlook.SectionfoursetsouthowtheCountyGovernmentintendsto
operatewithinitsmeans.Itestablishestheresourcesenvelop(totalrevenues)it
expectsthenalocatestheseacrossdepartmentsbysetingexpenditureceilingsfor
eachdepartment.Inaddition,ithasfoursub-sections:adjustmenttotheproposed
budget;themedium-termexpenditureframework;proposedbudgetframework;and
projectedfiscalbalanceandlikelyfinancing.Andlastly,sectionfivegivesaconclusion
oftheentirepaper.
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2.0REVIEWOFCOUNTYFISCALPERFORMANCEIN2017/18FY
ThissectiondetailstheCounty’sfiscalperformanceforthefinancialyear2017/18
inrelationtothebudgetappropriationfortheyear;andimplicationsarisingfrom
thefiscalperformancefortheperiodunderreview.
2.1OVERVIEWOFTHEFY2017/18BUDGET
TheCounty’sFY2017/18ApprovedSupplementaryBudgetwasKshs.5.58bilion,
comprisingofKshs.3.88bilion(69.6percent)andKshs.1.70bilion(30.54percent)
alocationforrecurrentanddevelopmentexpenditurerespectively.
Tofinancethebudget,theCountyexpectstoreceiveKshs.4.41bilion(79percent)
asequitableshareofrevenueraisednationaly,Kshs.425.13milion(7.6percent)
astotalconditionalgrants,generateKshs.220milion(3.9percent)from own
revenuesources,andKshs.527.38milion(9.4percent)cashbalancebrought
forwardfromFY2016/17.
Figure1..ShowstheexpectedsourcesofbudgetfinancingintheFY2017/18
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Source:VihigaCountyTreasury
TheconditionalgrantscontainedintheCARA,2017compriseofKshs.95.74milion
(18.4percent)forLeasingofMedicalEquipment,Kshs.164.95milion(38.8per
cent)fromtheRoadMaintenanceFuelLevyFund,Kshs.12.66milion(3percent)as
CompensationforUserFeeForegone,Kshs.17.33milion(4.1percent)from
DANIDA,Kshs.50milion(11.8percent)asWorldBankloanforNationalAgriculture
Growth&RuralInclusiveGrowthProject,Kshs.38.85milion(9.1percent)forthe
WorldBankKenyaDevolutionSupportProgramme,Kshs.50.89milion(12percent)
forDevelopmentofYouthPolytechnics,Kshs.73.96milion(17.4percent)asWorld
BankloanforTransformingHealthSystemforUniversalCareProjectandKshs.16.5
milion(3.9percent)asOtherLoansandGrants.
Duringtheperiodunderreview,theCountyGovernmentsetoutintheC-FSP2017
toatainpositivegrowthprospectsthroughincreasedactivitiesintheCounty
sectors.TheCountystrengthenedrevenueadministrationtoenhanceefficiencyin
revenuecolection.Countyexpenditurewasalsoguidedbysectorobjectivesand
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prioritiesasoutlinedintheCIDP.
2.2FISCALPERFORMANCE
DuringtheFY2017/18,theCountyreceivedKshs.4.41bilionasequitableshareof
revenueraisednationaly,Kshs.329.40milionastotalconditionalgrants,raised
Kshs.143.53milionfrom ownsourcerevenue,andhadacashbalanceof
Kshs.527.38milionfrom FY2016/17.Thetotalavailablefundsamountedto
Kshs.5.41bilion.Inoveral,Ownsourcerevenuesfor2017/18FYgrewby40per
centcomparedtothepreviousyear,thatis143milionfrom102milionhoweverit
alsofelshortofthebudgettargetby35percentasindicatedintable1below.
Table1:SummaryofCountyFiscalPerformance
(%)
(%) (%)Realization
Change
Realization in
in
ITEM inBudget Supplementary
2016/17 2017/18 2017/2018 2017/18 2016/17
SOURCE and Budgetand
and
Actuals Actuals
2017/18
2017/18 2017/18
Actuals
2nd
Budgeted
  Actual(Ksh) Supplementary Actual(Ksh) % % %
(Ksh)
budget
Exchequer
4,389,755,291 4,570,875,477 5,362,314,565 4,738,579,196 8 104 88
issue
Own
generated 102,445,789 220,000,000 220,000,000 143,533,060 40 65 65
revenues
TOTALS 4,492,201,080 4,790,875,477 5,582,314,565 4,882,112,196 9 102 87
Source:VihigaCountyTreasury
2.2.1OwnSourceRevenue(OSR)
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In2017/18FY,theCountyreceivedanequitableshareofCountyrevenueofKshs.
4,409,200,000 and grants of Kshs. 329,379,196 against a target of
Kshs5,362,314,565sourcerevenueamountedtoKshs.143,533,060againstatargetof
Kshs.220,000,000asshownbelow.
Figure2.YearlytrendinOSRcolectionfromthe2013/14FYtothe 2017/18FY
source:VihigaCountyTreasury
Table2:VihigaCounty,TrendinORSColectionbyQuarterfromFY2013/14totheFY
2017/18
FY FY FY FY FY
2013/14 2014/15 2015/16 2016/17 2017/18
QTR.1 18,825,000 25,624,320 29,925,190 23,563,100 12,820,040
QTR.2 17,683,250 23,095,640 34,891,710 15,954,700 29,069,376
QTR.3 41,034,020 29,423,870 27,377,470 26,129,400 50,551,434
QTR.4 45,786,700 37,896,590 32,925,190 31,300,700 51,092,210
 TOTALS 123,328,970 116,040,420 125,119,560 96,947,900 143,533,060
TARGET 204,274,739 377,743,491 220,000,000 220,000,000 220,000,000
17
source:VihigaCountyTreasury
Figure3QuarterlytrendinOSRfromthe2013/15FYtothe2017/18FY
source:VihigaCountyTreasury
ThetablesandfiguresaboveshowthattheCountystartedathighORSmark,
droppedthesecondyearthenstartedtoregaininthethirdyear.Inthefourth
yearbeinganelectioneeringyearOSRdroppedtremendouslytolessthan100
milionshilingsthenitpickedupinFY2017/18.
Itisobservedthatintheyearswheretherehasbeenanincreasingtrendin
colectionofOSRtheCountyhasneveratainedittargetasperthebudget.
ThereisneedfortheCountytorelookatitsOSRpotentialagainstitsabilityto
maximizethecolectionoutofit.
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Table3ORSPerformanceperstream2017/18
    QTR1 QTR2 QTR3 QTR4  2017/18
TOTALS
  STREAMS/RECEIPTS KSHS KSHS KSHS KSHS RECEIPTS
KSHS
1 RENTALINCOME 20,000 70,000 768,510 727,250 1,585,760
2 LANDBOUNDARYDISPUTES 100,000 143,000 185,000 200,000 628,000
3 SINGLEBUSINESSPERMITS 804,315 868,320 14,295,702 5,759,940 21,728,277
4 LIQUORLICENSE 2,451,657 578,120 93,420 3,580,815 6,704,012
5 RATES 54,265 5,550 466,213 203,692 729,720
SIGNBOARDS;
6 34,440 243,000 101,860 64,830 444,130
PROMOTIONS/ADVERTISEMENT
7 PLOT\SITERENT 524,505 571,855 40,435 554,985 1,691,780
8 LEASE\RENTALOFMACHINES 636,075 381,020 1,386,285 1,096,030 3,499,410
9 MARKET\TRADE 3,034,340 3,275,795 4,205,388 3,813,765 14,329,288
10 VEHICLEPARKING 7,561,840 8,220,320 9,533,875 9,383,790 34,699,825
11 PUBLICHEALTHSERVICE 271,410 294,800 600,700 1,242,430 2,409,340
12 SLAUGHTERMANAGEMENTFEES 51,910 186,980 327,369 821,165 1,387,424
13 WATERSUPPLYadmnFEE 93,800 222,250 379,340 324,520 1,019,910
14 BUILDINGPLANAPPROVAL 60,500 40,800 351,300 535,620 988,220
15 SAND\MURRAM 15,900 21,200 - 51,700 88,800
16 FINES,PENALTIESANDFORFEITURE 330 56,754 87,921 40,987 185,992
19
17 LIVESSTOCKCESS 747,268 350,880 377,883 547,370 2,023,401
18 TEACESS - - - - -
19 FACILITYIMPROVEMENTFUND 1,490,942 6,358,968 11,526,441 11,852,210 31,228,561
20 NOISEEMMISSION 25,200 46,200 - - 71,400
21 REGISTRATIONOFGROUPS 37,750 37,500 78,050 100,250 253,550
22 APPLICATIONFEES,S.B.P - 53,500 - - 53,500
23 MISCEINCOME 52,179 2,308,117 1,301,136 1,171,082 4,832,514
24 INSPECTION - 4,000 54,000 124,000 182,000
25 HIREOFHALL - 12,000 5,000 5,000 22,000
26 PLANAPPLICATIONFEES - 17,500 13,500 - 31,000
27 SCRUTINYOFPLANSELECTRICAL - - 24,000 60,000 84,000
28 SCRUITINYOFPLANSMECHANICAL - - 23,250 41,000 64,250
29 SALEOFFERTILIZER - - 6,063,455 7,333,835 13,397,290
30 PAYBILL - - - 796,340 796,340
31 WEIGHTSANDMEASURES - - 18,500 - 18,500
32 HIREOFGROUND - - 11,400 - 11,400
33 VETERINARYSERICES - - - 5,930 5,930
  TOTALSWEEPSTOCRFACCOUNT. 12,820,040 29,069,376 50,551,434 51,092,210 143,533,060
source:VihigaCountyTreasury
Table4ORSComparisonTable2016/17&2017/18
STREAMS 2017/18 2016/17 VARIANCE
1 RENTALINCOME 1,585,760 252,875.00 1,332,885
LAND BOUNDARY
2 DISPUTES 628,000 447,160.00 180,840
SINGLE BUSINESS
3 PERMITS 21,728,277 13,585,701.00 8,142,576
4 LIQUORLICENSE 6,704,012 1,151,500.00 5,552,512
5 RATES 729,720 553,921.00 175,799
SIGN BOARDS;
PROMOTIONS,
6 ADVERTISEMENT 444,130 1,201,405.00 -757,275
7 PLOT\SITERENT 1,691,780 2,199,551.00 -507,771
LEASE\RENTALOF
8 MACHINES 3,499,410 572,411.00 2,926,999
9 MARKET\TRADE 14,329,288 13,658,968.00 670,320
10 VEHICLEPARKING 34,699,825 33,256,850.00 1,442,975
PUBLIC HEALTH
11 SERVICE 2,409,340 1,842,605.00 566,735
SLAUGHTER
12 MANAGEMENTFEES 1,387,424 255,980.00 1,131,444
WATER SUPPLY
13 admnFEE 1,019,910 1,373,840.00 -353,930
BUILDING PLAN
14 APPROVAL 988,220 356,770.00 631,450
15 SAND\MURRAM 88,800 78,900.00 9,900
FINES, PENALTIES
16 ANDFORFEITURE 185,992 81,198.00 104,794
17 LIVESSTOCKCESS 2,023,401 1,688,104.00 335,297
20
18 TEACESS 0 6,670,881.00 -6,670,881
FACILITY
IMPROVEMENT
19 FUND 31,228,561 14,888,169.00 16,340,392
20 NOISEEMMISSION 71,400 8,800.00 62,600
REGISTRATION OF
21 GROUPS 253,550   253,550
APPLICATION FEES,
22 S.B.P 53,500   53,500
23 MISCEINCOME 4,832,514 105,980.00 4,726,534
24 INSPECTION 182,000 182,000
25 HIREOFHALL 22,000 22,000
PLAN APPLICATION
26 FEES 31,000 31,000
SCRUTINYOFPLANS
27 ELECTRICAL 84,000 84,000
SCRUITINY OF
PLANS
28 MECHANICAL 64,250 64,250
29 SALEOFFERTILIZER 13,397,290 8,214,220.00 5,183,070
30 PAYBILL 796,340 796,340
WEIGHTS AND
31 MEASURES 18,500 18,500
32 HIREOFGROUND 11,400 11,400
VETERINARY
33 SERICES 5,930 5,930
TOTAL
COLLECTIONS. 145,195,524 102,445,789 42,749,735
SWEEPS TO CRF
  ACCOUNT. 143,533,060 102,445,789.00 41,087,271
source:VihigaCountyTreasury
2.2.1.1REASONSFORIMPROVEMENTINOWNREVENUESOURCE2017/18COMPAREDTO
2016/17
1.OperationalizationoftheVihigaCountyadministrationAct2015thattook
colectionservicestothesubcountylevelthusclosertothetaxpayers.
2.ConducivepoliticalenvironmentcreatedbyconsistentpositivesentimentsbyH.E
TheGovernorontheneedbyeverycitizentopaytax.
3.Facilitationofthesubcountyrevenueofficersbythedepartmentoffinancefor
officerunning.
4.Regularappraisalofsubcountycolectionsbytherevenuemanagementteam
headedbytherevenuereceiverandreportingtotheCECMFinanceand
EconomicPlanning.
5.Provisionofmeansoftransportforsupervisionandenforcementtothevarious
revenueteams.
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6.FrequentandperiodicalpublicityofrevenueactivitiesonVihigaFMradiostation
whichhasabigaudienceandfolowingintheCounty.
7.Promptprocurementofrevenuebooksandotherstationary.
8.Enhancedmonitoringofrevenuecolectioninthedepartmentoftransportand
infrastructureonusageofmachinesandbuildingplansapprovals.Thisrealized
anincreasefromKshs.572,411.00toKshs.3,499,410representing511%.
9.Strengthenedinternalcontrolsystemwheredutieshavebeensegregatedatsub
countyofficesforeasydetectionoffraudandpreventpilferage.
10. PrompthandlingofindisciplinecasesbytheofficeoftheCECMFinanceand
Economic Planningtostaffsuspectedtohaveembezzledfunds.
2.2.1.2CHALLENGES
1.InadequaterevenuecolectorstocovertheOSReffectivelye.gmarkets.
2.Colapseoftherevenueautomatedsystemaftertheserviceprovider
Compulynxrefusedtoserviceandmaintainthesysteminfrastructure.
3.UninductedrevenueandenforcementteamsontheprovisionsoftheFinance
Actandotherenablinglegislations.
4.Thedepartmentoflands,housing,physicalplanningandurbandevelopment
hasnotoperationalizedtheVihigaCountyRatingandValuationAct2017
whichwiladdresslandratespayments.
5.Thoughthepositivesentimentsbytheexecutivewingofthegovernment,the
legislativewing(MCAs)onsomeoccasionshavemadepoliticalstatements
thathavenegativelyaffectedrevenuecolection.
6.Lackofenablingbylawsandregulationstohelpenforcerevenueespecialyon
defaultersandotheromissions.
22
7.Lackofenoughvehiclesforsupervisionandcolection.Therevenue
administrationActgaveaprovisionforavehicleperSubCounty.
8.DespiteinvoicingthecontractorbuildingtheKisumu-Kakamegaroadwitha
claimofKshs159m,noresponseorpaymenthasbeenreceivedtodate.
9.Lackofstaffuniformsandotherequipmentthathelpstoidentifythetax
colectorfromanyothermemberofthepublic.
10.Non-provisionofcrucialmarketamenitiesbyotherdepartmentswhich
hamperscolectionfromsomestreams.
2.2.1.3WAYFORWARD
1.Procureaneffectiveandaccountablerevenueautomatedsystemthat
conformstotheguidelinesissuedbythecommissiononrevenue
alocationonautomatedsystems.
2.Strengthentherevenueadministrationstructureaspertheprovisionsof
theAct.
3.Ensurepromptandtimelyprocurementofrevenuebooksandstationary.
4.OnesthefinancebilhasbeenpassedintoanAct,therevenuecolectors
andenforcementofficersneedtobethoroughlyinductedonthechanges.
23
2.2.2DisbursementfromExchequer
TheequitablesharealocationofCountyrevenueincreasedby8percentcomparedto
theprevious2016/17FYatributedtoimprovedrevenueperformanceatthenational
level.
Table5AnalysisofConditionalGrantsReleasedfortheFY2017/18FY2017/18
Actual
Receipts
Actual
Annual Annual as
receipts in
S/N CARA,2017 Budget Percentag
Grants  the FY
o Alocation Alocation e of
2017/18(in
(inKshs) (inKshs) Annual
Kshs.)
Alocation
(%)
Road
1 Maintenance 82%
164,948,954 164,948,954 135,608,730
FuelLevyFund
WorldBankLoan
forTransforming
2 Health System 31%
73,956,777 73,956,777 23,111,493
for universal
CareProject
Development of
3 Youth 100%
50,886,386 50,886,386 50,886,386
Polytechnique’s
WorldBankLoan
for National
4 Agricultural & 101%
50,000,000 50,000,000 50,609,855
Rural Inclusive
Project
KenyaDevolution
5 100%
Supportprogram 38,854,627 38,854,627 38,854,627
6 DANIDAGrant 100%
17,325,260 17,325,260 17,325,260
Conditional
7 Alocation-Other 0%
16,500,000 16,500,000 -
Loans&Grants
Compensation
8 for user fees 103%
12,657,201 12,657,201 13,002,761
foregone
Total 77%
425,129,205 425,129,205 329,399,112
source:VihigaCountyTreasury
24
2.2.3ExpenditurePerformance
TotalexpenditureintheFY2017/18,amountedtoKsh.2.71bilionagainstatargetof
Ksh.5.58bilionasperApprovedsupplementary2017/18.Thisrepresenting67.4
percentofthefundsreleasedforoperations.Whencomparedtoexpenditureof
2016/17financialyear,thisisadeclineof27.2percentfrom Kshs.3.72bilion.In
addition,atotalofKsh2.41bilionwasspentonrecurrentactivitieswhileKsh
297.47milionondevelopmentexpenditure.Recurrentexpenditureaccountsfor62per
centoftherecurrentsupplementaryadecreasefrom 82.9percentrecordedinFY
2016/17.Developmentexpenditureaccountsfor17.5percent,whichisadecrease
from52.5percentatainedinasimilarperiodofFY2016/17.Notethattheexpenditure
excludedpendingbilswhichamountedtoKshs.207.33milionfordevelopment
activitiesandKshs.977.48milionforrecurrentexpenditureasatJune30,2018.
TheCountyrecordedtotalexpenditureofKsh.2.71bilionwhichisanabsorptionrate
of48percent,adecreasefrom73.8percentatainedinasimilarperiodofFY2016/17.
TheunderspendingintheFY2017/18isatributedtolowabsorptionratesinboth
recurrentanddevelopmentexpendituresbythelineCountydepartments,under
colectioninrevenue,delayindisbursementsfromnationalGovernmentandbeingan
electionyeartherewasanembargoanddevelopmentreleasesfromNationalTreasury.
Table6.AbsorptionRates
Approved Overal
Actual Expenditure Absorption
  Budget bilion Absorption
bilionKsh Rate
Ksh Rate
Recurrent
2.41 3.88 62.11 43.19
Expenditure
25
Development
0.273 1.7 16.06 4.89
Expenditure
Total 2.71 5.58 48.57 48.08
source:VihigaCountyTreasury
2.2.3.RecurrentExpenditure
ThetotalrecurrentexpenditureofKshs.2.71bilioncomprisedofKshs1.62bilion
(67.2percent)incurredonpersonnelemolumentsandKshs.787.38milion(32.8%)
on operations and maintenance. Expenditure on personnelemoluments
representedadecreaseof12percentcomparedtotheFY2016/17whenthe
CountyspentKshs1.84bilion.
2.2.4DevelopmentExpenditure
ThetotaldevelopmentexpenditureofKshs.297.47milionrepresented17.5per
centoftheannualdevelopmentbudgetofKshs.1.7bilion.Thelowrateof
absorptionofdevelopmentfundmayatributedtodelayindisbursementoffunds
from theexchequertothecountiesduringthethreemonthsthatprecededthe
GeneralElection.
Duringtheperiodunderreview,developmentactivitiesstaledasresultofpolitical
heat,changeofguard,transitionandreorganizationofgovernmentintheCounty.
26
Table7:VihigaCounty,BudgetPerformancebyDepartmentinFY2017/18
FY2017/18Budget ExchequerIssues
Expenditurein FY2017/18 FY2017/18
Alocation(Kshs. inFY2017/18
Expenditure
Absorption
Department Milion) (Kshs.Milion) FY2017/18(Kshs. to rate(%)
Exchequer
    Milion) Issues(%)  
Rec Dev Rec Dev Rec Dev Rec Dev Rec Dev
Agriculture,
Livestock, 118.2 48.
Fisheries 133.83 211.31 131.2 101 57.17 77 75.5 27.16 3
&Co-Operatives
Lands,Housing
&Physical 31.65 65 31.65 23.94 20.16 - 63.7 - 63.7 -
Planning
Transport& 139.2 112.9 81.
141.36 436.14 141.63 51.85 36.6 36.6 25.9
Infrastructure 6 2 1
Industrialization,
Trade& 142.36 70.53 47.49 - 14.79 - 31.1 - 10.4 -
Tourism
CountyHealth 1,248.1 1,231.6
233.26 51.87 853.47 58.61 69.3 113 68.4 25.1
Services 4 1
Education,
91. 102.
Science& 337.49 258.5 259.51 38.16 347.08 35 133.7 13.5
7 8
Technology
County
364.97 54.78 330.97 - 150.53 13.14 45.5 - 41.2 24
Executive
County 89.
530.77 40.44 530.15 13.47 445.86 12.01 84.1 84 29.7
Assembly 2
Finance&
Economic 246.78 102.19 246.78 - 77.12 - 31.3 - 31.3 -
Planning
CountyPublic
49.13 - 49.13 - 24.67 - 50.2 - 50.2 -
ServiceBoard
PublicService&
365.98 53.26 365.98 - 246.76 5.62 67.4 - 67.4 10.6
Administration
Gender,Culture,
222.71 51.6 196.8 - 32.98 - 16.8 - 14.8 -
Youth&Sports
Environment,
2.
Water& 66.61 123.17 66.61 3 41.64 3 62.5 100 62.5
4
Forestry
27
3,882.0 1,700.1 3,629.5 387.9 2,407.9 297.4 76.
TOTAL 66.3 62 17.5
5 9 1 6 1 7 7
ThetableaboveshowsbudgetperformancebydepartmentwheretheCountyAssembly
atainedthehighestabsorptionrateofdevelopmentbudgetat29.7percent.The
DepartmentofEducation,ScienceandTechnologyatainedthehighestpercentageof
recurrentexpendituretorecurrentbudgetat102.8percentwhiletheDepartmentof
Industrialization,TradeandTourismatainedthelowestat10.4percent.
2.2.4.BudgetAbsorptionandComparisonbetweenCFSP 2017ceilingsandFY
2017/18budget
Respectivesectorsabsorptionratescomparedtotheirrespectivebudgetalocationsin
Table7belowshows;CountyPublicServiceBoardsectorrecordedanabsorptionrate
of97percentoftheirceilingfolowedbyPublicServiceandAdministrationandCounty
Executiveat95percenteach.Environment,Water,NaturalResources&Forestrysector
recordedtheleastabsorptionrateat37percent.Theslowabsorptionbyrespective
sectorshasbeenhingedmainlytoaslowprocurementprocess,delayindisbursements
andchalengesindepartment’scapacitytoabsorbthealocatedfunds.
ComparisonbetweenCFSP2017ceilingsand2017/18FYbudgetalocationshoweda
generalgrowthinbudgetalocationsoccasionedbyincreaseinequitableshareofCounty
revenue.
Table8.AbsorptionratecomparedtoCFSP2017/18andFY2017/18Budget
Expenditure
BUDGET 2017/18
in The FY
2017/18 Ceiling Absorption
Department  2017/18
Kshs. Kshs. Perceilings
(Kshs.
Milion) Milion)
Milion)
Agriculture,
Livestock,Fisheries 344.53 188.53 125.3 66%
&co-operatives
Lands, Housing &
96.65 76.65 63.7 83%
PhysicalPlanning
Transport &
577.77 450.77 117.7 26%
Infrastructure
Industrialization,
212.89 87.00 31.1 36%
Trade&Tourism
28
County Health
1,481.40 1,342.64 182.3 14%
Services
Education,Science&
595.99 516.73 225.4 44%
Technology
CountyExecutive 419.75 330.97 45.5 14%
CountyAssembly 571.21 654.99 173.3 26%
Finance&Economic
348.97 441.61 31.3 7%
Planning
County Public
49.13 49.13 50.2 102%
ServiceBoard
Public Service &
419.24 413.98 67.4 16%
Administration
Gender, Culture,
274.31 211.31 16.8 8%
Youth&Sports
Environment,Water,
NaturalResources& 189.78 147.78 162.5 110%
Forestry
TOTAL 5,581.62 4,912.10 1,292.5 26%
Source:VihigaCountyTreasury
2.2.5.Expenditurebyeconomicclassification
Thetable9belowshowsactualexpenditurebyeconomicclassification;personnel
emolumentsatKsh.1,620.00milion,whichis59,9percentoftheCounty
Governmentstotalrevenueandhasincreasedby11.80percentfromtheprevious
year2016/17FY.Developmentexpenditurefelshortby62.50percentfrom the
targetedamountofKsh.1.70bilion.
Table9.ShowingExpenditurebyEconomicClassification
FY FY
FY FY
2016/17 2017/18 %
  2016/17 2017/18
Ksh. Ksh. Change
% %
milion milion
Personnel
49.40% 59.90% -11.80%
Emoluments 1,837.70 1,620.00
Operations
and 29.30% 29.10% -27.60%
1,087.80 787.38
Maintenance
Development
21.30% 11.00% -62.50%
Expenditure 793.00 297.47
Total 100.00% 100.00% -27.30%
3,718.51 2,704.85
Source:VihigaCountyTreasury
Figure4.ShowingExpenditurebyEconomicClassification
29
Source:VihigaCountyTreasury
2.2.6Implicationof2017/18FYFiscalPerformance
ThefiscalperformanceintheFY2017/18hasaffectedfinancialobjectivesandfiscal
responsibilityprinciplessetoutinthe2017CountyFiscalStrategyPaperandtheBudget
2017/18inthefolowingways;
• OwnSourceRevenuecolectionimprovedby40percentcomparedtotheprevious
year,thatisKsh.143milionfromKsh.102milionhoweveritalsofelshortofthe
budgettargetofKsh.220milionby35.Thisundercolectioninrevenuehas
warrantedadjustmenttoprojectedrevenuesforthebudgetandinthemediumterm
sinceoverthepastthreeyearswehavebeenunabletomeetstherevenuetargets.
• Theunderspendinginthe2017/18FYbudgethasimplicationsonthetotalCounty
Governmentrevenueusedtobaseexpendituresforthe2018/19FY.Appropriate
revisionswilbeundertakenconsideringthefiscalperformanceof2017/18FY
throughtheSupplementaryforFY2018/19andintheCountyFiscalStrategyPaper
for2019
• Expendituresonwagesandbenefitsin2017/18FYaccountedfor59.9percent(24.9
percentabovetheprescribedlimit).Thisiseverybigmarginagainstthefiscal
responsibilityprinciples.
30
• Developmentexpenditurealsofelshortofthefiscalresponsibilityprinciplesofat
least30percentoftotalrevenueandweonlyatained17.5percentofthe
developmentfundssetaside.
• Somedepartmentrecordedoverabsorptionoftheirbudgetsonrecurrent
expenditureswhichisagainstthefiscalresponsibilityprinciplesandhasserious
implicationonthefiscalperformanceofothervoteheads.Someofthis
departmentslikeEducation,scienceandTechnologywith102.8percent.
• Delayandornon-disbursementofbudgetedfundbythenationaltreasuryhas
serousimplicationonbudgetimplementation.Thisaffectsthecashflowandthe
plannedactivitiesandprogramsremainundoneorunpaidfor.
Theseimplicationswilalsoinform2019CountyFiscalStrategyPaperprojections.Overthe
mediumtermtheCountyGovernmentwiladheretothefiscalresponsibilityprinciplesand
objectivesassetoutinsection107ofthePublicFinanceManagementActof2012.
3.0 RECENTECONOMICDEVELOPMENTSANDOUTLOOK
ThissectionpresentsRecentEconomicDevelopments;MediumTermFiscalFramework;
andRiskstotheOutlook.Itspurposeistoturntheatentionfromthepasttothepresent
timeandtheimmediatefuture.Inthissection,theCountyGovernmentdiscussesits
assessmentoftheprospectsforgrowthafteranalyzingtherecenteconomiceventsand
circumstances.
3.1 RecentEconomicDevelopments
AccordingtheEconomicSurveyreport2018bytheKenyaNationalBureauof
Statistics,theKenyaneconomyadvanced5.7percentyear-on-yearinthefirst
quarterof2018,higherthananupwardlyrevised5.3percentgrowthintheprevious
periodanda5.8percentestimatefromthecentralbank.Itisthestrongestgrowth
ratesincethelastthreemonthsof2016,amidimprovedweatherconditionsanda
boostinbusinessandconsumerconfidenceaftertheconclusionofgeneral
31
electionsin2017.
Figure5.KenyaGDPannualgrowthrate
Agriculturaloutputsurged5.2percent,themostsincethesecondquarterof2016(1.4
percentinQ42017),withteaproductionclimbing11percent.Also,manufacturing
rebounded(2.3percentcomparedto-0.4percent,themostsincethethirdquarterof
2016)andbothrealestate(6.8percentcomparedto6.3percent,themostsincethe
fourthquarterof2016)andwholesaleandretailtrade(6.3percentcomparedto6.2
percent,themostsincethesecondquarterof2016)increasedfaster.Onaquarterly
basis,theGDPgrew1.9percent,themostsincethesecondquarterof2014.GDP
AnnualGrowthRateinKenyaaveraged5.45percentfrom2004until2018,reachingan
al-timehighof12.40percentinthefourthquarterof2010andarecordlowof0.20
percentinthefourthquarterof2008.Kenya’seconomyisestimatedtohaveexpanded
by4.9percentin2017comparedtoarevisedgrowthof5.9percentin2016.The
slowdownintheperformanceoftheeconomywaspartlyatributabletouncertainty
associatedwithaprolongedelectioneeringperiodcoupledwithadverseeffectsof
weatherconditions.
Generaly,keymacroeconomicindicatorslargelyremainedstableandtherefore
32
supportiveofgrowthin2017.Interestratesdeclinedduetotheimpactoftheircapping
thatbecameeffectiveinSeptember2016.Inthemoneymarket,theKenyanShiling
strengthenedagainstmostofthemajortradingcurrenciesbutweakenedagainstthe
EuroandtheUSDolarin2017.Thecurrentaccountdeficitwidenedintheyearunder
reviewonaccountofsignificantgrowthofimportsagainstaslowergrowthofexports.
Therewasamoderatebuildupininflationarypressuresmainlyduetosignificant
increaseinoilandfoodpricesduringtheyearunderreview.Consequently,inflationrate
rosefrom6.3percentin2016to8.0percentin2017.
Performance across the various sectors ofthe economyvaried widely,with
AccommodationandFoodservices;InformationandCommunicationTechnology;
Education;Wholesale and Retailtrade;and Public Administration registering
acceleratedgrowthsin2017comparedto2016.Ontheotherhand,growthsin
Manufacturing;Agriculture,Forestry and Fishing;and Financialand Insurance
deceleratedsignificantlyoverthesameperiodandthereforedampenedtheoveral
growthin2017.
Employment,EarningsandConsumerPrices
Atotalof897.8thousandnewjobswerecreatedin2017with787.8thousandnewjobs
createdintheinformalsector.Employmentintheinformalsectoraccountedfor83.4
percentoftotalemploymentintheperiodunderreview.Thenumberofpersons
engaged,excludingthoseinrural-smalscaleagricultureandpastoralistactivities,rose
by5.6percentfrom16.0milionpersonsin2016to16.9milionpersonsin2017.
InflationasmeasuredbyConsumerPriceIndexincreasedfrom6.3percentin2016to
8.0percentin2017.
Money,BankingandFinance
TheCentralBankRate(CBR)wasretainedat10.0percenttocontinueanchoring
inflationexpectationsin2017.Themaximumlendingrateiscappedatnomorethan
4.0percentabovetheCBR.Averageinterestratesondepositsincreasedto8.22per
centinDecember2017from 7.33percentinDecember2016.Commercialbanks’
averagelendinginterestratesonloansandadvancesremainedstableat13.64percent
33
inDecember2017.The91-dayTreasurybilratefelfrom8.44percentinDecember
2016to8.01percentinDecember2017.
TheCountyisthereforeinbetersteadtoexperiencegrowthinagricultureandlivestock
production,buildingandconstruction,retailandwholesale,financialintermediation,
publicandprivateinvestments,increasedconsumerconfidenceandtheongoing
initiativestodeepenregionalintegration.
Thegrowingnationaleconomyisexpectedtoleadtoenhancedrevenueperformance.
ThiswilmeanincreasedalocationstotheCountybyCommissionofRevenue
Alocationthushavingimplicationontheimplementationofstrategicinterventions.
Globalinflationroseto3.1percentin2017from 2.8percentin2016,partly
atributabletoincreaseinoilprices.Worldtradegrewby4.8percentin2017compared
to2.6percentin2016asresultofrecoveryinglobalmanufacturingoccasionedby
increasedinvestments.Globalunemploymentratestoodat5.6percentin2017.
TheNairobiSecuritiesExchange20-Shareindexroseto3,712pointsinDecember2017
from 3,186pointsinDecember2016,withmarketcapitalizationrisingtoKSh2,522
bilioninDecember2017.
PublicFinance
NationalGovernmentoutlayfor2017/18isexpectedtoincreaseby21.7percentto
KSh2,777.8bilionfrom KSh2,283.0bilionin2016/17.Recurrentexpenditureis
estimatedatKSh2,107.2bilionin2017/18,whiledevelopmentexpenditureisbudgeted
atKSh670.6bilion.TotalrevenuecolectionsbytheNationalGovernment,inclusiveof
grantsisexpectedtobeKSh1,710.2bilion,ofwhichKSh1,466.2bilionisexpectedto
begeneratedfromtaxrevenue.
TotalstockofpublicdebtasatendofJune2017stoodatKSh3,971.4bilion,ofwhich
externaldebtpositionwasKSh2,294.2bilion,accountingfor57.8percent.Publicdebt
servicingin2017/18isexpectedtoamounttoKSh623.1bilion.
3.2 MediumTermFiscalFramework
TheCountyGovernmentwiloperatewithinaframeworkofbalancedbudget.The
34
CountyGovernment’sfiscalpolicyobjectiveinthemedium term wilbetofocus
resourcestopriorityandgrowthpotentialareasincludingwater,infrastructure,
agricultureandlivestockproduction,andhealth.
Revenue mobilization initiatives wilbe strengthened to enhance own revenue
performance.Torealignlocalrevenueperformancetopositivegrowthtrajectory,the
CountyGovernmentwilensureadequatelegislationstoguiderevenuecolectionand
management,improveenforcementforcompliance,enhanceuseoftechnologyto
automatealrevenuesourcesandbroadentaxbase.TheCountyGovernmentwil
engagetheNationalGovernmentanddevelopmentpartnersforadditionalresourcesto
supportimplementationoftargeteddevelopmentinterventions.TheGovernmentwil
alsoengagestakeholderstodevelopacomprehensivepolicyandlegislativeframework
toregulateexploitationofthevastnaturalresourcesintheCounty.Thepolicywil
addressitselftolicensing,atractinginvestors,taxationandsustainableuseofthe
resources.
Inthemedium term theCountyGovernmentwilstrengthenexpendituremanagement
focusingonexpenditureproductivity.Thiswilbedonebyfulimplementationofthe
IntegratedFinancialManagementInformationSystem (IFMIS)acrossdepartments.The
CountyGovernmentwilcontinuetomonitorexpenditurescloselytoavoidchanneling
resourcestounproductiveexpenditureareas.Majorexpenditureareaswilbeexpectedto
includepersonnelemoluments(P.E),developmentandoperations.TheGovernmentwil
alsoupscaleimplementationofprogrammestargetingthevulnerableincludingtheyouth,
womenandpeoplelivingwithdisabilities(PWDs)toenhancetheirparticipationinthesocio-
economicdevelopmentoftheCounty.
TheCountyGovernmentofVihigadoesnotanticipateanylongterm borrowinginthe
medium term.However,thefiscalresponsibilityprincipleswilremaintheguiding
frameworkforitspublicfinancemanagementdiscourse.
3.3RiskstotheOutlook
RiskstotheeconomicoutlookoftheCountyincludethefolowing;
• Theoutlookisbasedonassumednormalrainfal.However,rainfalpaternproved
erraticinsomeseasonsinthepast.Erraticrainfalpatern,ifexperienced,islikelyto
affectagriculturalproduction.
35
• Expenditurepressuresduetoincreasingwagebilthusleavinginadequateresourcesfor
development.
• DelayintheenactmentofCountyAlocationofRevenueBil.Thishasbeenaffecting
counties’budgetingprocessforlackofclearceilingsbeforehand.
• Localrevenueperformance.Thishasbeenfluctuatingandunderperforming.Butwith
theexpectedimprovedrevenueperformanceatthenationallevelduetothegrowth
momentumoftheKenya,thetotalrevenueoftheCountyisexpectedtoincreaseover
themediumterm.
• VariationsofCountyalocationofrevenueformulabytheCommissiononRevenue
AlocationandSenateisalsoapotentialriskasthismayleadtoreducedshareof
shareablerevenue.
• Exchequerreleases.Thisaffectsbudgetimplementation.
• ConflictingprioritiesbetweentheCountyAssemblyandtheCountyExecutivethus
affectingbudgetmakingprocessandbudgetexecution.
4.0RESOURCEALLOCATIONFRAMEWORK
ThissectionestablishestheresourceenvelopetheCountyexpectsandhowitwilbe
alocatedacrossalthesectorsfor2018/19FYandMTEF
Mediumtermprojectionshaveconsideredperformanceof2017/18FYandmacroeconomic
factorsexpectedatthenationallevel.Arateof5percenthasbeenused(insteadof5.8
GDPgrowthprojection)atoprojectthegrowthinCountyrevenues.
Table10belowshowstheCountyGovernmentfiscalprojectionsinthemedium term.
RevenuecolectionwilbemaintainedatKsh.153milionasindicatedinCFSP2018
36
consideringstrategiesemployedtowardsraisingrevenueinthemediumterm.Thisinclude;
passingofrelevantamendmentsontherevenuelegislations,onrevenueadministrationand
colection,fulautomationofrevenuecolectionandintegration,strengtheningand
enforcing surveilance and sensitization ofthe public.In addition,recurrentand
developmentexpenditurewilbemaintainedat65percentand35percentrespectively
meetingtheminimum30percentrequirementfordevelopmentexpenditure.
Table10.CountyGovernmentFiscalProjectionsinKsh.intheMediumTerm
2018/19
2019/20 2020/21
Sources/FY 2017/18 CFSP
Projection Projection
Projection
County
Equitable
4,409,200,00 4,770,000,00 5,008,500,00 5,258,925,00
share per
0 0 0 0
CRA
Own
Source
220,000,000 153,445,800 153,445,800 153,445,800
Revenue
Total 4,629,200,00 4,923,445,80 5,161,945,80 5,412,370,80
0 0 0 0
Source:VihigaCountyTreasury
4.1AdjustmenttotheFY2018/19Budget
AsweevencommenceimplementationoftheFY2018/19Budget,therewilbeneedto
adjustitthroughthesupplementarytoaddressthefolowingissues;changesinCARA2018,
changesinpersonnelemolumentsothatitisadequatelyprovidedforintheBudgetandany
othermaterarisingfrom changeofpolicyorlawandoroperationsattheCountyand
Nationalgovernmentlevel.
Thesecoupledwithlocalrevenueshortfalsasexperiencedinthe2017/18yearwilfurther
affectthecurrentbudget.Therefore,toaverttheserisks,revisionsonlocalrevenue
projectionstorealisticprojections.
4.2MediumTermExpenditureFramework
Alocationandutilizationofresourcesinthemediumtermwilbeguidedbythepriorities
outlinedinCountyIntegratedDevelopmentPlan(CIDP)andotherCountyplans;andin
37
accordancewithsection107ofthePFM Act2012.Foreffectiveutilizationofpublic
financesforenhancedexpenditureproductivity,theCountyGovernmentwilprioritize
expenditureswithintheoveralsectorceilingsandstrategicsectorpriorities.
4.3TheProposed2019/20BudgetFramework
4.3.1RevenueProjections
TheFY2019/20budgettargetsrevenue(equitableshareandlocal)colectionofKshs.5.0
Bilionupfrom Kshs4.77BilionintheFY2018/19.Thisrevenueperformancewil
dependentonthetrendofgrowthoftheKenyanGDPandtheongoingautomationof
revenuecolectionandrevenueadministration.However,Ownsourcerevenueisprojected
toremainthesamebecauseforthepastperformancethecountyhasnevermateitstarget,
atKshs.153.45milioninFY2019/20similartoFY2018/19.
Table11RevenueProjectionsforFY2019/20and2020/21
2018/19
2019/20 2020/21
Sources/FY 2017/18 CFSP
Projection Projection
Projection
County
Equitable
4,409,200,00 4,770,000,00 5,008,500,00 5,258,925,00
share per
0 0 0 0
CRA
Own
Source
220,000,000 153,445,800 153,445,800 153,445,800
Revenue
Total 4,629,200,00 4,923,445,80 5,161,945,80 5,412,370,80
0 0 0 0
Source:VihigaCountyTreasury
4.3.2ExpenditureForecasts
Intheproposed2019/20budget,overalexpendituresareprojectedtoincreaseby5percent
sameastherevenuegrowthinthesameperiodasindicatedinthetablebelow.Itisalso
assumedthattotalconditionalgrantswilremainthesameandthecountywilmaintaina
balancedbudget.
Inthisregard,theCountyGovernmentwiloverthemediumtermensurecompliancewith
38
thefiscalresponsibilityprinciplesasoutlinedinthesections107ofthePFMAct2012.The
CountyGovernmentisexpectedtoenhanceexpenditureproductivityintheproposedyear
andmanagetherisingwagebiltobewithintherequiredlimit.
Table12SummaryofExpenditureProjectionsinKSh.Milions2018/19FYandMTEF
Approved Projected Projected
Supplementary
Departments Budget Estimates Estimates
Budget2017/18
2018/19 2019/20 2020/21
Office of The
419.75 493.88 518.57 544.50
Governor
Finance &
Economic 348.97 631.86 663.45 696.62
Planning
Agriculture,
Livestock,
344.53 397.60 417.48 438.35
Fisheries
&Cooperatives
HealthServices 1,481.40 1,634.94 1,716.69 1,802.53
Education,
Science,Technical
595.99 721.48 757.55 795.43
and Vocational
Training
Gender, Culture,
Youth,Sportsand 274.31 245.87 258.17 271.07
SocialServices
Trade, Industry,
Tourism and 212.89 144.99 152.24 159.85
Entrepreneurship.
County Public
49.13 52.57 55.20 57.96
ServiceBoard
Environment,
Water,Energy &
189.78 157.96 165.86 174.15
Natural
Resources.
Transport,
Infrastructure & 577.77 754.03 791.73 831.32
Communication
PhysicalPlanning,
96.65 137.93 144.82 152.07
LandandHousing
CountyAssembly 571.21 654.99 687.74 722.13
Administrationand
Coordination of 419.24 412.54 433.17 454.83
CountyAffairs
Total County
5,581.62 6,440.64 6,762.67 7,100.81
Expenditure
Source:VihigaCountyTreasury
5.0 CONCLUSION
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IntheperiodunderreviewCBROPshowsthat,theCountyGovernmentgeneralydidnot
complywiththeprinciplesoffiscalresponsibilityintheminimumwagerate,development
ratioandintwodepartmenttherewasoverexpenditure.
Inthesameperiod,itisobservedthatpersonnelemolumentsdecreasedby11.8percent
whileoperationsandmaintenanceshrunkby27.6percent,developmentexpenditureshrunk
by62.5percentcomparedto2016/17.Thisimpliesthatthoughtheworkforcedecreased,
thewagebilwasstilhigherthanthefiscalresponsibility.Thelow expenditureon
maintenancemeansthattheCountyassetswerenotadequatelymaintained.Shrinking
developmentexpendituremeanslowservicedelivery,stagnantdevelopmentactivitiesand
questionableabilityfordepartmentstoabsorbtheirbudgets.
Therefore,theCountyneedstoutilizeitsresourcestimelyandbasedonthestrategic
objectivesassetoutintheCountyintegrateddevelopmentplan(CIDP),adheretofiscal
responsibilityprinciples.
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