PEFA framework for the assessment of public financial management at the county level, 2017 WEST POKOT COUNTY Public Expenditure and Financial Accountability Assessment 2018 Final report November 2018 i Kenya - West Pokot county Public Expenditure and Financial Accountability Assessment of West Pokot County, Kenya - Based on PEFA methodology 2016 July 2018 The quality assurance process followed in the production of this report satisfies all the requirements of the PEFA Secretariat and hence receives the ‘PEFA CHECK’. PEFA Secretariat, November 15, 2018 ii Currency and indicative exchange rates Local currency unit = Kenyan Shilling (Ksh) EUR 1 = Ksh 118.7000 (December 2017) US$1 = Ksh 100.7520 (March 2017) Fiscal Year July 1 to June 30 iii Table of Contents Executive Summary ..................................................................................................................................... iii 1. Introduction ......................................................................................................................................... 1 1.1. Rationale and purpose .................................................................................................................. 1 1.2. Assessment management and quality assurance ......................................................................... 2 1.3. Assessment methodology ............................................................................................................. 4 Coverage of the assessment ................................................................................................................ 4 Sources of information ........................................................................................................................ 4 2. West Pokot county background information ...................................................................................... 5 2.1. Economic context.......................................................................................................................... 5 An overview of the Kenyan economy .................................................................................................. 5 2.2. Fiscal and budgetary trends .......................................................................................................... 6 Allocation of resources ........................................................................................................................ 7 2.3. Legal and regulatory arrangements for PFM ................................................................................ 8 The main features of the legislation .................................................................................................... 8 The devolution process ........................................................................................................................ 9 2.4. Institutional arrangements for PFM ........................................................................................... 10 County governments.......................................................................................................................... 10 Key features of internal control ......................................................................................................... 12 Other important features of PFM ...................................................................................................... 12 3. Assessment of PFM performance ...................................................................................................... 14 HLG-1. Transfers from higher-level government ................................................................................... 14 3.1. Pillar I. Budget reliability ............................................................................................................. 16 PI-1. Aggregate expenditure outturn ................................................................................................. 16 PI-2. Expenditure composition outturn ............................................................................................. 17 PI-3. Revenue outturn ........................................................................................................................ 19 3.2. Pillar II. Transparency of public finances .................................................................................... 21 PI-4. Budget classification .................................................................................................................. 21 PI-5. Budget documentation .............................................................................................................. 23 PI-6. County government operations outside financial reports ........................................................ 25 PI-7. Transfers to subcounty governments ........................................................................................ 26 PI-8. Performance information for service delivery .......................................................................... 26 PI-9. Public access to fiscal information............................................................................................. 28 3.3. Pillar III. Management of assets and liabilities ........................................................................... 30 PI-10. Fiscal risk reporting .................................................................................................................. 30 iv PI-11. Public investment management .............................................................................................. 31 PI-12. Public asset management ........................................................................................................ 33 PI-13. Debt management ................................................................................................................... 34 3.4. Pillar IV. Policy-based fiscal strategy and budgeting................................................................... 36 PI-14. Macroeconomic and fiscal forecasting .................................................................................... 36 PI-15. Fiscal strategy .......................................................................................................................... 37 PI-16. Medium-term perspective in expenditure budgeting ............................................................. 39 PI-17. Budget preparation process .................................................................................................... 41 PI-18. Legislative scrutiny of budgets ................................................................................................ 45 3.5. Pillar V. Predictability and control in budget execution ............................................................. 47 PI-19. Revenue administration .......................................................................................................... 48 PI-20. Accounting for revenue ........................................................................................................... 49 PI-21. Predictability of in-year resource allocation............................................................................ 50 PI-22. Expenditure arrears ................................................................................................................. 52 PI-23. Payroll controls ........................................................................................................................ 53 PI-24. Procurement management ..................................................................................................... 56 PI-25. Internal controls on non-salary expenditure ........................................................................... 59 PI-26. Internal audit ........................................................................................................................... 61 3.6. Pillar VI. Accounting and reporting ............................................................................................. 65 PI-27. Financial data integrity ............................................................................................................ 65 PI-28. In-year budget reports ............................................................................................................. 68 PI-29. Annual financial reports .......................................................................................................... 70 3.7. Pillar VII. External scrutiny and audit .......................................................................................... 71 PI-30. External audit........................................................................................................................... 71 PI-31. Legislative scrutiny of audit reports ........................................................................................ 74 4. Conclusions of the analysis of PFM systems ...................................................................................... 76 4.1. Integrated assessment of PFM performance ............................................................................. 76 Budget reliability ................................................................................................................................ 76 Transparency of public finances ........................................................................................................ 76 Management of assets and liabilities ................................................................................................ 76 Policy-based fiscal strategy and budgeting ........................................................................................ 77 Predictability and control in budget execution ................................................................................. 77 Accounting and reporting .................................................................................................................. 78 External scrutiny and audit ................................................................................................................ 79 4.2. Effectiveness of the internal control framework ........................................................................ 79 v Control environment ......................................................................................................................... 79 Risk assessment ................................................................................................................................. 79 Control activities ................................................................................................................................ 80 Information and communication ....................................................................................................... 80 Monitoring ......................................................................................................................................... 81 4.3. PFM strengths and weaknesses .................................................................................................. 81 1. Aggregate fiscal discipline .............................................................................................................. 81 2. Strategic allocation of resources.................................................................................................... 82 3. Efficient use of resources for service delivery ............................................................................... 82 5. Government PFM reform process ..................................................................................................... 84 5.1. Approach to PFM reforms........................................................................................................... 84 5.2. Recent and ongoing reform actions ............................................................................................ 84 5.3. Institutional considerations ........................................................................................................ 84 Annex 1. Performance indicator summary ................................................................................................... 2 Annex 2. Summary of observations on the internal control framework.................................................... 10 Annex 3. Sources of information ................................................................................................................ 13 Annex 3A: List of related surveys and analytical work ........................................................................... 13 Annex 3B: List of persons who have been interviewed and had provided information for the PFM Performance Report ............................................................................................................................... 14 Annex 3C: Sources of information used to extract evidence for scoring each indicator. ...................... 15 Annex 4. County profile .............................................................................................................................. 22 Annex 5. Calculation sheet for PFM performance indicators PI-1 and PI-2 ............................................... 23 Calculation sheets for transfers from higher-level government ............................................................ 27 Contract awarded by type of procurement for the FY2015–2016 (Ksh)................................................ 30 List of Tables Table 2.1: Basic economic data and indicators for the West Pokot County ................................................. 6 Table 2.2: Aggregate fiscal performance data for the last three fiscal years (in percentage of total revenues) ...................................................................................................................................................... 7 Table 2.3: Budget allocations by sectors (as a percentage of total expenditures) ....................................... 8 Table 2.4: Budget allocations by economic classification (as a percentage of total expenditures) ............. 8 Table 2.5: Structure of the public sector (Ksh, millions) - FY2015/16 ........................................................ 11 Table 2.6: Financial structure of county government - budget estimates (Ksh, millions) - FY2015/16 ..... 11 Table 2.7: Financial structure of county government - actual budget (Ksh, millions) - FY2015/16 ........... 12 Table 3.1: Revenue sharing formula ........................................................................................................... 15 Table 3.2: Budgeted and actual transfers for the last three fiscal years (Ksh, millions and percentage) .. 15 Table 3.3: Aggregate expenditure outturn (Ksh, millions and percentage) ............................................... 16 Table 3.4: Expenditure composition outturn by function (Ksh, millions and percentage)......................... 17 vi Table 3.5: Expenditure composition outturn by economic type (Ksh, millions and percentage) .............. 18 Table 3.6: Breakdown of local revenue outturn by economic classification (Ksh, millions and percentage) .................................................................................................................................................................... 19 Table 3.7: West Pokot local sources of revenue for the last three fiscal years (Ksh, millions and percentage) ................................................................................................................................................. 20 Table 3.8: Results matrix on local sources of revenue for the last three fiscal years (percentage) ........... 21 Table 3.9: Satisfaction of PEFA basic elements criteria .............................................................................. 23 Table 3.10: Satisfaction of PEFA additional elements criteria .................................................................... 24 Table 3.11: Compliance with basic elements of public access to information ........................................... 29 Table 3.12: Compliance with additional elements of public access to information ................................... 29 Table 3.13: Major ongoing investment projects in West Pokot County ..................................................... 31 Table 3.14: Categories of nonfinancial assets - FY2015/16 (Ksh, millions)................................................. 34 Table 3.15: Breakdown of FY2016/17 estimated and projected allocations by program in the 2015/16 and 2016/17 budgets respectively (Ksh, millions and percentage) ............................................................ 40 Table 3.16: Budget calendar for 2017/2018 ............................................................................................... 41 Table 3.17: Budget estimates in the CFSP and in the PBB for 2016/17 (Ksh, millions and percentage) .... 44 Table 3.18: Payroll data for February and March 2017 for the County Executive and the County Assembly (Ksh) ............................................................................................................................................................ 55 Table 3.19: Type of procurement methods, 2015/16................................................................................. 57 Table 3.20: Public access to procurement information .............................................................................. 58 Table 3.21: Procurement complaints management ................................................................................... 58 Table 3.22: Audit activity timetable by departments for FY2015–16 ......................................................... 64 Table 3.23: Differences between various IFMIS reports and AFSs for FY2015/16 (KSh, millions) ............. 69 Table 3.24: Reports audited by the OAG during FY2013/14, FY2014/15, and FY2015/16 ......................... 73 vii Acronyms ADP Annual Development Plan AFS Annual Financial Statement AIE Authority to Incur Expenditure BIRR Budget Implementation Review Report BPS Budget Policy Statement BQ Bill of Quantities CARA County Allocation and Revenue Act CBEF County Budget and Economic Forum CBK Central Bank of Kenya CBROP County Budget Review Outlook Paper CDMSP County Debt Management Strategy Paper CEC County Executive Committee CFSP County Fiscal Strategy Paper CIDP County Integrated Development Plan CN Concept Note CO Chief Officer COB Controller of the Budget COFOG Classification of Functions of Government COSO Committee of Sponsoring Organizations CPU Central Planning Unit CRA Commission on Revenue Allocation CRF County Revenue Fund DANIDA Danish International Development Agency DORA Division of Revenue Act ECDE Early Childhood Development Education GDP Gross Domestic Product GFS Government Finance Statistics HRM Human Resource Management HSSF Health Sector Service Fund ICT Information and Communication Technology IFMIS Integrated Financial Management Information System IPPD Integrated Payroll Personnel Database IDRC International Development Research Centre IPPF International Professional Practice Framework IPSAS International Public Sector Accounting Standards ISSAI International Standards on Supreme Audit Institutions KADP Kenya Accountable Devolution Program KDSP Kenya Devolution Support Programme KENAO Kenya National Audit Office KIPPRA Kenya Institute for Public Policy Research and Analysis KNBS Kenya National Bureau of Statistics i KPI Key Performance Indicator KRA Kenya Revenue Authority KSG Kenya School of Government KWSC Kapenguria Water and Sewerage Company LAIFOMS Local Authorities Integrated Financial and Operations Management System M&E Monitoring and Evaluation MCA Member of the County Assembly MDAs Ministries, Departments, and Agencies MTEF Medium-Term Expenditure Framework NHIF National Hospital Insurance Fund NGO Nongovernmental Organization NSSF National Social Security Fund OAG Office of the Auditor General OCOB Office of the Controller of Budget PAYE Pay As You Earn PBB Program-based Budget PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PFMR Public Financial Management Reforms POS Point of Sale PPADA Public Procurement and Asset Disposal Act PPARB Public Procurement and Administrative Review Board PPOA Public Procurement Oversight Authority PPRA Public Procurement Regulatory Authority PSASB Public Sector Accounting Standards Board SAGA Semi-Autonomous Government Agency SRC Salaries and Remuneration Commission SCOA Standard Chart of Accounts Sida Swedish International Development Cooperation Agency SMART Specific, Measurable, Achievable, Realistic, and Time-bound SOP Standard Operating Procedure TSA Treasury Single Account TSC Teachers Service Commission WHO World Health Organization ii Executive Summary Background The rationale for the Public Expenditure and Financial Accountability (PEFA) assessment is to provide a clear and deeper understanding about the functioning of public financial management (PFM) systems as well as the organizational aspects of existing institutions at county levels. The results of the analysis provide useful insights into relevant entry points for desired PFM-related reforms and a benchmark for the necessary upgrade of the PFM systems which are still in the early stages of development within Kenya’s devolved units of government. This assessment was organized and commissioned by Kenya Institute for Public Policy Research and Analysis (KIPPRA) in collaboration with the World Bank and involves other organizations as outlined in Box 1.1. KIPPRA also carried out the actual survey and assessment and was responsible for management and monitoring of the exercise. The assessment period covers three financial years, namely FY2013/14, FY2014/15, and FY2015/16, and focused on various indicators and dimensions as defined in the PEFA assessment tools. The assessment period covered is FY2013/14, FY2014/15, and FY2015/16 depending on the indicator and dimension of assessment. The field work assessment took place in April 2017; this is the time of assessment for those indicators for which a more up-to-date assessment period is required. Main outputs of the assessment Fiscal discipline Overall revenue and expenditure performance were on average relatively in line with budgeted amounts. One of the reasons for the good performance is the stability of receipts from the National Treasury which account for at least 95 percent of the county revenue. Consumption of fixed capital had the largest deviation because of the low absorption of development expenditure. Deviations were more pronounced in FY2013/14, which was the first year of county operation and was affected by unrealistic projections. The slow procurement process and shortage of technical staff, such as engineers to prepare bills of quantities (BQs) and supervise projects, were also a cause for deviations. The budget is prepared in accordance with National Treasury guidelines which require budget proposals to be presented using administrative, economic, and the programme-based approaches. However, no information about revenue outside financial reports is produced (for example, financial reports of early childhood education development education [ECDE] college). The County Treasury uses an integrated financial management information system (IFMIS) to facilitate transaction processes and reporting. IFMIS users have passwords and the system maintains a log of users along with their functions. Any changes to reports must be approved by departmental heads to enhance financial data integrity. Budget documents such as the County Fiscal Strategy Paper (CFSP), County Budget Review Outlook Paper (CBROP), annual development plan (ADP), and budget are prepared on time. Quarterly budget reports are also availed for the public, but not in good time, and they do not cover all public resources and expenditure. In addition, in-year reports do not present budget execution along with iii all the data with which they should be compared, which hampers the efficient follow-up of service delivery. Financial reports for budgetary units are prepared annually and budget implementation reports are prepared each quarter. Coverage and classification of data allows direct comparison to the original budget for the main administrative headings. They include information on revenue, expenditures, and cash balances. The county is yet to develop systems to monitor county corporations such as the Kapenguria Water and Sewerage Company (KWSC), which operates presently. Contingent liabilities (related to car loan and mortgage scheme) are well managed and most of them are presented in financial reports, but the debt inherited from the defunct authority is not disclosed. The county maintains a record of its holdings in major categories of financial and nonfinancial assets. However, the nonfinancial asset register is not comprehensive as it does not include major assets such as land. The county has not developed standard operating procedures (SOPs) for disposal of assets because the counties were prohibited from disposing public assets until full transition is effected by the Intergovernmental Technical Relations Committee. Debt management capacity of the county is weak because of lack of a debt management unit and strategy. The county inherited debts from the previous defunct local authorities, but they are not published and not updated, because there is no debt management entity. The county has a well-managed automated payroll control system, that is, the integrated payroll personnel data (IPPD) which integrates the personnel database and payroll. Changes to the personnel records and payroll are updated at least monthly, in time for the following month’s payments. Staff hiring and promotion are controlled by a list of approved staff positions and are subject to payroll audit. Only the County Public Service Board and the County Assembly Service Board are allowed to change personnel records and payroll for the County Executive and County Assembly through written approval of the County Secretary and the Clerk, respectively. A procurement database, maintained by the County Executive, is complete for all procurement methods for goods, services, and works. According to this database, more than 90 percent of procurement is done according to competitive methods, but the number of contracts awarded through open tenders seems to have decreased during the last three years. The public can only have access to the legal and regulatory framework for procurement and bidding opportunities. A major area of weakness in procurement is that procurement plans, contract awards, data on resolution of procurement complaints, and annual procurement statistics are not made available to the public. An independent procurement complaints body exists at the National level and it is the body that can resolve procurement cases. Strategic resource allocation The budget preparation process is based on a comprehensive and clear budget circular. Ceilings are established during the CFSP preparation but are fixed only after the budget calendar has been issued. Some departments prepare medium-term strategic plans, but the budget documents do not present any evidence showing that proposals in the annual budget estimates are aligned with the strategic plans of these departments. The County Executive does not prepare its own macroeconomic forecasts but borrows the macroeconomic framework of the national government. The government prepares forecasts of revenue iv and expenditure for the budget year and two subsequent fiscal years but does not present the underlying assumptions for the forecasts. Further, no fiscal impact analysis is performed in the CFSP, which is presented in February to the County Assembly to explain the potential impact of policy decisions. The CBROP briefly explains the reasons for deviation from the objectives and targets set but does not provide an explanation of the changes to expenditure estimates between the second year of the last medium-term budget and the first year of the current medium-term budget, even at the aggregate level. The county does not undertake economic analysis of investment projects and relies on observations and citizen views received during public participation forums. Recurrent costs are usually not considered when costing investment projects and monitoring of these projects is weak. No standard criterion is applied when selecting investment projects because the county does not have a central planning unit (CPU) yet to perform this. In addition, no structure has been put in place to monitor execution of investment projects. Efficient service delivery The revenue department does not provide taxpayers with clear access to information on the main revenue obligation areas, rights, redress processes, and procedures. Also, the county does not have a risk-based approach in the revenue department to maximize public revenue collection. In addition, no independent body has been put in place to carry out revenue audits and fraud investigations. On the other hand, efficiency in revenue collection has recently been enhanced through the use of point-of-sale (POS) machines. Policies and programs are published for the majority of departments and key performance indicators (KPIs) are included in budget estimates. However, they do not meet the specific, measurable, achievable, realistic, and time-bound (SMART) criteria. Budget estimates present targets for KPIs but do not show any actual results because no responsibilities are assigned for performance evaluation. Besides, no information is published on the activities performed for the majority of departments and no survey has been carried to assess the results. Budget execution is well managed and followed with the support of the computerized system, the IFMIS. Responsibilities are clearly laid down for most key steps and the IFMIS is used in all departments for budget execution. However, it was difficult to confirm whether there is compliance with payment rules and procedures due to scarcity of data. Internal audits apply the International Professional Practice Framework (IPPF) as stipulated in the PFM Act, 2012, with a risk analysis approach and cover all the departments in the County Executive. Three levels of reviews are applied before reports are released. Audit reports are compared with audit planning to verify whether planned audits have been undertaken. Responses to internal audit reports are provided within one month of the report being issued. Follow-up of the budget audit is ensured by the Internal Audit Department. Audits have not highlighted relevant systemic and control risks. Hearings on audit findings are supposed to be conducted in public, but no evidence was provided. Committee reports are provided to the full chamber of the County Assembly. They are not published on an official website but are easily accessible to the public. The scrutiny is supposed to be completed over a period of six months, but no evidence was adduced by the County Assembly. v Resources received by budget users are listed in the CBROPs and progress reports, but the resources received by service delivery units are not mentioned in the reports, and no report is produced on the performance of services delivery. The County Assembly reviews budget documents covering fiscal policies, medium-term fiscal forecasts, and medium-term priorities and details of expenditure and revenue but cannot follow and issue recommendation on the efficiency of services delivery. Existing PFM reform agenda The vision of the West Pokot County Government is “to be a leading county in effective and efficient resource management coordinated sustainable development and service delivery� and its mission is “to facilitate equitable development and improved public service delivery to stimulate sustainable social- economic development, high quality of life and become the best county in Kenya.� The national government through the National Treasury takes the lead in initiating and implementing PFM reforms. The current PFM reforms (PFMR) strategy is elaborated in the document ‘Strategy for Public Finance Management Reforms in Kenya 2013–2018’. The overall goal of this PFMR Strategy is to ensure “A public finance management system that promotes transparency, accountability, equity, fiscal discipline, and efficiency in the management and use of public resources for improved service delivery and economic development�. At the county level, priorities will be given to improve governance, administration, and decision-making processes for an improved social, economic, and political environment. New accounting standards and financial statement formats are currently being introduced to bring consistency and reliability to annual accounts. This standardisation will also facilitate consolidation of general government data. Once the new norms have been established, the publication of annual financial statements (AFSs), as required by the PFM Act, 2012, will be required to achieve accountability and transparency. The table below gives an overview of the scores for each of the PEFA indicators. Scoring Dimension Ratings Overall PFM Performance Indicator Method i. ii. iii. iv. Rating Subnational PEFA indicator HLG-1: Transfers from a M1 B C D* D+ higher level of government Pillar I. Budget reliability PI-1 Aggregate expenditure outturn M1 B B PI-2 Expenditure composition outturn M1 A B A B+ PI-3 Revenue outturn M2 D D D II. Transparency of public finances PI-4 Budget classification M1 C C PI-5 Budget documentation M1 D D Central government operations outside financial PI-6 M2 D* D* D D reports PI-7 Transfers to subnational governments M2 N/A PI-8 Performance information for service delivery M2 B C D D D+ PI-9 Public access to fiscal information M1 D D III. Management of assets and liabilities PI-10 Fiscal risk reporting M2 N/A N/A D D PI-11 Public investment management M2 D* D* D D D vi Scoring Dimension Ratings Overall PFM Performance Indicator Method i. ii. iii. iv. Rating PI-12 Public asset management M2 C D D D+ PI-13 Debt management M2 D N/A D D IV. Policy-based fiscal strategy and budgeting PI-14 Macroeconomic and fiscal forecasting M2 C C D D+ PI-15 Fiscal strategy M2 D B B C+ Medium-term perspective in expenditure PI-16 M2 A D D* D D+ Budgeting PI-17 Budget preparation process M2 D D D D PI-18 Legislative scrutiny of budgets M1 A C C C C+ V. Predictability and control in budget execution PI-19 Revenue administration M2 D D D D* D PI-20 Accounting for revenue M1 A B C C+ PI-21 Predictability of in-year resource allocation M2 D C C B C PI-22 Expenditure arrears M1 C C C PI-23 Payroll controls M1 D D* C C D+ PI-24 Procurement management M2 D* D* D B D+ PI-25 Internal controls on non-salary expenditure M2 B C D* C PI-26 Internal audit M1 B C A D* D+ VI. Accounting and reporting PI-27 Financial data integrity M2 D* A A B B PI-28 In-year budget reports M1 C D C D+ PI-29 Annual financial reports M1 B D C D+ VII. External scrutiny and audit PI-30 External audit M1 C D* D A D+ PI-31 Legislative scrutiny of audit reports M2 D* D* D* D D vii 1. Introduction The subnational Public Expenditure and Financial Accountability (PEFA) assessment seeks to ascertain the performance of the public financial management (PFM) system of county governments using the PEFA methodology. So far, the Government of Kenya has gained experience in the application of the PEFA methodology by undertaking four national PEFA assessments over the years, the latest carried out in 2017 and the report due for completion in 2018. However, this is the first subnational assessment to be carried out in Kenya following the adoption of a devolved system of government. It is notable that the national and subnational PEFA assessments are almost being done concurrently and this is important because both levels of government share the same PFM system implying that an evidence-based reform agenda can be implemented simultaneously after areas that require improvements are identified. The subnational assessments, which covered 6 out of 47 counties, have been jointly financed by the World Bank and International Development Research Centre (IDRC) through the Kenya Institute for Public Policy Research and Analysis (KIPPRA). 1.1. Rationale and purpose The main rationale of this assessment is to give a better understanding of the public PFM systems, processes, and institutions that will provide an entry point for PFM reform efforts at the county level. This would then be used to leverage existing capacity building efforts, for example, the Public Financial Management Reforms (PFMR) Strategy, National Capacity Building Framework, and the World Bank’s Kenya Accountable Devolution Program (KADP) and Kenya Devolution Support Programme (KDSP). The findings will further facilitate identification of capacity needs, especially in terms of human capacity gaps in different components of PFM system in the counties, which KIPPRA seeks to strengthen as part of its capacity building and policy development mandates. The assessment will also be useful in identifying priorities for PFM reforms in the future to ensure sustainable, effective, and transparent allocation and use of public resources. The PEFA assessment will become a benchmark for the upgrade of the PFM system in Kenya’s counties, which are still in an early stage of development. Currently, the fiscal discipline and the efficient allocation of resources according to the priorities of the county of West Pokot are viewed as important prerequisites to deployment of a well- functioning public finance system. Effective PFM institutions and systems in the county governments are important for the successful implementation of devolution. The PEFA assessments are founded on the principles of openness, accountability, and public participation in public finance that are contained in Section 201 (a) of the Constitution of Kenya 2010. The assessments will provide a baseline of the current state of PFM within the counties and for the entire financial system and indicate areas that require improvements. This first subnational PEFA assessment has been undertaken in six counties in Kenya, and West Pokot was one of the selected counties. The county expressed interest in undergoing a PEFA assessment and a commitment to design and implement a reform agenda based on the results of the assessment. An important point to note regarding results of the assessment is that they will not be used for comparing the counties but to indicate the state of the PFM system in the county. Objectives of the PEFA Assessment The specific objectives of the PEFA assessment in West Pokot County include the following: 1 (a) Assess the state of financial management capacities in the county. (b) Identify gaps in terms of capacity, systems, policies, and processes in PFM in the county. (c) Provide basis for informing entry points for PFM reform engagements in the county that will be used to leverage existing capacity-building efforts. (d) Facilitate and develop a self-assessment capacity at the county level and build capacities of key staff to carry out assessments in the future. 1.2. Assessment management and quality assurance The PEFA CHECK is a mechanism for confirming the adequacy of the quality assurance processes used in planning and implementing a PEFA assessment. The PEFA CHECK verifies if good practices in both planning and implementing an assessment have been followed. The PEFA CHECK is therefore not a judgment of the quality of an assessment’s technical content but a verification of its compliance with practices commonly accepted and used in conducting PEFA assessments, as outlined in six formal criteria as shown in Box 1.1. Box 1.1: PEFA CHECK criteria 1. The concept note (CN) or similar document and the assessment report (draft and revised draft) follow an adequate peer review process. Documents are submitted to reviewers representing at least four PFM institutions. The peer reviewers should include the government assessed and the PEFA Secretariat, and at least two other independent institutions from within or outside the country (such as international organizations, PFM�related nongovernmental organizations (NGOs), civil society groups, or other governments). 2. The draft CN is submitted for peer review before the in�country assessment field work starts. 3. A final version of the CN is shared with all peer reviewers. 4. The complete draft PEFA report is submitted to all peer reviewers for review. All reviewers are invited to participate in the report’s finalization process. 5. A revised draft PEFA report and a separate matrix with peer reviewers’ comments and assessment team responses are submitted to all peer reviewers. The PEFA Secretariat carries out a follow�up review that evaluates whether its comments have been addressed. 6. The assessment management and quality assurance arrangements are described in the PEFA report, including a clear reference to the follow�up review. The partnering local government organizations involved in the management and the assessment of this PEFA assignment are presented in Box 1.2 with their specific roles and contribution to the delivery of the intended outputs. 2 Box 1.2 : Assessment management and quality assurance arrangements (i) Oversight Team - Chair and Members Organization name Team member details KIPPRA Executive Director (Chair) Dr. Rose Ngugi KIPPRA Dr. Augustus Muluvi KIPPRA Dr. Christopher Onyango KIPPRA Mr. Benson Kiriga KIPPRA Dr. Simon Githuku KIPPRA Dr. Douglas Kivoi World Bank Ms. Christine Anyango Owuor World Bank Mr. Tim Williamson Council of Governors Mr. Joseph Kung’u PFMR Secretariat Mr. Warui Maina/Joel Bett Office of the Controller of Budget (OCOB) Mr. Joshua Musyimi/Grace Kimitei Office of the Auditor General (OAG) Mr. George Nashon Otieno Assessment Manager: Simon Githuku - KIPPRA (ii) Assessment Team Team A Organization Team B Organization Dr. Bernadette Wanjala (Team KIPPRA Dr. Simon Githuku (Team Lead) KIPPRA Lead) Jean-Marc Philip (Lead World Bank Elisaveta Teneva (Lead World Bank Consultant) Consultant) Samuel Kiautha (Consultant) World Bank Jeremiah Oliech (Consultant) World Bank Duncan Mugo Ndirangu National Christine Owuor World Bank Treasury Meimuna Mohamed Commission Joshua Musyoka National Treasury on Revenue Allocation (CRA) Warui Maina National Juliah Muguro KIPPRA Treasury Fredrick Owino KIPPRA Macklin A. Ogolla Controller of the Budget (COB) Grace Kimitei COB Nickson Omondi Kenya Revenue Authority (KRA) Silvanos Obondi OAG John Mose CRA Dr. Robert Ng’ang’a Kenya School Dr. Douglas Kivoi KIPPRA of Government (KSG) Kennedy Okoth KRA Paul Odhiambo KIPPRA Dr. David Waigwa World Bank Mathew Ngusya OAG Dr. Christopher Onyango KIPPRA Dr. Augustus Muluvi KIPPRA Manaseh Otieno KIPPRA (iii) Review of CN and/or terms of reference • First round of comments was addressed in December 2017. • Second and final round of comments were addressed in February 2018. • Invited reviewers: PEFA Secretariat, World Bank, OAG, and National Treasury. 3 • Reviewers who provided comments: Name Organisation Jens Kristensen World Bank Timothy Williamson World Bank Dr. Jane Kiringai World Bank Agnes C. Mita OAG County Executive representatives West Pokot County Executive County Assembly representatives West Pokot County Assembly Warui Maina National Treasury (iv) Secretariat and date(s) of its review(s): First review comments from the PEFA Secretariat on October 14, 2017, and second review comments from the PEFA Secretariat on January 10, 2018. (v) Date(s) of final CN and/or terms of reference: March 17, 2017. (vi) Review of the assessment report • Date of the first draft report: May 5, 2018 • Invited reviewers: county governments, OCOB, OAG, IBEC, National Treasury, CRA, World Bank, Swedish International Development Cooperation Agency (Sida), PEFA Secretariat • Reviewers who provided comments: World Bank, Sida, PEFA Secretariat. • Date of the comments: June 8, 2018 • Date of assessment team’s response: August 28, 2018 • Date of Secretariat’s evaluation of response: September 13, 2018 • Date of assessment team’s response: October 29, 2018. • Date of PEFA CHECK: November 15, 2018 1.3. Assessment methodology Coverage of the assessment This subnational PEFA assessment covers the county of West Pokot and is part of the assessment covering one-eighth of the counties in Kenya, that is, six counties. The assessment did not cover public corporations, except in terms of the fiscal transparency of their operations (PI-6 and PI-9) and their fiscal relationship to the budgetary county government. The field work assessment took place in April 2017, which is the time of assessment for those indicators where a more up-to-date assessment period is required. Sources of information The main documents that have been used in the assessment are (a) the Constitution, (b) the PFMR Strategy 2013–2018 (2016), and (c) the PFM Act, 2012. The exhaustive list of all documents and materials used and referred to in this PEFA assessment are contained in Annex 3C. 4 2. West Pokot county background information 2.1. Economic context An overview of the Kenyan economy Kenya has a unitary, but devolved system of government consisting of the national and 47 county governments, as provided in the Constitution. All the counties do not have detailed economic data such as gross domestic product (GDP) growth, inflation rates, and so on. However, the Kenya National Bureau of Statistics (KNBS) has developed county-specific statistical abstracts. The National Treasury and the World Bank are set to undertake compilation of county-specific GDPs. The Kenyan economy has sustained its robust growth in the past decade, supported by significant structural and economic reforms. The economy grew by 5.7 percent, 5.9 percent, and 4.9 percent in 2015, 2016, and 2017, respectively. The leading sectors in growth during 2017 included tourism, building and construction, transport, and information and communication technology (ICT). On the other hand, the agriculture sector declined tremendously to 1.6 percent from 5.1 percent the previous year due to drought coupled with pests and diseases. The inflation rate in 2017 was 8.0 percent, a decline from 6.3 percent in 2016. The inflationary pressure was mainly attributed to significant increases in oil and high food prices. Economic growth is expected to be accelerated during 2018 due to improved political stability and a favorable macroeconomic environment. In addition, the ongoing investments in infrastructure, improved business confidence, and strong private consumption are likely to support a strong growth. Besides, the favorable climatic conditions are likely to boost agriculture production and the electricity and water sectors, and hence support manufacturing growth. On the other hand, rising oil prices and depressed growth of credit to the private sector, which started in 2016, is likely to undermine the growth prospects. However, the adverse effects are likely to be offset by the strong favorable factors, resulting in better growth in 2018. Overview of West Pokot County economy West Pokot County is located in the Rift Valley region of Kenya with an area of 9,169.40 km2 (Table2.1). It borders Turkana County to the north, Baringo County to the east, Elgeyo Marakwet and Trans Nzoia Counties to the south, and the Republic of Uganda to the west. The Pokot people live in West Pokot County and Baringo County in Kenya and in the Pokot District of the Eastern Karamoja region in Uganda. According to the West Pokot County Statistical Abstract 2015, the population of West Pokot is about 512,690 inhabitants and the population density 56 inhabitants per km2. Kapenguria town is the headquarters of West Pokot County. Other major towns are Chepareria, Ortum, and Sigor. The county has 502 primary schools, 72 secondary schools, 83 health facilities, and one doctor for every 63,747 inhabitants. The county economy is mainly supported by agriculture and livestock keeping with pastoralism, agriculture, and mining as the main economic activities. Trade in the form of retail and wholesale is also a key sector in the county. The county usually gets substantial amount of food from Uganda through cross-border trade. In terms of administration, the county has four constituencies and 20 5 County Assembly wards (Table 2.1). West Pokot County has 5,927 public employees drawn from the national and county governments and Teachers Service Commission (TSC). Table 2.1: Basic economic data and indicators for the West Pokot County Indicator Amount 2 Area (km ) 9,169.4 Number of constituencies 4 County Assembly wards 20 Population 512,690 2 Population density per km 56 Main economic activities Pastoralism, agriculture, and mining Wage employment by sector 5,927 National government 1,820 County government 733 TSC 3,374 Early Childhood Development Education (ECDE) centers 596 Public 548 Private 48 Number of primary schools 502 Public 477 Private 25 Number of secondary schools 72 Public 71 Private 1 Number of health facilities 83 Doctor to population ratio 63,747 Source: CRA, County Integrated Development Plan (CIDP), and West Pokot County Statistical Abstract 2015. During FY2015/16, the livestock sector production was affected by diseases, drought, and famine which led to closure of various livestock sale yards and negatively affected the county’s revenue performance. The county has committed to continue pushing for the completion of ongoing irrigation schemes and value addition technologies and preventive measures in the livestock sector by enhancing disease surveillance and vaccination. Tourism as well as mining sectors are still underdeveloped but have the potential of turning the county around by creating job opportunities and increasing county revenue. These sectors remain crucial in unlocking the full potential of the county. Kengen's Turkwel Hydropower Plant is also situated in the county and produces about 105 MW of power that is fed to the national grid. Communities around the power plant and the districts of West Pokot and Turkana County do not enjoy the benefits coming from the power plant. 2.2. Fiscal and budgetary trends According to Article 203 of the Constitution, a minimum of 15 percent of the total revenue collected by the national government should be disbursed to county governments every financial year. Counties are supposed to collect their own revenues to fund their operations, but internal revenue generation has been low comprising approximately 2 percent of the county resource envelope (Table 2.2). West Pokot 6 County gets more than 95 percent of its revenue from equitable shares originating from the national government and this indicates high dependence of the county on national revenue. Table 2.2: Aggregate fiscal performance data for the last three fiscal years (in percentage of total revenues) 2013–2014 2014–2015 2015–2016 Receipts Tax revenues Proceeds from domestic and foreign grants 0.25 0.62 Transfers from National Treasury 98.13 96.94 94.96 Transfers from other government entities 0.08 0.15 2.30 Other revenues 1.79 2.66 2.12 Total revenues 100 100 100 Payments Compensation of employees 32.40 28.60 Use of goods and services 29.18 21.66 15.34 Subsidies 18.36 Transfers to other government units 0.72 12.63 Other grants and transfers 6.05 6.08 3.61 Social security benefits 0.14 Acquisition of assets 35.41. 42.84 36.17 Other expenses 2.73 Total payments 89.00 103.85 99.07 Surplus/deficit 11.00 −3.85 0.93 Source: Annual financial statements (AFSs). The Division of Revenue Act (DORA) and County Allocation and Revenue Act (CARA) provide the amounts which are to be disbursed to the counties every year as recommended by the CRA based on given criteria. The current CRA allocation formula is such that 45 percent of resources are allocated in accordance with the population density. The remaining 55 percent of resources are allocated in the following manner: geographical size 8 percent, poverty levels 20 percent, equal shares 25 percent, and fiscal responsibility 2 percent.1 In addition, the local revenue raised in FY2015/16 presented a decline of Ksh 5.6 million from the revenue collected in FY2014/15. This corresponds to a performance of only 55.4 percent and was below the target. Table 2.2 presents an overview of selected fiscal indicators for the last three fiscal years. Table 2.2 shows that, aggregate fiscal discipline has been respected for the last three years, as the budget has never presented a deficit but a surplus. The county also inherited a debt from the previous defunct local government, but it did not generate any debt since its creation. Allocation of resources Table 2.3 presents the trends in sectoral allocation of resources. It shows that the priorities in budget expenditure are focused on education and health that accounted respectively for 12.7 percent and 24.3 1 For details, see: http://www.crakenya.org/. 7 percent of the budget in FY2015/16. About 90 percent of the budgetary allocation goes to the County Executive and the remaining amount (10 percent) to the County Assembly. Table 2.3: Budget allocations by sectors (as a percentage of total expenditures) Functional head 2013/14 2014/15 2015/16 County Executive 14.6 32.7 15.2 Finance and economic planning 4.2 3.7 3.3 Roads, public works, and transport 17.5 10.3 10.4 Health and sanitation 29.3 17.1 24.3 Education and ICT 5.1 6.7 12.7 Agriculture and irrigation 3.7 4.4 6.7 Livestock, fisheries, and veterinary services 1.7 2.9 4.1 Trade, industry, and cooperative development 1.9 3.2 2.1 Lands, housing, physical planning, and urban development 2.0 3.8 2.0 Water development, environment, and natural resources 4.4 4.0 4.9 Tourism, culture, sports, youth, and gender development 1.8 2.3 3.1 West Pokot County Assembly 13.8 9.0 11.1 Total 100 100 100 Source: AFSs. The trends in economic allocation of resources show that West Pokot is compliant with the PFM Regulations No. 25 (1b), 2015, that requires that wages should not exceed 35 percent of revenue and that development expenditure share should be 30 percent of the total budget in accordance with Section 107 (2b) of the PFM Act, 2012. Table 2.4 shows that wages accounted for 30 percent of revenues and development for 37 percent of actual budgetary allocations. Table 2.4: Budget allocations by economic classification (as a percentage of total expenditures) Economic head 2013/14 2014/15 2015/16 Compensation of employees 32.8 31.2 29.7 Use of goods and services 20.6 21.1 16.0 Consumption of fixed capital 39.8 41.3 37.4 Interest 0.0 0.0 0.0 Subsidies 0.0 0.0 10.1 Other grants and transfers 6.8 6.5 3.8 Social benefits 0.0 0.0 0.0 Other expenses 0.0 0.0 3.1 Total expenditure 100 100 100 Source: AFSs. 2.3. Legal and regulatory arrangements for PFM The main features of the legislation The Constitution introduced significant changes to the political system of governance of Kenya. There are presently two levels of governments, national and county governments. The legal and regulatory framework providing support for PFM in the county of West Pokot is derived from the Constitution and various acts and regulations outlined as follows: 8 (a) Chapters 11 and 12 of the Constitution on devolved governments and principles of public finance respectively. Institutional arrangement for PFM include the CRA (Article 216), the National Treasury (Article 225(1)), COB (Article 228), Auditor General (Article 229), Salaries and Remuneration Commission (SRC) (Article 230), Central Bank of Kenya (CBK) (Article 231), Parliament (Article 93), and County Assemblies (Article 176 (1)). Article 227 (2) provides for the creation of a framework for procurement and asset disposal by all public entities through an act of Parliament. (b) The PFM Act, 2012. Part IV of this act details responsibilities with respect to PFM of public funds in the counties. This act covers all PFM aspects including but not limited to the budget making process and public participation; Treasury Single Account (TSA); financial accounting and reporting; and internal auditing, among others. Section 103 creates the County Treasury whose general responsibilities and powers in relation to public finance are spelled out in Sections 104 and 105. According to Section 106, upon request, the National Treasury can second public officers to the County Treasury to enhance its capacity. Section 107 places the role of enforcing fiscal responsibility principles, as contained in Chapter 12 of the Constitution, on the County Treasury. The County Treasury is responsible for some of the key documents related to public finance such as the budget, County Fiscal Strategy Paper (CFSP), and County Budget Review Outlook Paper (CBROP) and thereafter present them to the County Assembly. (c) The PFM Regulations (2015) for county governments. Some highlights include strengthening intergovernment fiscal relations, restricting wages to 35 percent of realized revenue, and mandating the development budget to be 30 percent of the total budget. (d) The Public Procurement and Asset Disposal Act (PPADA) (2015). The act provides for procedures for efficient public procurement and procedures for assets disposal by public entities. Regulations are under development. (e) The Public Audit Act (2015) provides for the organization, functions, and powers of the OAG spelled out in accordance with the Constitution. The Auditor General is required to present audit reports to Parliament and relevant County Assemblies six months after the end of a fiscal year. Under Section 4, the OAG was established, replacing the Kenya National Audit Office (KENAO). Section 10 provides explicitly for the independence of the Auditor General. Section 11 significantly reinforces the process for selecting competent persons to the position of the Auditor General in case of any vacancy. The President may nominate a candidate and submit the nomination to Parliament for its approval. Section 24 provides for outsourcing. Section 25 provides for an Audit Advisory Board in place of the National Audit Commission (established under the 2003 Act to consider and approve the annual budget for KENAO and to determine the remuneration and other terms of appointment of staff). It affirmed that only a person registered and practicing as an accountant under the Accountants Act, 2008, should be qualified for provision of a financial audit opinion. Sections 47–48 provide for the auditing of financial statements required by the PFM Act, 2012, and the time deadlines to be adhered to. The devolution process Framework for the devolved system of government The Constitution of Kenya 2010 introduced two levels of governments, the national and county governments. The legal and regulatory framework provided support for PFM in the county government of Kajiado, specifically Chapters 11 and 12, devolved governments and principles of public finance, 9 respectively. A fundamental change was the major devolution of central government responsibilities to 47 newly created county governments (Chapter 11, Articles 174–200). Part 2 of the Fourth Schedule enlists 14 roles and functions of the county governments: 1. Agriculture 2. County health services 3. Control of air pollution, noise pollution, other public nuisances and outdoor advertising 4. Cultural activities, public entertainment, and public amenities 5. County transport 6. Animal control and welfare 7. Trade development and regulation 8. County planning and development 9. Pre-primary education, village polytechnics, home craft centers, and childcare facilities 10. Implementation of specific national government policies on natural resources and environmental conservation 11. County public works and services 12. Firefighting services and disaster management 13. Control of drugs and pornography 14. Ensuring and coordinating the participation of communities and locations in governance at the local level and assisting communities and locations to develop administrative capacity for the effective exercise of functions and powers and participation in governance at the local level The county governments comprise the Executive, headed by elected Governors and the County Assemblies comprising elected members. The counties are also represented by Senators who are elected and constitute the Senate, which is the upper house of Parliament. Institutional arrangements for PFM include the CRA (Article 216), the National Treasury (Article 225(1)), COB (Article 228), Auditor General (Article 229), SRC (Article 230), CBK (Article 231), Parliament (Article 93), and County Assemblies (Article 176 (1)). Article 227 (2) provides for the creation of a framework for procurement and asset disposal by all public entities through an act of Parliament. Generally, internal and external controls are performed at the national level. Internal control is carried out by the COB through the IFMIS while external control is performed by the OAG. The legal framework under the PFM Act, 2012, and its regulations also apply to the county government. The Policy on Devolved System of Government (2015) has identified institutional, intergovernmental, and resource-related challenges to be overcome to improve implementation and service delivery. 2.4. Institutional arrangements for PFM County governments The current Constitution was promulgated on August 27, 2010, providing for a two-tier government structure with a national government and 47 devolved county governments. The functions of county 10 governments, as contained in the Fourth Schedule (Constitution 2010), include Finance and Economic planning; Roads, Public Works, and Transport; Health and Sanitation; Education and ICT; Agriculture and Irrigation; Livestock, Fisheries, and Veterinary Services; Trade, Industry, and Cooperative Development; Land, Housing, Physical Planning, and Urban Development; Water Development, Environment and Natural Resources; and Tourism, Culture, Sports, and Social Development. Members of the County Executive are nominated by the Governor, but their appointment has to be approved by the County Assembly. Part IV of the PFM Act, 2012, gives the county government the responsibility of managing public finances in the county. Section 103 of the PFM Act, 2012, establishes the County Treasury comprising the County Executive Committee (CEC) member in charge of finance, the Chief Officer (CO), and department(s) of the County Treasury responsible for financial and fiscal matters. According to Section 103 (3), the CEC member for finance shall be the head of the County Treasury. The COs are the chief accounting officers in their respective departments. The County Assembly is vested with the legislative authority of county laws, general oversight of the county government, and representation of the people. It consists of Members of County Assembly (MCAs) elected from different assembly wards in the county. In addition to its primary function of passing legislation, the County Assembly also approves nominees to other county public service offices. Most of the MCAs are elected during a general election but some are also nominated by political parties. The County Assembly has the oversight role over the County Executive in terms of use of public finances. Key public finance documents such as the budgets, CFSP, and CBROPs have to be presented by the County Executive for approval. All funds including the emergency funds and any other by the County Executive must be approved by the County Assembly. The County Government Act, 2012, also outlines the structure and operation of county governments as comprising subcounties, wards, and villages. The structure of the public sector and public finances in West Pokot County is presented in Tables 2.5 and 2.6. Table 2.5: Structure of the public sector (Ksh, millions) - FY2015/16 Social security Government subsector Public corporation subsector fundsa Extra Financial Budgetary Nonfinancial public budgetary public unit corporations units corporations County government 4,542.5 n.a. n.a. n.a. n.a. County Assembly 5,12.5 — — — — Source: AFS 2015/16. Table 2.6: Financial structure of county government - budget estimates (Ksh, millions) - FY2015/16 County government Budgetary Extra budgetary Social security Total aggregated unit units funds Revenue 4,775 n.a. n.a. Expenditure 4,728 n.a. n.a. Transfers to County Assembly 65 — — Liabilities n.a. — — Financial assets n.a. n.a. — Nonfinancial assets n.a. n.a. — Source: AFS 2015/16. 11 Table 2.7: Financial structure of county government - actual budget (Ksh, millions) - FY2015/16 County government Budgetary Extra budgetary Social security Total aggregated unit units funds Revenue 4,542 n.a. n.a. 4,542 Expenditure 4,500 n.a. n.a. 4,500 Transfers to County Assembly 573.9 — — — Liabilities 245.9 — — 245.9 Financial assets 449.5 n.a. — 449.5 Nonfinancial assets 1,642.9 n.a. — 1,642.9 Source: AFS 2015/16. Key features of internal control Internal control is performed through the IFMIS and reengineering of the IFMIS was a major improvement for reinforcing this control. Access to the IFMIS is now complete at the county levels, but the IFMIS Office is still configuring aspects of the IFMIS to meet specific needs for ministries, departments and agencies (MDAs) and counties. Presently, the IFMIS is not comprehensively used at the county level. According to the OAG, manual processes are still being used for preparing and approving local purchase orders/contracts and then loaded into the Purchasing and Accounts Payables module of the IFMIS. Similarly, payments vouchers (PVs) are being prepared manually and then uploaded into IFMIS, instead of being prepared within IFMIS on the basis of invoices and receipts of goods and services. As a result, the OAG’s audit of the AFS is not complete within six months of the end of the fiscal year (see PI-29). Integration of systems within the IFMIS has not yet been completed for the following modules: • Procurement. The county has its own system for procurement monitoring. The Procurement to Pay module, which is available at the national level, is not used by the county (see PI-24). • Revenue. Most of the county’s revenues come from the central administration. The county has its own IT-based tax administration system known as Local Authorities Integrated Financial and Operations Management System (LAIFOMS) to collect some of the revenues. This system is not integrated with the IFMIS (see PI-20). • Payroll. The county government uses the Integrated Personnel Payment Database (IPPD) management system for human resource management (HRM) and the county pays wages through the IFMIS. However, the IPPD system is not yet integrated with the IFMIS, as the payroll is prepared in IPPD and then manually extracted. Other important features of PFM Public participation is a requirement of the Constitution of Kenya and is stipulated as a function of the West Pokot county government. West Pokot legislation outlines the principles of public participation and the imperative for facilitating public participation in the work of the county government. An Annual Report 12 on Participatory Budgeting - West Pokot County Experience is published on the website of the County Executive.2 2 http://www.westpokot.go.ke/images/downloads/generaldownloads/PUBLICPARTICIPATION/WEST-POKOT- COUNTY-public-participation-report-for-FY-2016-17.pdf 13 3. Assessment of PFM performance HLG-1. Transfers from higher-level government Summary of scores and performance table HLG-1. Transfers from higher-level D+ Brief justification for score government (M1) HLG-1.1. Outturn of transfers from B Transfers have represented at least 90% of the original budget higher-level government estimate in all the last three years. HLG-1.2. Earmarked grants outturn C The difference between the original budget estimate and actual earmarked grants was less than 10 percent in two of the last three years. HLG-1.3. Timeliness of transfers D* Quarterly transfers should be released quarterly through the IFMIS, from higher-level government but the effective dates were not provided, and important delays were reported in the CFSP and in the press. HLG-1.1. Outturn of transfers from higher-level government Article 216 of the Constitution mandates the Commission on Revenue Allocation to make recommendations on an equitable basis for revenue sharing among county governments. Article 217 (1) of the Constitution mandates the Senate to determine once every five years the basis for annually allocating the share of national revenue among county governments. The Sixth Schedule Section 16 provides for preparation of the first and second bases of sharing revenue to be made at three-year intervals. The first formula was approved by the 10th Parliament in November 2012. The main sources of revenue for the county governments in Kenya are equitable share, conditional grants, and own source revenues. These revenues are described as follows: • Equitable share. This constitutes revenue raised by the national government and equitably allocated to all county governments in accordance with Article 203 of the Constitution. The allocation should be at least 15 percent of national revenue based on the most recent audited accounts of revenue received, as approved by the National Assembly. • Conditional grants. This is provided for under Article 202 of the Constitution and constitutes additional allocations from the national government’s share of revenue, either conditionally or unconditionally. Conditional allocations are tied to the implementation of specific national policies with specific objectives by the national government. • Own source revenue. Article 209 of the Constitution provides that a county may impose: property rates, entertainment taxes, and charges for the services they provide. However, the taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries, or the national mobility of goods, services, capital, or labor. The formula reported in Table 3.1has been used to share revenue for financial years 2012/13, 2013/14, 2014/15, and 2015/16. It must be noted that the CRA recommends the introduction of a development factor of 1 percent and reduction of the basic equal share by the same level. 14 Table 3.1: Revenue sharing formula Parameter Current formula Population 45% Basis Equal Share 25% Poverty 20% Land Area 8% Fiscal responsability 2% Total 100% Source: CRA. According to the AFS, the main sources of revenue for the county governments in Kenya are equitable share, conditional grants, and own source revenues (see indicator PI-3). Table 3.2 presents the breakdown of transfers from the national government. Table 3.2: Budgeted and actual transfers for the last three fiscal years (Ksh, millions and percentage) 2013/14 2014/15 2015/16 Source of Budget Actual % Budget Actual % Budget Actual % Revenue Equitable share 3,155.1 3,155.1 100% 3,763.4 3,836.0 102% 4,313.7 4,138.3 96% Conditional grants 437.8 0.0 0% 97.5 53.0 54% 274.1 137.8 50% Total 3,593 3,155 88% 3,861 3,889 101% 4,588 4,276 93% Source: AFSs. Table 3.2 shows that the total amount of transfers represented 88 percent of the budget estimate in 2013/14, 101 percent in 2014/15, and 93 percent in 2015/16. In summary, transfers to the county of West Pokot have been at least 90 percent of the original budget estimate in two of the last three years. Dimension rating = B HLG-1.2. Earmarked grants outturn According to the Constitution, an Equalisation Fund receives 0.5 percent of all national revenue each year and is to be used for basic services in poor areas. However, the Constitution says that the fund may be spent either directly by the national government or given to counties as a conditional grant. The fund represents less than 2 percent of the total amount of transfers to counties. Over the period under review, conditional grants were composed of Free Maternity, Leasing of Medical Equipment, User Charges, Compensation for Use Fees Forgone and Roads Maintenance Fuel Levy. In addition, conditional transfers originate from international organizations, such as the Health Sector Service Fund (HSSF) of the Danish International Development Agency (DANIDA) for health facilities, Loans and Grants (World Health Organization [WHO]), and World Bank support to health facilities. Composition variance of conditional grants was respectively 24.4 percent in 2013/14, 2.3 percent in 2014/15, and 5.8 percent in 2015/16. Calculation details are provided in Annex 3C. 15 In summary, the difference between the original budget estimate and actual earmarked grants was less than 10 percent in two of the last three years. Dimension rating = C HLG-1.3. Timeliness of transfers from higher-level government According to the PFM law, equitable share estimates must be included in the Budget Policy Statement (BPS), which must be presented and adopted by Parliament in February or March. The disbursement of funds to counties should be made at the beginning of every month or not later than the 15th day from the commencement of the quarter. However according to the CFSP, the release of the equitable share from the national government has not been regular, thus leading to delays in commencement and completion of projects. Dimension rating = D* 3.1. Pillar I. Budget reliability A budget is reliable if it is implemented in accordance with the approved estimates before the beginning of the financial year. To determine the extent to which this is the case, three indicators, namely: aggregate expenditure outturn, expenditure composition outturn, and revenue outturn were examined for the financial years 2013/14, 2014/15, and 2015/16. PI-1. Aggregate expenditure outturn Summary of scores and performance table PI-1. Aggregate expenditure B Brief justification for score outturn (M1) 1.1. Aggregate expenditure B Aggregate expenditure outturn for the last two financial years ranged outturn between 90% and 110% of initial budget Table 3.3 presents the budgeted and actual total expenditure for the years 2013/14 to 2015/16. It shows that the absorption rate of the approved budget was low at 77.2 percent during 2013/14, but the percentage increased in the two subsequent years. The low absorption was because it was the first year of implementation of the devolved system of government in Kenya. Table 3.3: Aggregate expenditure outturn (Ksh, millions and percentage) FY Budget Actual Total expenditure deviation 2013/14 3,631 2,801 77.1% 2014/15 4,273 4,109 96.2% 2015/16 4,830 4,555 92.2% Source: AFS. In summary, the aggregate expenditure outturn was between 90 percent and 110 percent of the initial budget for the last two financial years. Dimension rating = B 16 PI-2. Expenditure composition outturn Summary of scores and performance table PI-2. Expenditure composition outturn (M1) B+ Brief justification for score 2.1. Expenditure composition outturn by A Variation in expenditure composition outturn by function function was below 5% of total expenditure in two of the last three years. 2.2. Expenditure composition outturn by B Variation in expenditure composition outturn by economic type economic classification was below 10% of total expenditure in two of the last three years. 2.3. Expenditure from contingency reserve A There is no contingency fund scheduled in the budget yet. PI-2.1. Expenditure composition outturn by function The budget is prepared according to economic, programming, and administrative classifications but the budget execution follow-up is based on economic and administrative classifications (see PI-4). From Table 3.4 total expenditures were lower than total amounts budgeted in all the years though revenue performances remained good. There was a bigger variance during FY2013/14 compared to the two subsequent years. The departments of water development, lands and housing, and roads and public works spent the largest shares of their budgets. On the other hand, the departments of health and sanitation, and livestock, fisheries, and veterinary services had the largest variations between the budgeted and actual expenditures. However, explanations about the deviations of expenditures from budgets were not available. It is also notable that there was no baseline information for FY2013/14, hiring of ECDE teachers, long procurement process, and delays in exchequer releases. Table 3.4: Expenditure composition outturn by function (Ksh, millions and percentage) 2013–14 2014–15 2015–16 Administrative/functional head Budget Actual Budget Actual Budget Actual County Executive 443.7 408.4 1,362.3 1,344.3 543.7 526.2 Finance and Economic Planning 123.7 118.6 159.6 151.5 188.4 148.6 Roads, Public Works, and 648.2 491.0 422.3 422.1 473.8 464.0 Transport Health and Sanitation 1,158.6 821.2 708.9 701.1 1,166.3 1,084.2 Agriculture and Irrigation 125.4 104.9 187.3 182.6 304.9 299.6 Livestock, Fisheries, and 157.5 46.8 130.0 118.5 216.8 183.5 Veterinary Services Trade, Industry, and Cooperatives 59.1 52.6 130.7 130.2 110.7 92.5 Land, Physical Planning, and 64.5 55.1 156.6 156.5 92.2 90.4 Urban Development Water Development, Environment and Natural 230.0 122.7 208.8 163.2 256.4 216.3 Resources Education, Communication, and 145.7 142.1 298.1 274.5 630.7 566.7 ICT Tourism, Culture, Sports, Youth, 70.1 51.5 120.9 93.0 144.5 137.4 and Gender Development County Assembly 404.8 386.2 387.5 371.9 527.5 493.9 17 2013–14 2014–15 2015–16 Administrative/functional head Budget Actual Budget Actual Budget Actual County Public Service 174.6 152.5 Management Total Expenditure 3,631.3 2 ,801.1 4,273.1 4,109.4 4,830.5 4,455.8 Composition Variance 15.2% 4.0% 4.3% Source: CBROPs. As reported in table 3.4, variation in expenditure composition outturn by function was 4.0 percent in 2014/15 and 4.3 percent in 2015/16. In summary, variation in expenditure composition outturn by function was below 5 percent of total expenditure in two of the last three years. Dimension rating = A PI-2.2. Expenditure composition outturn by economic type The County Treasury and the COs administer expenditures according to administrative, economic, and programming classifications. The extent of variance between actual and budgeted expenditures by composition of expenditures is presented in Table 3.5 Actual expenditure deviated from the original budget appropriation by 23.9 percent, 3.6 percent, and 8.6 percent during the financial years 2013/14, 2014/15, and 2015/16, respectively. The result is heavily influenced by fluctuations in consumption of fixed capital, mainly because of the difficulty in complying with the procurement rules in due time. Table 3.5: Expenditure composition outturn by economic type (Ksh, millions and percentage) 2013/14 2014/15 2015/16 Economic head Budget Actual Budget Actual Budget Actual Compensation of employees 939.0 919.3 1,282.50 1,282.20 1,301.90 1,296.80 Use of goods and services 622.5 578.4 867.2 866.6 745.2 697 Consumption of fixed capital 1,879.2 1,112.9 1,839.1 1,695.20 1,960.50 1,631.20 Interest 0 0 0 0 0 0 Subsidies 0 0 0 0 527.5 507.7 Social security benefits -0.4 Grants and transfers 190.6 190.4 284.2 265.4 245.7 229.4 Other expenses 0 0 0 0 50 5.7 Total expenditure 3,631.30 2,801.1 4,273.10 4,109.40 4,830.5 4,455.8 Composition variance (%) 23.9 3.6 8.6 Source: AFSs. As reported in table 3.5, calculations derived from this table show that variation in expenditure was 3.6 percent in 2014/15 and 8.6 percent in 2015/16. In summary, the variation in expenditure composition outturn by economic classification was below 10 percent of total expenditure in two of the last three years. 18 Dimension rating = B PI-2.3 Expenditure from contingency reserve There is no contingency fund officially approved in the county. The only item that would be assimilated to a contingency fund is the Disaster Fund and this appears as a regular budget item. The amount budgeted as Disaster Fund was Ksh 34 million in the 2015/16 budget. If the Disaster Fund is to be considered as a contingency fund, it will constitute 0.7 percent of the total budget for FY2015/16. In summary, the Disaster Fund constitutes 0.7 percent of the total budget for FY2015/16. Dimension rating = A Ongoing reforms Strategic plans from respective departments and views from public participation forums are taken into account in budgets. Besides, there are ward-specific projects which take about 31 percent of the development expenditure, whereas about 69 percent is reserved for various departments to implement capital intensive projects, as proposed in their strategic plans. In addition, a bill to create an Emergency Fund has been prepared for presentation to the County Assembly. PI-3. Revenue outturn Summary of scores and performance table PI-3. Revenue outturn (M2) D Brief justification for score 3.1. Aggregate revenue outturn D The county met 92% and 116% of the budgeted revenue in only one of the three financial years. 3.2. Revenue composition D Variance in revenue composition was less than 15% in only one of the outturn last three years. PI-3.1. Aggregate revenue outturn The total budgeted and actual revenue streams are presented in Table 3.6. The overall revenue performance over the three years was 139.6 percent, 101.5 percent, and 79.3 percent, respectively. The budgeted and actual revenue variance for these sources are particularly equally large, as presented in Table 3.6. Table 3.6: Breakdown of local revenue outturn by economic classification (Ksh, millions and percentage) Total Deviation Economic head revenue from budget Budget 59.1 2013/14 Actual 82.5 139.6% Budget 499.7 2014/15 Actual 507.4 101.5% Budget 380.8 2015/16 Actual 301.8 79.3% Source: AFS. 19 The own source of revenue was higher than expected for the two first financial years, but lower than expected in 2015/16. This is due to various factors including unrealistic revenue estimates, reduced compliance rates, and pilferages due to weak revenue collection systems. In summary, the actual local revenue was between 92 percent and 116 percent of budgeted revenue in only one of the last three years. Dimension rating = D PI-3.2. Revenue composition outturn The overall performance of the revenue outturn for the county is summarized in Table 3.7. According to the CBROP 2016, the deviation of the own revenue for FY2015/16 was partly explained by the lack of a valuation roll to determine appropriate rates for land and other properties. Besides, the county had anticipated collection of Ksh 31 million but only realized about Ksh 1 million. However, as part of reforms by the county the valuation roll has been finalized and is expected to significantly contribute to increased internal revenue generations in FY2016/17. Table 3.7: West Pokot local sources of revenue for the last three fiscal years (Ksh, millions and percentage) 2013/14 2014/15 2015/16 Economic head Budget Actual Budget Actual Budget Actual Roll Over Funding 22.1 22.1 403.5 403.5 203.5 203.5 Kiosk Rent 0.0 0.0 1.3 2.5 3.2 1.8 Single Business Permits 9.9 13.0 10.9 11.0 16.0 6.6 Market Fees 3.6 3.9 4.0 3.8 6.0 3.4 Building Approval Fee 0.3 0.6 0.3 0.4 0.5 0.2 Other Cess 5.3 5.7 5.8 7.1 8.0 6.0 Royalties 9.2 11.5 10.1 25.6 30.0 25.8 Livestock Cess 5.8 6.8 6.4 9.7 12.0 7.0 House Rent 2.8 3.3 3.1 0.3 0.5 1.6 Advertising Fee 0.0 0.0 0.0 0.4 1.0 0.3 Parking Fee 0.0 0.0 0.5 4.5 0.5 0.7 Bus Pack and Motorcycle Operating 0.0 0.0 5.0 1.8 7.0 6.0 Fee Renewals/Application Fee 0.0 0.0 0.5 2.2 2.2 1.5 Liquor Licensing Fee 0.0 0.0 0.5 0.0 1.0 0.1 Other Fees/Charges 0.0 7.2 3.7 10.4 11.0 9.4 Hire of Agricultural Machinery and 0.0 0.0 0.0 0.0 2.5 0.4 Sale of Seedlings Health (Cost Sharing and National 0.0 4.1 35.0 20.6 40.0 26.5 Hospital Insurance Fund [NHIF]) Lands Rates 0.0 1.6 5.0 2.7 30.9 0.7 Livestock Permits 0.0 0.0 4.0 0.9 5.0 0.5 Transfers from Local Authority 0.0 2.8 0.0 0.0 0.0 0.0 Total Revenue 59.1 82.5 499.7 507.4 380.8 301.8 Source: AFSs. 20 Built from Table 3.7, the total revenue deviation and composition outturn for the county are summarized in Table 3.8. This table shows that the composition variation of local revenue was 39 percent in FY2013/14, 13 percent in FY2014/15, and 31 percent in FY2015/16. Table 3.8: Results matrix on local sources of revenue for the last three fiscal years (percentage) Year Total revenue deviation Composition variance 2013/14 139.6 38.9 2014/15 101.5 13.3 2015/16 79.3 31.1 In summary, the variance in revenue composition was less than 15 percent in only one of the last three years. Dimension rating = D 3.2. Pillar II. Transparency of public finances There are five performance indicators under this pillar: budget classification, budget documentation, central government operations outside financial reports, transfers to subnational governments, performance information for service delivery, and public access to fiscal information. These indicators measure whether the budget and fiscal risks oversights are comprehensive and whether the fiscal and budget information is accessible to the public. PI-4. Budget classification Summary of scores and performance table PI-4. Budget classification (M1) C Brief justification for score 4.1. Budget classification C Budget formulation is based on administrative, programming, and economic classifications using Government Finance Statistics (GFS) standards though not consistently applied. Budget execution and reporting is made only on the basis of administrative and economic classification. PI-4.1. Budget classification Section 105 (d) of PFM Act, 2012, and PFM Regulation No. 40, 2015, require that county budget classifications should be as guided by the National Treasury. Counties are required to present the budget according to the administrative, economic, program-based budget (PBB) format. The PBB presents the budget by programs according to administrative and economic classifications.3 The budget is initially built in Excel before being uploaded as vote heads into the budget planning system through the IFMIS. Budget execution and reporting are presented according to the administrative, economic, and programming classifications. The administrative units to which programs are classified and further reported in the accounts and budgets are set in the County Government Act, 2012, and the Constitution. The functional classification is 3 The standard chart of accounts (SCOA) can be checked in the book print out on the sub-head item-source- programme geographical. 21 related to the administrative classification, as each key person is responsible of different sectors. This classification differs from the national government classification, since some functions are not devolved, for example, primary and higher education and security among others. The administrative classification of the County Executive is composed of key management personnel (accounting officers) who have direct fiduciary responsibility, as follows: • Office of the Governor • Finance and Economic planning • Roads, Public Works and Transport • Health and Sanitation • Education and ICT • Agriculture and Irrigation • Livestock Development, Veterinary Services, and Fisheries • Trade, Industry, Cooperative Development, and Energy • Lands, Physical Planning, and Urban Development and Housing • Water, Environment, and Natural Resources • Tourism, Culture, Gender, and Social Development • West Pokot County Public Service Board Functional classification does not exist, but it can be considered that administrative classification is very close to the functional classification. The economic classification is broken down into current and capital expenditure: • Current Expenditure o Compensation to Employees o Use of Goods and Services o Current Transfers to Government Agencies o Other Recurrent • Capital Expenditure o Acquisition of Nonfinancial Assets o Capital Transfers to Government Agencies o Other Development This classification is quite limited and diverse budget items such as recurrent or development expenditure is not in accordance with GFS standards. 22 The programming classification is now in place but has not been consistent over the recent years, owing to the fact that the first budget of 2013/14 was not in the PBB format. The number of programs is directed by the national government. The first level of programming classification is as follows: • P 1: General Administration Planning and Support Services • P 2: County Executive Affairs • P 3: Public Service Board Services • P 4: Field Administration Services • P 5: Special Initiatives In summary, budgets have been applying the administrative, economic, and programming classification criteria. However, Budget Implementation Review Reports (BIRRs) published by the COB present only budget execution according to administrative and economic classifications. Dimension rating = C Ongoing reforms The COB should help the counties restructure their classification to implement a functional classification and be in line with the internationally accepted Classification of Functions of Government (COFOG). PI-5. Budget documentation Summary of scores and performance table PI-5. Budget documentation D Brief justification for score (M1) 5.1. Budget documentation D Budget documentation does not fulfil at least 3 basic elements. Although Section 130 of PFM Act, 2012, provides for deficit financing through borrowing, the county governments were restrained from borrowing in the absence of a clear borrowing framework. This implies that the first basic criterion is not applicable. The second criterion requires that the previous year’s budget outturn is presented in the same format as the budget proposal. However, only the previous year’s budget estimates are presented in the same format in the CBROP. The county satisfies the third criterion, that is, revised budget final supplementary estimates of current year are presented in the same format as the budget proposal in the CFSP. Finally, aggregation of both revenue and expenditure are presented in the CFSP and CBROP, but not according to the main heads of the budget classification (programming/administrative and economic). The CFSP does not present budget execution according to the economic classification and the CBROP does not present a detailed breakdown of economic classification. In addition, the CBROP does not provide previous budget execution of the current year. Table 3.9: Satisfaction of PEFA basic elements criteria No. Basic elements Criteria 1 Forecast of the fiscal deficit or surplus or accrual operating result. Yes 2 Previous year’s budget outturn, presented in the same format as the budget proposal. No 3 Current fiscal year’s budget presented in the same format as the budget proposal. This can Yes be either the revised budget or the estimated outturn. 23 No. Basic elements Criteria 4 Aggregated budget data for both revenue and expenditure according to the main heads of No the classifications used, including data for the current and previous year with a detailed breakdown of revenue and expenditure estimates. (Budget classification is covered in PI-4.) With regard to additional elements, the county is not permitted to borrow and therefore no deficit financing is needed. Consequently, the first criterion is not applicable. For the following item, macroeconomic forecasting is borrowed from the national government since it are not performed at the county level. National assumptions are presented in the CFSP. The county does not have any debt, but there is an inherited debt from the previous defunct local government. The debts acquired from the defunct local authorities have not been authenticated and factored into the budgets as contingent liabilities. The Intergovernmental Technical Relations Committee is working to ascertain the correct position of debts. Other contingent liabilities are taxes levied as pay as you earn (PAYE) and others such as court cases. However, some contingent liabilities have been factored into the 2017/18 budget. The medium-term fiscal forecasts are done in the current budget and the CIDP. Finally, most taxes are part of the payments made to employees either as salaries or as payments to suppliers and contractors in terms of PAYE, value added tax, and withholding tax. However, some taxes have emerged when the KRA made a claim on nonpayment for some taxes and this has been charged on the county. Table 3.10: Satisfaction of PEFA additional elements criteria Nb Additional elements Criteria 5 Deficit financing, describing its anticipated composition. n.a. 6 Macroeconomic assumptions, including at least estimates of GDP growth, inflation, interest n.a. rates, and the exchange rate. 7 Debt stock, including details at least for the beginning of the current fiscal year presented in No accordance with the GFS or other comparable standard. 8 Financial assets, including details at least for the beginning of the current fiscal year presented No in accordance with the GFS or other comparable standard. 9 Summary information of fiscal risks, including contingent liabilities such as guarantees, and No contingent obligations embedded in structured financing instruments such as public-private partnership (PPP) contracts, and so on. 10 Explanation of budget implications of new policy initiatives and major new public investments, No with estimates of the budgetary impact of all major revenue policy changes and/or major changes to expenditure programs. 11 Documentation on the medium-term fiscal forecasts. Yes 12 Quantification of tax expenditures. No In terms of reforms, the county is in the process of establishing a debt unit for effective management of debt-related issues. In addition, a debt management strategy is being developed in accordance with Section 123 of PFM Act, 2012, even though the county has capacity constraints in terms of debt analysis. In summary, budget documentation does not fulfil at least three basic elements. Dimension rating = D 24 PI-6. Central government operations outside financial reports Summary of scores and performance table PI-6. County government operations D Brief justification for score outside financial reports (M2) 6.1. Expenditure outside financial reports D* The financials of ECDEs colleges have not been made available. 6.2. Revenue outside financial reports D* No information about revenue outside financial reports has been provided. 6.3. Financial reports of extra budgetary D No financial report of extra budgetary unit has been units provided by the county. PI-6.1. Expenditure outside financial reports Hospitals, health centers, ECDE colleges, and youth polytechnics are effectively semi-autonomous government agencies (SAGAs). They are supposed to prepare AFSs that include assets, liabilities, and third-party funding, as well as receipts from capitation grants and the expenditures thereof, but they do not comply with that obligation. Spending of fees and grants received by schools (mainly primary) from third parties is not captured in expenditure reports. Spending from donor-funded projects is not captured by the IFMIS and is not reported. Identified expenditures outside financial reports are as follows: (a) Construction of Kenya Medical Training College This entity offers training to medical students. The county government built the infrastructure which was budgeted for, but the institution is run by the national government. The idea was to ensure that local students of a certain quota would come from West Pokot County. (b) Construction of Agricultural Training Centre This is still under construction by the county government and the funds have been budgeted for. (c) Maintenance and support of Kapenguria Water and Sewerage Company (KWSC) The county is yet to assume the ownership of the KWSC as it is under the national government. However, the county has seconded two staff to work in the company and further subsidizes its electricity costs. (d) ECDE The ECDEs are governed by an ECDE county coordinator and subcounty coordinators. The county has a number of newly built and established units constructed from budgeted funds and also pays salaries of the teachers. The ECDE services are free and do not earn income for the county. (e) Construction of ECDE college The county has constructed an ECDE college where students pay fees and the county caters for operational costs, for example, paying salaries of tutors. The college creates its own budget and financial statements. (f) Funding of a youth polytechnic The polytechnic offers technical education to youths and falls under the directorate handling development activities. The county finances the salaries of tutors and developmental projects. The polytechnic generates reports on the use of funds disbursed by the county. However, the polytechnic is still under the control of the national government. 25 In summary, as the financial statements of these extrabudgetary units were not provided (see PI-6.3) the amount of extrabudgetary expenditure is unknown. Not all quantitative data have been provided to enable calculation of the level of expenditure outside government financial reports. Dimension rating = D* PI-6.2. Revenue outside financial reports No information about the budget outside financial reports is presented in the AFS and no data has been provided by the County Executive for hospitals, health centers, ECDE colleges, and youth polytechnics. Dimension rating = D* PI-6.3. Financial reports of extrabudgetary units No financial report of extrabudgetary units has been provided by the county. Dimension rating = D Ongoing reforms The ECDE college is now required to present an AFS within stipulated timelines. PI-7. Transfers to subnational governments Summary of scores and performance table PI-7. Transfers to subnational governments N/A Brief justification for score (M2) 7.1. System for allocating transfers N/A There is no subgovernment under the county level. 7.2. Timeliness of information on transfers N/A There is no subgovernment under the county level. PI-8. Performance information for service delivery Summary of scores and performance table PI-8. Performance information for D+ Brief justification for score service delivery (M2) 8.1. Performance plans for service B Information is published annually on the activities to be performed delivery under the policies or programs for the majority of departments. 8.2. Performance achieved for C The midterm progress report presents activities performed and service delivery indicates the achievements obtained. 8.3. Resources received by service D No survey carried out in one of the last three years provides delivery units estimates of the resources received by service delivery units for at least one large department. 8.4. Performance evaluation for D Performance evaluation is done by an internal department and service delivery even the external evaluation done by the COB is not available. No independent evaluation was performed. 26 PI-8.1. Performance plans for service delivery The Department of Monitoring and Evaluation in the Ministry of Devolution and Planning has developed County Guidelines for the Development of County Integrated Monitoring and Evaluation System.4 Performance plans for service delivery are established for all functional units and are reflected in the PBB prepared by the county. The annual PBB is presented by function and classifies plans for key service delivery areas, for example, agriculture, education, and health among others. Information includes specific programs, the delivering unit, key outputs, and key performance indicators (KPIs) targeted in applicable units. However, the allocation of resources to the specific programs is not specified. The annual PBB presents many indicators, but most of them lack baselines and targets or are provided with unmeasurable targets. While the PBBs focus on outcomes, these outcomes are not always immediate and there is need for information on outputs to track movement to expected outcomes. It is also difficult to link with the programs and their objectives. In summary, annual PPBs present performance indicators relating to the outcomes or outputs (but not both) for all ministries. Dimension rating = B PI-8.2. Performance achieved for service delivery The outputs and outcomes of the budgets are explained in the medium-term progress reports of 2015, prepared to assess implementation of the CIDP for 2013–2015 and the annual county progress report for 2016 covering 2015–2016. These reports provided an indication of the funds spent, completion rates, and the number of units achieved. The midterm progress report indicates the achievements made, challenges, and lessons learned for the purpose of improving service delivery in the county. This report presents the need to embrace monitoring and evaluation (M&E) in all areas of implementation of county programs and projects. For instance, in the education sector, this would include the number of pupils enrolled, bursaries awarded, the intakes, and the transitions from primary to secondary to university. In summary, the midterm progress report presents the activities performed and indicates the achievements obtained. Dimension rating = C PI-8.3. Resources received by service delivery units The information captured by, for example, the education department, on the resources, do not support the comparison of service performance with the actual resources received in the respective service delivery units. The progress reports do not explain the funds received for support, by source. The CBROPs and the progress reports do not indicate comparison and analysis done on resources received and the performance output achieved. Resources received by budget users are listed in the CBROPs and progress 4 http://www.cogkp.or.ke/cogkpdocuments.nsf/docs/CRES-A4HRJH/$FILE/CIMES-Handbook.pdf. 27 reports, but the resources received by service delivery units are not mentioned. Further, no survey has been carried out in any of the last three fiscal years to provide estimates of the resources received by service delivery units, at least for one large department. In summary, no survey carried out in the last three years provides estimates of the resources received by service delivery units for at least one large department. Dimension rating = D PI-8.4. Performance evaluation for service delivery M&E for the effectiveness and efficiency of usage of funds and the project is performed by the M&E department in the county. While challenges and the way forward are enumerated in the project implementation reports and the PBB, this is not done at the program level as per the budgets, and no efficiency ratios are calculated to confirm the use of funds and even absorption as budgeted for. The county is also evaluated by the COB but these reports are not availed for corrective measures. In summary, performance evaluation is done by an internal department and even the external evaluation done by the COB is not available. No independent evaluation was performed. Dimension rating = D Ongoing reforms Some of the ongoing reforms include coming up with quarterly progress reports to assist in in-year performance evaluation. The county is in the process of forming a County Integrated Monitoring and Integration framework where all-inclusive M&E reports will reflect lower-level M&E at subcounty, ward, and village levels. PI-9. Public access to fiscal information Summary of scores and performance table PI-9. Public access to fiscal information D Brief justification for score (M1) 9.1. Public access to fiscal information D The county meets two basic elements and one other element but does not meet four basic elements. On the basic elements, the enacted budget is not immediately published in the County Assembly website after it has been passed. However, the public can get copies of the enacted budget. The county keeps budget documents at the ward offices for easy access by the public. The County Executive uploads onto its website various documents such as the annual development plan (ADP), CFSP, CIDP, and CBROPs, but the progress of budget implementation is not published. The public participation initiative is cascaded downward to the ward levels where the ward administrators help explain the budget and other public initiatives to the people. Whereas the county does not publish audited financial reports, the same are available on the website of the OAG, although not within twelve months after the end of the year. The compliance to the basic elements is reported as in Table 3. 28 Table 3.11: Compliance with basic elements of public access to information No. Basic elements Compliance 1 A complete set of executive budget proposal documents (as presented by the country in No PI-5) is available to the public within one week of the executive’s submission of them to the legislature. 2 The annual budget law approved by the legislature is publicized within two weeks of Yes passage of the law. 3 In-year budget execution reports. The reports are routinely made available to the public No within one month of their issuance, as assessed in PI-27. 4 Annual budget execution report. The report is made available to the public within six Yes months of the fiscal year’s end. 5 Audited annual financial report, incorporating or accompanied by the external auditor’s No report. The reports are made available to the public within twelve months of the fiscal year’s end. With regard to additional elements, the CFSP presents the broad strategic priorities and policy goals that guide the preparation of the county budget for the next financial year and in the medium term. The CFSP should be prepared by February 28 of every year and published on the website of the government.5 The other components are not satisfied. As assessed in PI-14.1, macroeconomic forecasts at the national level are contained in the annual BPS available within one week of endorsement, but no forecast is performed at the county level. No abridged page copy of the budget (citizen budget) is done and translated to the local dialect. However, the county will partner with AHADI Kenya, an NGO, to assist in the translation of the budget into a simplified language and use the local dialect to produce the budget implementation reports. Table 3.12: Compliance with additional elements of public access to information No. Additional elements Compliance 6 Prebudget statement. The broad parameter for the executive budget proposal regarding Yes expenditure, planned revenue, and debt is made available to the public at least four months before the start of the fiscal year. 7 Other external audit reports. All non-confidential reports on government consolidated No operations are made available to the public within six months of submission. 8 Summary of the budget proposal. A simple, clear summary of the executive budget No proposal or the enacted budget accessible to those with no expertise on budgets, often referred to as a “citizens’ budget�, and where appropriate translated into the most commonly spoken local language, is publicly available within two weeks of the executive budget proposal’s submission to the legislature and within one month of the budget’s approval. 9 Macroeconomic forecasts. The forecasts, as assessed in PI-14.1, are not available at the n.a. county level. In summary, the county meets two basic elements and one other element but does not meet the four basic elements. Dimension rating = D 5 www.westpokot.go.ke 29 3.3. Pillar III. Management of assets and liabilities PI-10. Fiscal risk reporting Public corporations for the purpose of this indicator are defined in accordance with GFS 2014. In this regard, it is possible that certain institutional units that are legally constituted as corporations may not be classified as corporations for statistical purposes, if they do not charge economically significant prices. Summary of scores and performance table PI-10. Fiscal risk reporting D Brief justification for score (M2) 10.1. Monitoring of public N/A There are no public corporations to be monitored. Full transfer of the corporations KWSC from the national government is yet to take place. 10.2. Monitoring of subcounty N/A There are no further devolved units below the county government governments level. 10.3. Contingent liabilities and D County Executive quantifies some significant contingent liabilities, but other fiscal risks no information has been provided, including the debt left by the defunct authorities. PI-10.1. Monitoring of public corporations Though the KWSC is supposed to be owned by the county government, full transfer from the national government is yet to take place. This is because there are legal hurdles on the board management, that is, the Water Bill that is in line with the Constitution has not been enacted. Besides, there are no structures that have been put in place to monitor this company. The score for the component is N/A. PI-10.2. Monitoring of subcounty governments There are supposed to be further devolved units below the county government level as per the Urban Areas and Cities Act 2011, but the act has not been operationalized. Hence, the dimension is not applicable. The score for the component is N/A. PI-10.3. Contingent liabilities and other fiscal risks The contingent liabilities in West Pokot County comprise car loans, mortgages, NHIF, LAP Fund,6 and cost of litigation with regard to former county officials who were dismissed. Under the National Social Security Fund (NSSF) Act 2013, the NSSF (mandatory registration) is a contingent liability supported at the national level. However, no figures were provided about the abovementioned fiscal risks. Dimension rating = D 6 LAPFund is a State Corporation operating under an Act of Parliament Cap. 272 Laws of Kenya, County Government Act 2012 (section 132), Urban Areas and Cities Act 2011 (Section 49), in conjunction with the RBA Act, 1997 and Regulations 2000. 30 PI-11. Public investment management Summary of scores and performance table PI-11. Public investment D Brief justification for score management (M2) 11.1. Economic analysis of D* No evidence of objective criteria of economic analysis of investment investment proposals projects. 11.2. Investment project D* The county does not have a central planning unit (CPU) and there are no selection standard project selection criteria. 11.3. Investment project D Capital expenditure is costed by programs for each ministry in budget costing documents, but investment projects are not costed. 11.4. Investment project D Monitoring is done by county departments. Annual Progress Reports monitoring presenting some rudimentary investment projects’ follow-up are published, but they do not mention total cost or execution rate. PI-11.1. Economic analysis of investment proposals Some economic analysis is done by the county officials themselves, through observation in some cases. In other cases, needs-based analysis is conducted, especially at the ward level, to determine the kind of investment projects to be granted priority. Public participation is another means through which the ordinary citizens give their views regarding investment projects that need to be implemented. Some projects in West Pokot County could be considered as major investment projects according to the PEFA criteria. They are published on the website of the government and reported in Table 3.137. Table 3.13: Major ongoing investment projects in West Pokot County Project Source Project Name location Objectives Targets Activities Time frame of (ward) funds Tamkal water supply Weiwei Supply water to 2500 Construction 2012/2013 GOK project Kacheliba town and people of intake its environs pipeline Tapach water project Tapach Supply water to 5000 Construction 2012/2013 GOK Kacheliba town and people of intake its environs pipeline Desilting of Makutano Mnagei Supply water to 2500 Construction 2012/2013 GOK water supply reservoir Kacheliba town and people of intake and extension of its environs pipeline pipelines Kacheliba town solar Suam Supply water to 2500 Construction 2012/2013 GOK bore hole Kacheliba town and people of intake its environs pipeline Muruny-siyoi, Kapenguria Supply water to Siyoi, 106,000 Tanks 2013-16 World Kapenguria gravity - Kapenguria, and treatment Bank water supply and environs works sewerage 7 http://www.westpokot.go.ke/index.php/aboutthecounty/county-projects/on-going-projects. 31 In summary, an economic analysis is likely to have been performed to assess such investment projects, but it was not provided and the total cost of the projects is not indicated. Dimension rating = D* PI-11.2. Investment project selection The county does not have a CPU in charge of investment selection, and major investment projects, especially the flagship projects listed in the CIDP, are prioritized by the County Executive, which is the Cabinet in West Pokot County. Other investment projects are selected by departments and implemented accordingly. There are also ward-specific projects, in which communities, through public participation, generate a list of priorities for consideration, and some projects are selected for each financial year. In summary, major investment projects are prioritized by the County Executive, but there are no standard project selection criteria. The evidence could not be produced. Dimension rating = D* PI-11.3. Investment project costing Projections of total capital cost of investment projects are included in the budget reports. The project cost is spread for two or three fiscal years in the PBB. The recurrent cost is not included in the projections. For construction projects, contractors often dictate time frames of projects, and projections must be revised. The absorption during the first six months or first year of implementation is quite low and more financial resources need to be deployed in the subsequent years of project implementation. In summary, capital expenditure is costed by program for each ministry in budget documents, but investment projects are not costed. Dimension rating = D PI-11.4. Investment project monitoring Monitoring of investment projects used to be done by implementing departments in the county. In construction investment projects, the department of public works is normally engaged in the M&E. The county has published, on its website, Annual Progress Reports where details of major investment projects are provided. An M&E unit has recently been created with one staff and is now responsible for M&E and the publication of a consolidated M&E report, but standards for project implementation have not been availed and they are likely not in place because follow-up is still rudimentary in the Annual Progress Report and projects execution rates are not presented. In summary, monitoring is done by county departments. Annual Progress Reports presenting some rudimentary investment projects follow-up are published, but they do not mention total cost or execution rate. Dimension rating = D 32 Ongoing reforms The county government has developed standards for projects, for example, cattle dips, ECD classes, dispensaries, and so on. This is in an effort to reduce time for preparation of bills of quantities (BQs), which lengthen the procurement process and in effect reduce absorption of development expenditures. Further, the county government is developing a framework that will involve civil society groups and citizens in project monitoring. Budget implementation report is to be done on a quarterly basis beginning next fiscal year. There are measures being prepared to be presented to the County Executive for approval, on ways to improve project costing and technical evaluation of all projects suggested by citizens during public participation forums. PI-12. Public asset management Summary of scores and performance table PI-12. Public asset management D+ Brief justification for score (M2) 12.1. Financial asset monitoring C The government maintains a record of its holdings in financial assets in its AFSs, which is published on the website of the county government. 12.2. Nonfinancial asset D Registers contain only partial information on nonfinancial assets monitoring and do not indicate their utilization or age. 12.3. Transparency of asset D The county has not disposed of any assets except cash and cash disposal equivalents. The county has not set up any rule related to transfers of assets for the defunct authorities. PI-12.1. Financial asset monitoring Currently, the county only has cash and its equivalents in the bank as financial assets, but the information is not complete. The county is yet to invest in major forms of financial assets, such as securities, bonds, loans, and receivables. Information on these assets is published on the website of the county government and in the reports of the OAG, but information on assets performance is not produced in the reports. In summary, the government maintains a record of its holdings in financial assets in its AFSs, which is published on the website of the county government. Dimension rating = C PI-12.2. Nonfinancial asset monitoring A variety of registers for fixed assets in the county is up-to-date since 2013. However, the land register is not complete due to controversies with regard to some pieces of land in which ownership is contested. Some pieces of land purchased by the county government have no title deeds. In addition, the county is yet to harmonize the defunct Transition Authority’s report on assets and liabilities with its own. The county has also produced a report on verification of assets and liabilities of defunct local authorities. Table 3.14 presents the categories of nonfinancial assets for FY2015/16 reported in the AFS. 33 Table 3.14: Categories of nonfinancial assets - FY2015/16 (Ksh, millions) Asset class Amount Buildings and structures 8,466 Refurbishment of buildings 225 Construction of roads 3,294 Construction of civil works 2,601 Refurbishment of civil works 513 Purchase of vehicle and transport equipment 60 Overhaul of vehicle and transport equipment 0.0 Household furniture and equipment 15 Office equipment, furniture, and fittings 158 ICT equipment, software, and other ICT assets 220 Other machinery and equipment 36 Intangible assets 206 Land 137 Source: AFS 2015/16. In summary, registers contain only partial information on nonfinancial assets and do not indicate their utilisation or age. Dimension rating = D PI-12.3. Transparency of asset disposal According to the PPADA 2015, a disposal committee should be appointed on an ad hoc basis when there is need. However, because the counties were prohibited from disposing public assets until full transition is made effective by the Intergovernmental Relations Technical Committee no standard operating procedures (SOPs) for disposal of assets has been developed. Thus, the county has not disposed of its assets since it became operational in March 2013. In summary, the county has not disposed of any assets except cash and cash equivalents. The county has not set up any rule related to transfers of assets for the defunct authorities. Dimension rating = D PI-13. Debt management Summary of scores and performance table PI-13 Debt management (M2) D Brief justification for score 13.1 Recording and reporting of D The records of the inherited debts from the defunct local debt and guarantees authorities is not updated. 13.2 Approval of debt and N/A The National Treasury had barred the counties from borrowing until guarantees a framework is developed. 13.3 Debt management strategy D The county has a medium-term debt management strategy. However, the strategy does not indicate at least the preferred evolution of risk indicators such as interest rates and refinancing, and foreign currency risks. 34 PI-13.1. Recording and reporting of debt and guarantees Records of the inherited debts from the defunct local authorities are not updated. Currently, the county has not borrowed money from either local or foreign sources, as the National Treasury had not finalized the borrowing framework. However, the county has inherited debts from the previous government. In summary, records of the inherited debts from the defunct local authorities has not been updated. Dimension rating = D PI-13.2. Approval of debt and guarantees According to Article 212 of the Constitution, on PFM and devolution, county governments are allowed to borrow only if guaranteed by the national government and approved by the County Assembly. According to Article 213 of the Constitution, guarantees by the national government must adhere to the following: • Parliament to enact a law and prescribe how the national government may guarantee loans, and • Within two months of the end of a fiscal year, the national government to publish a report on all guarantees issued during the past year. Even though the Constitution allows the counties to borrow, the National Treasury had barred the counties from borrowing until after the August 2017 general elections., As a result, there is no debt management unit in the county presently and no policies and procedures to provide guidance for undertaking borrowing have been put in place. In summary, because the National Treasury had barred the counties from borrowing until a framework for borrowing is developed, there is no single debt management entity and There are no policies and procedures to provide guidance for undertaking borrowing. Dimension rating = N/A PI-13.3. Debt management strategy Fiscal responsibility principles for the county governments are presented in the CFSP. It can be considered that the county has a minimalist medium-term debt management strategy. However, the fiscal responsibility principles do not clearly present any risk factor and, more particularly, do not show explicitly how foreign currency risks would be addressed. Regarding recent reforms, the county intends to invest in capacity building so that when borrowing becomes operational, the county government of West Pokot will be in a position to ensure sustainable debt management. The county plans to provide affordable credit access to the business community through the Biashara Mashinani fund that is expected to increase business activities to enhance county revenue. In summary, the county has medium-term debt management strategy. However, the strategy does not indicate at least the preferred evolution of risk indicators such as interest rates and refinancing, and foreign currency risks. Dimension rating = D 35 3.4. Pillar IV. Policy-based fiscal strategy and budgeting Budgets and fiscal strategies should be prepared with due regard to government policies, strategic plans, and adequate macroeconomic and fiscal projections. There are five indicators under this pillar: macroeconomic and fiscal forecasting, fiscal strategy, medium term perspective in expenditure budgeting, budget preparation process and legislative scrutiny of budgets. PI-14. Macroeconomic and fiscal forecasting Summary of scores and performance table PI-14. Macroeconomic and fiscal D+ Brief justification for score forecasting (M2) 14.1. Macroeconomic forecasts C The county does not prepare its own macroeconomic forecasts but uses projections made at the national level. 14.2. Fiscal forecasts C The government prepares forecasts of revenue and expenditure for the budget year and the two following fiscal years but does not present the underlying assumptions for the forecasts. 14.3. Macro fiscal sensitivity D The county does not carry out any sensitivity analysis with analysis assumptions. PI-14.1. Macroeconomic forecasts The overview of the recent economic performance presented in the CBROP, September 2016, does not present the economic situation of the county but the one of the country. The county adopts the forecasts as prepared by the national government. The county is yet to set up a macro working group which will develop the county-specific macro indicators. While preparing the budget, the county adjusts the recurrent expenditures by an inflation factor of 10 percent. This 10 percent is applied even for the outer years of the forecasts adopted by the county government. The forecasts are updated once a year during the preparation of the CBROP and the CFSP. These forecasts are not reviewed by any independent body. This is supposed to be carried out by the County Assembly which lacks the capacity to scrutinize the indicators. In summary, the county does not prepare its own macroeconomic forecasts but uses the forecasts developed at the national level. Dimension rating = C PI-14.2. Fiscal forecasts The county performs both revenue and expenditure forecasts. It is a requirement by the PFM Act, 2012, to prepare a balanced budget. The forecasts for the transfers are provided by the national government at the stage of preparing the BPS before the county government finalizes its CFSP. The county in projecting its own sources of revenue is informed by the availability of the new sources of revenue and the performance of the existing revenue streams. The ceilings provided by the ADP are usually different from what is provided by the CFSP; for example, the ADP for 2015/16 financial and economic planning was estimated at Ksh 280 million but at the CFSP it reduced to Ksh 139 million. 36 In summary, the government prepares forecasts of revenue and expenditure for the budget year and the two following fiscal years but does not present the underlying assumptions for the forecasts. Dimension rating = C PI-14.3. Macro fiscal sensitivity analysis In terms of ongoing reforms, other than previous’ year budget, the County Treasury has adopted the use of actual expenditure as a base when setting the ceilings for the budget year to inform future estimates and the budgeted amounts. This has enabled the county to make realistic expenditure forecasts. The county does not include conditional grants in the budget unless there is a firm commitment from the donors and the national government. This had affected the budget for 2013/14 and 2014/15. While projecting the development expenditure, ongoing projects are given priority. Finally, the equalization fund is not included in the county budget as it used to be in the previous years. In summary, the county does not carry out a sensitivity analysis with the underlying assumptions. Dimension rating = D PI-15. Fiscal strategy Summary of scores and performance table PI-15. Fiscal strategy (M2) C+ Brief justification for score 15.1. Fiscal impact of policy D There is no evidence of fiscal impact analysis to explain deviations of proposals the fiscal impact as explained in the CFSP for FY2014/15 and FY2015/16. 15.2. Fiscal strategy adoption B CFSP 2016, which is presented to the County Assembly, presents time-based fiscal goals (breakdown of revenues and expenditure) and a list of qualitative or quantitative targets by ministries. 15.3 Reporting on fiscal B The County Executive has submitted a report to the County outcomes Assembly that gives explanations on the reasons for deviations from the objectives and targets. PI-15.1. Fiscal impact of policy proposals The county has an approved CIDP that guided the overall development agenda. On a yearly basis, the county prepares an ADP, CBROP, CFSP, and budget estimates as required by the PFM Act. There are usually deviations on expenditure and revenue forecasts provided in the ADP and the CBROP. The county did not prepare the CFSP for 2013/14. The 2015/16 CFSP was prepared and submitted to the County Assembly on February 26, 2016. Based on the CFSP analysis for 2014/15 and 2015/16, there is no evidence of fiscal impact analysis to explain the deviations. Section 132 (c,e) of the PFM Act, 2012, stipulates the requirements for submission and consideration of the revenue-raising measures. Each year, the County Executive is expected to pronounce the revenue-raising measures and submit a County Finance Bill for approval by the County Assembly, setting out the revenue-raising measures together with a policy statement expounding on the same. In summary, the County Executive has submitted a report to the County Assembly that gives explanations on the reasons for deviations from the objectives and targets. 37 Dimension rating = D PI-15.2. Fiscal strategy adoption The county produced CFSPs for financial years 2014/15 and 2015/16 and they are published in the county’s website.8 CFSP 2016 presents ceilings (targets) for revenue and expenditure for FY2017/18 to FY2019/20. The fiscal strategy adoption enforces the following fiscal responsibility principles: (a) The county government’s recurrent expenditure shall not exceed the county government’s total revenue; (b) Over the medium term a minimum of 30 percent of the county government’s budget shall be allocated to the development expenditure; (c) The county government’s expenditure on wages and benefits for its public officers shall not exceed a percentage of the county government’s total revenue as prescribed by the County Executive member for finance in regulations and approved by the County Assembly; (d) Over the medium term, the government’s borrowings shall be used only for the purpose of financing development expenditure and not for recurrent expenditure; (e) The county debt shall be maintained at a sustainable level as approved by the County Assembly; (f) The fiscal risks shall be managed prudently; and (g) A reasonable degree of predictability with respect to the level of tax rates and tax bases shall be maintained, taking into account any tax reforms that may be made in the future. CFSP 2016 also presents explicitly time-based fiscal goals (breakdown of revenues and expenditure), and a list of qualitative or quantitative targets by ministries, associated with funding estimates. The fiscal strategic performance indicators presented above are followed in the CBROPs (see PI-15.3). In summary, the county fiscal strategy includes quantitative or qualitative fiscal objectives for at least the budget year and the following two fiscal years but not explicit time-based quantitative fiscal goals and targets together with qualitative objectives. Dimension rating = B PI-15.3. Reporting on fiscal outcomes The county prepares the CBROP which tracks the annual performance in the Medium-Term Expenditure Framework (MTEF) cycle in broad terms. The county prepares the CBROP reports with explanations of deviations, which are submitted to the County Assembly. The CBROP is submitted before the budget to the County Assembly. Submission of the CBROP for budget preparation 2017/18 to the County Assembly was done on September 7, 2016 (see PI-17). The CBROP does not provide a specific action plan to address the deviations. 8 See www.westpokot.go.ke/downloads. 38 In summary, the County Executive has submitted a report to the County Assembly that gives explanations on the reasons for deviations from the objectives and targets. Dimension rating = B Ongoing reforms The county has established an M&E unit and hired staff to be in charge of preparing quarterly reports. PI-16. Medium-term perspective in expenditure budgeting Summary of scores and performance table PI-16. Medium-term perspective in D+ Brief justification for score expenditure budgeting (M2) 16.1. Medium-term expenditure A The annual budget presents estimates of expenditure for the estimates budget year and the two following fiscal years, allocated by administrative, economic, and program/subprogram classification. 16.2. Medium-term expenditure D Cabinet approval evidence on medium-term expenditure ceilings ceilings has not been provided, and estimates in the CFSP FY2016/17 and the PBB FY2016/17 show strong discrepancies. 16.3. Alignment of strategic plans and D* Medium-term strategic plans are prepared for some medium-term budgets departments. Some expenditure policy proposals in the annual budget estimates align with the strategic plans but no evidence has been provided yet. 16.4. Consistency of budgets with D The budget documents do not provide an explanation of some previous year’s estimates of the changes to expenditure estimates between the second year of the last medium-term budget and the first year of the current medium-term budget, even at the aggregate level. PI-16.1. Medium-term expenditure estimates The county prepares the MTEF estimates for the budget year. The county uses the classification provided in the IFMIS module on the plan to budget. PBB 2016/2017 presents estimated expenditure for FY2016/17 and projected expenditure for FY2017/18 and FY2018/19, for each department, by program/subprogram with a break down by economic classification. In summary, the annual budget presents estimates of expenditure for the budget year and the two following fiscal years allocated by administrative, economic, and program/subprogram classification. Dimension rating = A PI-16.2. Medium-term expenditure ceilings The County Executive should approve ceilings by the end of February as required by the PFM Act, 2012 and the ceilings are to be approved by the County Assembly by March. The first circular on the processes and procedures for preparing the FY 2016/17–FY2019/20 Medium-Term Budget was issued on August 11, 2016, without mentioning ceilings. Estimates for the three fiscal years were presented in the CFSP FY2016/17, published in February 2016 but no circular was issued afterward. 39 In summary, it cannot be stated that aggregate expenditure ceilings for the budget year and the two following fiscal years are approved by the government before the first budget circular is issued. Dimension rating = D PI-16.3. Alignment of strategic plans and medium-term budgets The departments of agriculture, livestock, health, and finance are the only ones that have prepared strategic plans. The strategic plans are not fully aligned with the medium-term plans. However, the county did not provide the strategic plan for the previous mentioned departments. In addition, the PFM Act requires that the ADP should be detailed but links between the CIDP and ADP are unclear, and all distributional decisions are made at a further stage. In summary, some expenditure policy proposals in the annual budget estimates align with the strategic plans but no evidence has been provided. Dimension rating = D* PI-16.4. Consistency of budgets with previous year’s estimates Table 3.15 presents the breakdown of allocations by departments for the 2015/16 and 2016/17 budgets. The budget documents do not provide explanations for the deviations of the allocations from the previous budgets prepared by the county. Table 3.15: Breakdown of FY2016/17 estimated and projected allocations by program in the 2015/16 and 2016/17 budgets respectively (Ksh, millions and percentage) Estimated in Projected Difference Programme 2016/17 in 2015/16 Percentage Programme 1 301.3 366.6 21.68 Programme 2 46.9 19.9 −57.46 Programme 3 20.7 18.4 −10.93 Programme 4 77.3 27.2 −64.84 Programme 5 0.0 79.8 +INF Source: Budget estimates 2016/17. From the analysis made on the 2015/16 and 2016/17 PBB budgets, significant discrepancies can be observed between projected allocations by programs for FY2016/17 in the 2015/16 budget and estimated allocations for the same fiscal year in the 2016/17 budgets. In summary, budget documents do not provide an explanation of the changes to expenditure estimates between the second year of the last medium-term budget and the first year of the current medium-term budget, even at the aggregate level. Dimension rating = D 40 PI-17. Budget preparation process Summary of scores and performance table PI-17. Budget preparation process D Brief justification for score (M2) 17.1. Budget calendar D Most of the departments adhere to the budget calendar but no budget calendar table has been provided yet and there is poor adherence to the budget calendar in practice. 17.2. Guidance on budget D A comprehensive and clear budget circular is issued to preparation budgetary units, but the ceilings are fixed during the CFSP preparation after the budget circular has been issued. 17.3. Budget submission to the D The County Executive has submitted the annual budget legislature proposal to the legislature less than one month before the start of the fiscal year in each of the last three years. PI-17.1. Budget calendar The budget calendar starts when the National Treasury issues the BPS. According to Section 25 of the PFM Act, 2012, the National Treasury is required to submit the BPS to Parliament, by February 15 of each fiscal year. This BPS sets out the broad strategic priorities and policy goals that will guide the national and county governments in preparing their budgets both for the following financial year and over the medium term. Further, the PFM Act, 2012, requires that the BPS include the amount of indicative transfers of funds from the national government to the county governments. The BPS must be published not later than fifteen days after its submission to the County Assembly. Table 3.16: Budget calendar for 2017/2018 Activity Responsibility Time frame/deadline Budget Performance Review 1.1 Prepare and issue County Treasury circular CEC Finance and Friday, August 5, 2016 Planning 1.2 Submission of program All accounting officers Friday, August 12, 2016 Performance Reviews for FY2015/16 budget and progress report for CIDP 1.3 Preparation of FY2017/18 ADP All accounting officers Monday, August 8–Friday, August 19, 2016 1.4 Submission to and approval by County CEC Finance and Thursday, August 25, 2016 Assembly of FY2017/18 ADP Planning 1.5 Draft CBROP Head of Budget Monday, August 9–Tuesday, August 30, 2016 1.6 Submission to and approval by County CEC Finance and Wednesday, August 31, Executive and County Budget and Planning 2016 Economic Forum (CBEF) of CBROP 1.7 Submission of CBROP to County Assembly CEC Finance and Wednesday, September 7, Planning 2016 41 Review of MTEF Budget Proposals 2.1 Estimation and review of resource Macro working group Thursday, August 25, 2016 envelope 2.2 Determination of Policy Priorities Macro working group Thursday, August 25, 2016 2.3 Convene sector working group meetings COs & Head of Planning Monday, August 12–Friday, September 16, 2016 2.4 Public hearing on sector budget proposals COs, County Tuesday, September 20– Assembly Clerk, and Friday, September 23, 2016 County Assembly Sectoral Committee Chairs 2.5 Preparation of 2017/18 county wage bill Head of Human Monday, September 26– Resources and Head of Wednesday, September 28, Budget 2016 2.6 Reviewing and incorporating stakeholder COs, County Assembly Monday, October 26– inputs in the sector proposals and Clerk, and Head of Friday, October 7, 2016 preparation of sector Budget reports and draft sector budget proposals 2.7 Presentation of sector reports and COs and County Tuesday, October 11, 2016 draft sector budget proposals to County Assembly Clerk Executive and CBEF 2.8 Consolidation of draft budget proposals Head of Budget Wednesday, October 12– Friday, October 21, 2016 County Fiscal Strategy Paper (CFSP) 3.1 Draft County Debt Management Strategy Head of Budget and Monday, October 31–Friday, Paper (CDMSP) Head of Planning November 4, 2016 3.2 Release of 2017/2018 BPS National Treasury Thursday, November 10, 2016 3.3 Release of final 2017/18 budget ceilings County Executive Tuesday, November 15, 2016 3.4 Draft CFSP Head of Budget and Monday, November 7– Head of Planning Monday, November 21, 2016 3.5 Submission of CFSP and CDMSP to County Head of Budget and Monday, November 21, Executive for approval Head of Planning 2016 3.6 Submission of CFSP to County Assembly CEC Finance and Wednesday, November 23, for approval Planning 2016 3.7 Submission of CDMSP to County Assembly CEC Finance and Wednesday, November 23, Economic Planning 2016 3.8 Adoption of CFSP by County Assembly County Assembly Thursday, December 8, 2016 Budget and Appropriation Committee 3.9 Preparation and Submission of Head of Budget and Wednesday, November 23– FY2016/17 supplementary budget Head of Planning Thursday, December 22, proposals 2016 42 County Public Participation 4.1 Joint meeting of MCAs, CBEF, Subcounty Head of Budget and Tuesday, January 10, 2017 and Ward Administrators to prepare Chairman Budget and public participation schedule and venues Appropriation Committee 4.2 Publicize public participation schedule Head of Budget and Tuesday, January 10– Ward Administrators Sunday, January 15, 2017 4.3 Public participation - all 20 wards Head of Budget, Head of Monday, January 16– Planning, and Ward Tuesday, January 31, 2017 Administrators 4.4 Public participation report Head of Budget and Wednesday, January 1– Head of Planning Saturday, February 4, 2017 4.5 Presentation of public participation report Head of Budget Monday, February 6, 2017 to departments and County Assembly Preparation and Approval of Final Departmental Program Budgets 5.1 Preparation of draft budget estimates by Department Heads and Thursday, January 19– departments Technical Staff Friday, January 20, 2017 5.2 Submission of draft budget reports to Departments and Head Monday, January 23, 2017 budget office of Budget 5.3 Submission, joint review and validation of CEC Finance and Tuesday, January 7– consolidated draft budget estimates by Economic Planning Wednesday, February 8, County Executive and CBEF 2017 5.4 Submission of draft budget estimates to CEC Finance and Thursday, February 9, 2017 County Assembly Economic Planning Consideration of Passage of Appropriation Bill 6.1 Submission of annual cash flow Head of Accounting and Thursday, February 9, 2017 Principal Finance Officer 6.2 Submission of annual procurement plan Head of Supply Chain Thursday, February 9, 2017 6.3 Submission of Appropriation Bill to County CEC Finance and Tuesday, March 28, 2017 Assembly Economic Planning 6.4 Approval of draft budget estimates County Assembly Wednesday, March 29, 2017 6.5 Passage of Appropriation Bill County Assembly Thursday, March 30, 2017 Finance Bill 7.1 Draft Finance Bill Head of Revenue Tuesday, January 24–Friday, February 17, 2017 7.2 Public participation/stakeholder forums Head of Revenue, Ward Tuesday, March 7–Thursday, on Finance Bill Administrators, and March 16, 2017 Head of Budget 7.3 Preparation of Finance Bill public Head of Revenue Friday, March 17–Thursday, participation report March 23, 2017 7.4 Submission of Finance Bill to County Head of Revenue Wednesday, March 29, 2017 Assembly Source: BPS 2017/18. 43 Subsequently, the county prepares the CFSP, guided by the BPS which sets expenditure limits for counties. The CFSP is tabled in the County Assembly in February9. It is then committed to the County Budget and Appropriations Committee to deliberate upon it according to their respective mandate. It was indicated that some departments, such as tourism, education, trade, and so on, met the timelines, but no evidence was provided to enable scoring the indicator correctly. Indeed, poor adherence to deadlines is observed in practice, due to the lack of the necessary expertise to prepare required documents. In summary, it was not possible to determine how much time departments were allowed to complete their budget estimates from the receipt of the circular, but poor adherence to deadlines is observed in practice. Dimension rating = D* PI-17.2. Guidance on budget preparation The calendar gives a clear guidance on the budget circular to the departments. The budget circular does not accompany the ceilings to departments. The circular presents a template to be completed by the department to propose their estimates but does not include total budget expenditure and ceilings. County ceilings are usually established by the end of February each year by the County Budget and Appropriations Committee. They are included in the CFSP, which is submitted to the County Assembly. Estimates in the CFSP FY2016/17 and the PBB FY2016/17 presented in June 2016 to the County Assembly show strong discrepancies between the CFSP FY2016/17 prepared in February 2016 and the PBB (Table 3.17). Table 3.17: Budget estimates in the CFSP and in the PBB for 2016/17 (Ksh, millions and percentage) Estimates in Estimates in Percentage CFSP PPB difference County Executive 342.0 446.1 30.45 Finance and economic planning 223.6 315.8 41.26 Roads, public works and transport 448.5 503.2 12.20 Health and sanitation 1,089.9 1,390.3 27.57 Education and ICT 348.6 593.4 70.25 Agriculture and irrigation 225.9 238.9 5.75 Livestock, fisheries, and veterinary services 125.7 148.9 18.49 Trade, industry, and cooperative development 86.0 94.7 10.06 Lands, housing, physical planning, and urban development 116.8 140.9 20.57 Water development, environment, and natural resources 132.3 203.8 54.09 Tourism, culture, sports, youth, and gender development 105.9 127.6 20.54 West Pokot County Assembly 444.7 535.0 20.31 County public service management 160.1 145.2 −9.34 Intergovernmental relations and special initiatives 103.9 157.5 51.61 Total 3,953.7 5,041.3 27.51 9 The CFSP was laid in the County Assembly on February 26, 2015. 44 Source: CFSP and PBB FY2016/17. In summary, the total budget expenditure and ceilings are not presented in the circular, only in the CFSF and in the PBB, and they are inconsistent. Dimension rating = D PI-17.3. Budget submission to the legislature According to the PFM Act, 2012, final estimates submitted to the County Assembly should follow recommendations from the County Budget and Appropriations Committee. The committee consists of a Chairperson, and not more than eight other members. The budget was presented by the County Executive and submitted to the County Assembly as follows: • FY2014/15 budget was presented on June 30, 2015; • FY2015/16 budget was presented on June 2, 2015; and • FY2016/17 budget was presented on June 30, 2016. In summary, the County Executive has submitted the annual budget proposal to the legislature less than one month before the start of the fiscal year in each of the last three years. Dimension rating = D PI-18. Legislative scrutiny of budgets Summary of scores and performance table PI-18. Legislative scrutiny of C+ Brief justification for score budgets (M1) 18.1. Scope of budget A The legislature’s review covers fiscal policies, medium -term fiscal scrutiny forecasts, and medium-term priorities as well as details of expenditure and revenue. 18.2. Legislative procedures C Section 130 of PFM Act, 2012, and the Standing Orders give the for budget scrutiny procedures for budget scrutiny. They include internal organizational arrangements, such as specialized review committees, technical support, and negotiation procedures. However, the fact that the budget is presented to the County Assembly just one day before it is approved, highlights that the failure to use these procedures in practice and the lack of budget scrutiny. 18.3. Timing of budget C The County Assembly has approved the annual budget before the start of approval the following year in one of the last three fiscal years. 18.4. Rules for budget C Section 135 of the PFM Act, 2012, and Standing Order No. 127 provide the adjustments by the executive rules for adjustment of the budget; which are allowing extensive administrative reallocations and expansion of total expenditure up to 10%. The rules are adhered to by all departments. 45 PI-18.1. Scope of budget scrutiny The County Assembly scrutinizes the policies, MTEF, and the budget. Standing Order Paper No. 117 establishes the procedures for scrutinizing the CFSP while Standing Order Paper No. 118 provides for the presentation of budget estimates by respective committees to the County Assembly. The PBB has facilitated budget approval mechanisms by involving the MCAs in the deliberation process. Where previously the MCAs would deliberate on the allocations only when the budget is presented, there are now more documents to scrutinize (ADP, CBROP, CFSP, and so on) long before the project is presented to the County Assembly, following their engagement in the Participatory Budgeting forums. In summary, the legislature’s review covers fiscal policies, medium-term fiscal forecasts, and medium- term priorities as well as details of expenditure and revenue. Dimension rating = A PI-18.2. Legislative procedures for budget scrutiny Section 130 of the PFM Act, 2012 and Standing Order No. 106 give procedures for the budget scrutiny and establishes the Budget and Appropriation Committee. They provide for the involvement of the people in the process of policy making and for transparency and provision to the public of timely and accurate information. They stipulate that the functions and powers of the county are to ensure and coordinate the participation of communities and locations in governance at the local level. The County Assembly approved the policies with the CIDP on September 26, 2013, the CFSP on March 13, 2015, and the ADP on June 23, 2015. The budget committee considers the policy documents together with the sectoral committees of the respective departments. Section 207 of the PFM Act, 2012, provides that the county governments are to establish structures, mechanisms, and guidelines for citizen participation. In fulfilling this requirement, the County Assembly involved the public in the budget preparation process for FY2015/16 as shown in the report of participation provided. Some views from these public participation forums were considered in the FY2015/16 CFSP. The chairpersons for the sectoral committees provided oversight roles whenever Sector Working Groups presented their economic development priorities for each sector. MCAs’ participation in and commitments made during the PB meetings have allowed for swifter approval of budgets when they are presented to the County Assembly. In West Pokot, where the MCAs would previously deliberate on and change the allocations made, following MCAs’ engagement in the PB forums, fewer changes are made to the proposed budgets. To prepare the FY2016/17 budget, the government conducted public participation on November 25, 2016, where all the county development partners, civil society members, CBEF members, MCAs, staff of both national and county governments, county professionals, interest groups, and members of the public were invited to give inputs for the strategy paper. In summary, technical assistance and negotiation procedures are provided along the budget elaboration process, because the MCAs are part of the citizen engagement in budget approval since PB has been put in place. The participation of MCAs in the PB meetings cannot be considered as a proper legislative scrutiny of the budget. The fact that the budget is presented to the County Assembly just one day before it is approved highlights the lack of budget scrutiny, hence negotiation procedures after the budget have been presented to Parliament. 46 Dimension rating = C PI-18.3. Timing of budget approval For the last three fiscal years, the budget has not been approved in due time except for FY2015/16. From the evidence provided the dates of approval are as follows: • FY2014/15 budget was presented on June 30, 2015, and approved on July 2, 2014; • FY2015/16 budget was approved on June 2, 2015, and approved on June 4, 2015; and • FY2016/17 budget was presented on June 30, 2016 and approved on July 1, 2016. In summary, the County Assembly has approved the annual budget before the start of the following year for only one of the last three fiscal years. Dimension rating = C PI-18.4. Rules for budget adjustments by the executive Section 135 of the PFM Act, 2012, provides the rules for adjustment of the budget. Section 43 of the PFM Act, 2012, permits accounting officers of MDAs to reallocate budgetary funds within their authorized use (as per the approved budget without requiring prior National Treasury approval, subject to the following restrictions: (a) no transfer to another entity or person; (b) no reallocation of capital expenditure items except to defray other capital expenditure items; (c) no reallocation of wage to non-wage expenditure; and (d) no transfers that may result in the contravention of fiscal responsibility principles. Reallocations between programs/sub-votes are allowed, subject to National Treasury approval if (a) budgeted provisions are unlikely to be utilized and (b) reallocations do not exceed 10 percent of the approved budget for such programs/sub-votes. Extensive administrative reallocations are made during budget implementation. In addition, 10 percent of the budget can be increased two months before passing the supplementary budget to Parliament. The FY2016/17 PBB mentions that “During the implementation of the budget the department faced the following challenges: under funding, rugged terrain, limited staff capacity which caused delays in preparing Bills of Quantity (BQs) and most emergency works/special projects done were not budgeted. This caused serious budget deficit forcing the department to borrow funds from other departments’ projects.� In summary, clear rules exist which may be adhered to in all instances but they allow extensive administrative reallocations, up to 10 percent of the total amount of expenditure. Dimension rating = C 3.5. Pillar V. Predictability and control in budget execution Indicators of this pillar examine whether the budget is implemented within a system of effective standards, processes, and internal controls, ensuring that resources are obtained and used as intended. There are eight indicators under this pillar: revenue administration, accounting for revenue, predictability of in-year resource allocation, expenditure arrears, payroll controls, procurement management, internal controls on non-salary expenditure, and internal audit. 47 PI-19. Revenue administration Summary of scores and performance table PI-19. Revenue D Brief justification for score administration (M2) 19.1. Rights and obligations D Entities collecting the revenues do not provide payers with access to for revenue measures information on the main revenue obligation areas and on rights including, as a minimum, redress processes and procedures. 19.2. Revenue risk D The County Revenue Unit has not put in place a comprehensive, management structured, and systematic approach for assessing and prioritizing compliance risks. 19.3. Revenue audit and D The county government has not put in place an independent body to investigation carry out revenue audits and fraud investigations. 19.4. Revenue arrears D* The stock of revenue arrears at the end of the last completed fiscal year monitoring is not available. PI-19.1. Rights and obligations for revenue measures The Revenue Department of West Pokot County is the sole entity charged with the responsibility of administering all revenues of the county. The main source of information to the payers is the Finance Act. The Finance Act is passed every year and it is only available in hard copy at the county offices since the county has not published it in its website. The Finance Act is however not comprehensive since it does not include information on registration, timely filing, payment of liabilities, and reporting of information on the declaration. The county officials also sensitize the public about revenues and their obligations as citizens through the local radio station (Kalya FM). However, it was not possible to ascertain the nature of information provided through this channel. Thus, entities collecting the revenues do not provide taxpayers with access to information on the main revenue obligation areas and on rights including, as a minimum, redress processes and procedures. Dimension rating = D PI-19.2. Revenue risk management The Revenue Department has not put in place a comprehensive, structured, and systematic approach for assessing and prioritizing compliance risks. The Revenue Department has also not classified the revenue payers into various categories of small, medium, and large payers to effectively facilitate prioritization of compliance risks and mitigation measures. The county has however automated revenue collection to minimize revenue pilferage. It was also noted that there is no integrated revenue management system which, if in place, can detect and arrest potential revenue risks. In summary, the County Revenue Unit has not yet implemented a comprehensive, structured, and systematic approach for assessing and prioritizing compliance risks. Dimension rating = D 48 PI-19.3. Revenue audit and investigation The Revenue Department of the county government has not implemented audit and fraud investigation systems and no independent body is operational to carry out revenue audits and fraud investigations. It is therefore difficult to identify risks and follow up to minimize revenue leakages. In summary, the county government has not put in place an independent body to carry out revenue audits and fraud investigations. Dimension rating = D PI-19.4. Revenue arrears monitoring The county does not have outstanding revenue arrears. In the context of county governments, revenue arrears accrue from property rates and rent not received as at close of the fiscal year. However, the county has not been collecting property rates after expiry of the valuation roll which forms the basis of levying property rates for land and property owners. Some of the reforms the county is implementing to improve own source revenues include the use of posters to provide payers with comprehensive information and revising of its valuation roll to facilitate collection of property rates revenue. In summary, the stock of revenue arrears at the end of the last completed fiscal year is not available. Dimension rating = D PI-20. Accounting for revenue Summary of scores and performance table PI-20. Accounting for revenue C+ Brief justification for score (M1) 20.1. Information on revenue A A central agency collects monthly revenue data from entities collecting collections all county government revenue and consolidates this information into a report. 20.2. Transfer of revenue B Entities collecting government revenue transfer the collected funds to collections the Treasury at least every week. 20.3. Revenue accounts C Reconciliation of revenue collections and transfers are carried out on a reconciliation monthly basis, but they only cover collections and transfers to the Treasury accounts. Reconciliations do not include assessments and arrears. PI-20.1. Information on revenue collections According to information provided, revenue from various sources is collected using point-of-sale (POS) machines. Field revenue collectors surrender their daily collection reports to their respective supervisors. The supervisors compile the reports and hand them over to the ward revenue officers who report to subcounty revenue officers. The subcounty revenue officers prepare weekly reports for all revenue types within their jurisdiction and submit the reports to the head of County Revenue Unit at the headquarters. The weekly reports are consolidated into monthly revenue reports covering all types of revenue collected 49 by the county. Therefore, the County Executive obtains revenue data at least monthly from entities collecting revenue. This information is broken down by revenue type and is consolidated into a report. In summary, a central agency obtains revenue data at least monthly from entities collecting all county government revenue. This information is broken down by revenue type and is consolidated into a report. Dimension rating = A PI-20.2. Transfer of revenue collections Revenue collected from various sources is banked daily into the county revenue collection bank account by the individual revenue collectors or their supervisors. In some cases, revenue collected may take two to three days before banking. This is normally occasioned by lack of banking services in some of the collection centers where revenue is surrendered to the supervisors and kept safe. In summary, entities collecting county revenue transfer the funds to the County Treasury at least weekly. Dimension rating = B. PI-20.3. Revenue accounts reconciliation Reconciliation of revenue collections and transfers are carried out on a monthly basis. The reconciliations only cover collections and transfers to the County Treasury accounts. Reconciliations do not include assessments and arrears. In summary, reconciliation of collections and transfers is done on a monthly basis, but they do not include assessments and arrears. Dimension rating = C PI-21. Predictability of in-year resource allocation Summary of scores and performance table PI-21. Predictability of in-year resource C Brief justification for score allocation (M2) 21.1. Consolidation of cash balances D Records of balances are calculated separately and balances from the accounts are not transferred into a central consolidated account. 21.2. Cash forecasting and monitoring C West Pokot County prepares cash flow forecasts for the fiscal year, but these forecasts are not updated. 21.3. Information on commitment ceilings C Budgetary units plan and commit expenditure for at least six months in advance but no evidence was provided. In practice, budget users do not seem to have reliable information more than one month in advance. 21.4. Significance of in-year budget B Adjustments to budgets are done once in every fiscal year adjustments during the supplementary budget. The process is transparent but not predictable, because 10 percent of the budget can be increased two months before the supplementary budget 50 PI-21.1. Consolidation of cash balances The county has three main bank accounts held with the CBK: • CBK County Revenue Fund (CRF) • CBK recurrent account • CBK development account Section 109 of the PFM Act, 2012, provides that each county government shall ensure that all monies raised or received by or on behalf of the county government shall be paid into the CRF account. West Pokot County consolidates most of its cash balances once a month in the CRF account held with the CBK as well as the two other accounts with the CBK, recurrent and development accounts. In addition, each department in the county operates its own account. The county has seventeen other accounts with commercial banks that are used to transact and make receipts and payments. Some of them belonging to the defunct authorities are dormant accounts (see PI-27.1) In summary, records of balances are calculated separately and balances from the accounts are not transferred into a central consolidated account. Dimension rating = D PI-21.2. Cash forecasting and monitoring The county prepares its cash flow forecast for the entire fiscal year since its forecasts for cash inflows and outflows are reliable. Cash forecasting and monitoring is most of the time limited to the schedule prepared by the CRA. Internal revenue flow is however unpredictable due to fluctuations on a month to month basis. The same applies to equitable share from the national government. According to the CFSP 2015/16, “the release of the equitable share from the national government has not been regular and budgeting as well as planning for the funds becomes cumbersome thus leading to delays in commencement and completion of projects.� The county PBB for FY2016/17 states that: “Internal revenue flow is unpredictable due to fluctuations on a month to month basis. Same applies to equitable share from the national government. The release of the equitable share from the national government has not been regular and budgeting as well as planning for the funds becomes cumbersome thus leading to delays in commencement and completion of projects�. In summary, West Pokot County prepares cash flow forecasts for the fiscal year, but these forecasts are not updated. Dimension rating = C 51 PI-21.3. Information on commitment ceilings Budgetary units are able to plan and commit expenditure for at least six months in advance in accordance with the budgeted appropriations and cash/commitment releases. Budgetary units operate as per the schedules released by CRA. The county does not have control mechanisms to fall back to in case there are cash flow problems. For instance, PBB 2016/17 states that the Health and Sanitation Department faced the following challenges in implementing previous budgets: inadequate budgetary provisions, huge wage bill, and lengthy procurement process resulting in delays of delivery and implementations of projects. In summary, it seems that in practice, budget users do not have reliable information more than one month in advance. Dimension rating = C PI-21.4. Significance of in-year budget adjustments Extension of the budget must be approved by Parliament within two months after the money is spent, through a new appropriations act, and it may not exceed 10 percent of the total budget for the year unless special permission has been granted by Parliament. The procedure for supplementary estimates is under Standing Order No. 127 of the PFM Act, 2012. The County Assembly uses the standing orders to make the adjustments. All the departments comply with the rule but 10 percent of the budget can be increased two months before the supplementary budget. The county makes only make one supplementary budget in every fiscal year. All other budgetary units within the county also make one adjustment to their annual budget in a fiscal year. All departments within the county are also allowed to make one adjustment to their budget during the supplementary budget. No IFIMIS extracts for the supplementary budget were availed. In summary, the county makes only one supplementary budget in every fiscal year. The process is transparent but not predictable. Dimension rating = B PI-22. Expenditure arrears Summary of scores and performance table PI-22. Expenditure arrears (M1) C Brief justification for score 22.1. Stock of expenditure arrears C The stock of expenditure arrears is no more than 10% of total expenditure in at least two of the last three completed fiscal years. 22.2. Expenditure arrears monitoring C Data on the composition of expenditure arrears is generated at the end of each fiscal year in an AFS. PI-22.1. Stock of expenditure arrears Expenditure arrears in the context of the County Government are referred as pending bills. These are financial obligations due to employees, statutory organisations, service providers, suppliers, and 52 contractors. Outstanding arrears as at the end of 2014/15 and 2015/16 consisted of amounts due to employees, contractors, service providers, and suppliers. Arrears due to contractors, service providers, and suppliers were occasioned by works completed, goods supplied, and services offered as per contract agreements, but payments not yet made on due dates. The arrears due to employees’ allowances are those that are payable but had not yet been paid as at the end of the fiscal year. As at close of 2013/14, 2014/15, and 2015/16 financial years the county had expenditure arrears amounting to Ksh 299,685,824, Ksh 306,780,299, and Ksh 316,850,666 respectively, according to the AFSs. Total expenditure as at close of the three financial years was Ksh 2,803,680,964, Ksh 4,109,385,676, and Ksh 4,487,008,801 respectively. Based on these figures the percentage of stock of expenditure arrears to total expenditure for the financial years 2013/14, 2014/15, and 2015/16 is 11 percent, 7 percent, and 7 percent respectively. In summary, the stock of expenditure arrears is no more than 10 percent of total expenditure in at least two of the last three completed fiscal years. Dimension rating = C PI-22.2. Expenditure arrears monitoring Expenditure arrears are not recorded and reported in the IFMIS but are recorded in manual records and reports are generated manually. Data on composition of expenditure arrears is generated at the end of each fiscal year and can be found either in the annex of the PBB and in the AFS. Pending bills for fiscal year 2016/2017 are presented in the CDMSP with a breakdown by department. Pending bills by type of pending accounts payable are presented in the AFS. Pending bills from the defunct authorities have been classified as debts. However, no periodic report is produced to analyze the decomposition of arrears over time (for example, stock of arrears less and more than one year) and the evolution of the stock of arrears. In summary, data on the stock and composition of expenditure arrears is generated at the end of each fiscal year. Dimension rating = C PI-23. Payroll controls Summary of scores and performance table PI-23. Payroll controls (M1) D+ Brief justification for score 23.1. Integration of payroll and D Staff hiring and promotion are checked against the approved budget personnel records prior to authorization. However, staff hiring and promotion are controlled only by a list of drafted staff positions, and reconciliation of the payroll with personnel records takes place only at the end of the year. 23.2. Management of payroll D* Changes to the personnel records and payroll are updated at least changes monthly, but only data related to arrears were produced for two months in 2017, not those related to retroactive adjustments. 53 23.3. Internal control of payroll C Authority and basis for changes to personnel records and the payroll are clear, and sufficient controls exist to ensure integrity of the payroll data of greatest importance, but no audit trail was provided to prove that these controls can ensure high integrity of data. 23.4. Payroll audit C A payroll audit has been conducted at least once in the last three completed fiscal years, but the materiality and information on scope and coverage of the audit was not provided. PI-23.1. Integration of payroll and personnel records The County Government uses the IPPD management system. The personnel database and payroll are both integrated systems but are not directly connected. The IPPD system is not integrated to the IFMIS, which has a budget module. All changes affecting payroll are performed on a monthly basis and checked against the previous month’s payroll data. The county governments use the IPPD management system to generate monthly payroll and staff payslips. The system is used for HRM, including appointments/recruitment, personnel records management, career development, and pension. In addition, it administers the records of benefits enjoyed through offers such as loans, medical benefits, claims, personal advances, and allowances. The payslip database is uploaded to the Government Human Resource Information System, which is an online platform that enables staff to access their pay information. Reconciliation of the payroll with personnel records takes place on an annual basis through a payroll audit. All the counties do not have an approved staff establishment but use existing staff and projected hires as a basis for the annual budget. In addition, staff hiring is done on a need basis. In summary, staff hiring and promotions are checked against the approved budget before authorization but, during the period under review, staff hiring was based on a draft list instead of approved staff establishment through the IPPD. However, reconciliation of the payroll with personnel records takes place at the end of the year. Dimension rating = D PI-23.2. Management of payroll changes Changes to personnel records and payroll are updated within one month from the time of approval of adjustments in the IPPD. Amendments to the personnel database and payroll changes are regularly done (mostly monthly) and reports captured in the Authorized Data Sheet. This is, however, applicable for employees who are on the IPPD. Adjustments are done on time to reflect in the subsequent month’s pay. Departmental heads furnish the payroll section with lists of employees working in their respective departments, which enables the payroll section to compare the departmental lists with the one furnished to them by the public service board. Some counties also carried out head counts to identify ghost workers For the County Executive, payroll data for February and March 2017 indicated total expenditure of Ksh 89,439,742 and Ksh 95,380,876, respectively. Retroactive adjustment were not provided, but salary arrears for February and March were Ksh 66,770 and Ksh 615,808, respectively. Therefore, the percentage of arrears to gross salary for the two months is 0.1 percent and 0.6 percent, respectively. Payroll data for February and March 2017 for the County Assembly indicated total expenditure of Ksh 16,893,390 and Ksh 17,750,984, respectively. Salary arrears for February and March were Ksh 10,000 and 54 0, respectively. Therefore, the percentage of arrears to gross salary for the two months is 0.1 percent and 0 percent, respectively. Although the payroll summary for the County Assembly reflects substantial arrears, they relate to MCAs’ monthly sitting allowances which do not have a specific code in the payroll due to the design of the IPPD. Since these are normal monthly sitting allowances, they were not taken into consideration in the computation of the percentages. Table 3.18: Payroll data for February and March 2017 for the County Executive and the County Assembly (Ksh) County County Executive Assembly February March February March Wages 89,439,742 95,380,876 16,893,390 17,750,984 Arrears 66,770 615,808 10,000 0 Arrears in % of wages 0.07 0.65 0.06 0.00% Source: County Treasury. In summary, changes to the personnel records and payroll are updated at least monthly, generally in time for the following month’s payments. Data related to arrears was provided only for February and March and not those related to retroactive adjustments. Dimension rating = D* PI-23.3. Internal control of payroll Authorization for changes to personnel records and payroll for the County Executive and County Assembly is vested with the County Public Service Board and the County Assembly Service Board respectively. Decisions of the County Public Service Board are implemented through written communications to the County Secretary, Head of Human Resource, and the Payroll Manager, in that order. Officers who interact with payroll have personal passwords to access the system to ensure a clear audit trail. However, the procedures are not documented in a manual. Assessment of the PFM Performances toward strengthening PFM in county governments in Kenya are contained in the job description. Further, there are no restrictions in making payroll changes for the staff who are paid through the manual system. On the other hand, decisions of the County Assembly Service Board are implemented through written communications to the Clerk to the County Assembly, Head of Human Resource, and the Payroll Manager, in that order. Thus, an audit trail in the form of manual documents is available and was verified during assessment. In summary, authorisation for changes to personnel records and payroll for the County Executive and County Assembly is vested with the County Public Service Board and the County Assembly Service Board respectively, but neither evidence on what is covered in the manual audit trail nor what fields of information it contains is available. Dimension rating = C 55 PI-23.4. Payroll audit The payroll section undertakes periodic payroll audits. During the last three completed fiscal years, the Internal Audit Department of the county carried out three human resource audits. The first one covering 2013/14 and part of 2014/15 dated June 9, 2015. The second audit dated January 25, 2016, covered FY2014/15 The third was a special audit dated February 15, 2016. In addition to the internal audits, the HRM Department also carried out a head count audit in August 2013. From the documents provided, it was evident that there was follow-up by the management (for instance letter Ref. WPC/HR/I/2016 dated February 16, 2016 from the HRM Department to the County Public Service Board requesting a freeze of staff bank accounts implicated in the internal audit report. In summary, a payroll audit has been conducted at least once in the last three completed fiscal years but materiality and information on scope and coverage of audit was not provided. Dimension rating = C PI-24. Procurement management Summary of scores and performance table PI-24. Procurement D+ Brief justification for score management (M2) 24.1. Procurement D* Databases or records are maintained for contracts and include data on monitoring what has been procured, value of procurement, and who has been awarded contracts. It was not possible to verify whether data are complete for all procurement methods for goods, services, and works. 24.2. Procurement methods D* Information provided was not sufficient to verify the materiality. 24.3. Public access to D Only two elements of the six PEFA criteria were met by the county. procurement information 24.4. Procurement B The procurement complaint system meets the first criterion and three of complaints management the other criteria. PI-24.1. Procurement monitoring The County Executive has only one Procurement Department, but procurement officers also operate in each of the departments. Tender and quotation registers have been centralized, meaning that procurement and payment for the same cannot be made for goods, services, or works that are outside of the register. The interface between procurement and suppliers have not been created in the IFMIS. Hence, data is only available on what has been procured, value of procurement, and who has been awarded contracts for all procurement methods for goods, services, and works, except those of public establishments. Assessment and reviews are done annually by the Public Procurement Regulatory Authority (PPRA) for contracts awarded above Ksh 5 million, direct procurements, and termination of procurement proceedings; disposals to employees; and contracts awarded to youth, women, and persons with disability. The PPRA publishes an annual report each year. 56 In summary, databases or records are maintained for contracts and these include data on what has been procured, value of procurement, and who has been awarded contracts, and data were provided, but the completeness could not be evidenced. The database is not connected to the IFMIS and reports published by the PPRA only covers contracts above Ksh 5 million. Dimension rating = D* PI-24.2. Procurement methods The county government has built a restrictive list of suppliers who are required to manifest their interest and qualify by meeting the set criteria as provided on its website. Procurement methods include direct procurement, open tender, and restricted tender (Table 3.19). According to the PPADA 2015, all payments above Ksh 6 million have to go through an open tender. For values between Ksh 4 million and Ksh 6 million, restricted tender can be used if the complexity of the tenders or specialized nature of the goods can be justified. A list of prospective providers of a specified category of goods, works, or services is established by a procuring entity for a specified period of time but not exceeding two years and is maintained for the purpose of inviting them on a rotational basis for subsequent tendering. For direct procurement, a report has to be given to the PPRA. At least three suppliers have to be invited to make their bids. In 2012, the Access to Government Procurement Opportunities (AGPO) law mandated that 10 percent of government contracts had to be awarded to disadvantaged groups (that is, enterprises owned by young people, women, or persons with a disability) without competition from established firms. This percentage was increased to 30 percent in 2013. Table 3.19: Type of procurement methods, 2015/16 Row Labels Sum of tender Direct Procurement 9.03% Open Tender 52.59% Restricted Tender 38.38% Total 100.00% Source: Procurement report 2015/16. However, calculations were made by the staff of the County Executive and the information provided was not sufficient to verify the basis of these calculations. Dimension rating = D* PI-24.3. Public access to procurement information Table 3.20 gauges the kind of procurement information that the public has access to in West Pokot. The table shows that three out of the six elements required by the PEFA methodology were met by the county. 57 • For the first criteria, ‘Access to legal and regulatory framework for procurement’, counties use the national regulatory framework, the PPADA 2015, which is available from the PPRA.10 • For the fifth criteria, ‘Data on resolution of procurement complaints’, information is available online as published by the Public Procurement and Administrative Review Board (PPARB).11 Table 3.20: Public access to procurement information Key procurement information to be made available to the public: Compliance (Y/N) (1) Legal and regulatory framework for procurement Yes (2) Government procurement plans No (3) Bidding opportunities No (4) Contract awards (purpose, contractor, and value) No (5) Data on resolution of procurement complaints Yes (6) Annual procurement statistics No For the third criteria, ‘Access to bidding opportunities’, the reference can be found on the websites of the County Executive and the County Assembly, but the completeness of this information cannot be evidenced. In summary, only two criteria out of the six required by the methodology are satisfied. Dimension rating = D PI-24.4. Procurement complaints management Procurement complaints are addressed through the PPARB which is a function within the PPRA. Clear guidelines are published on the process to be followed for any conflict or complaint filed. The decisions of the PPARB are binding to all parties involved. 5 of the 6 criteria required by the PEFA methodology are satisfied. However there is a fee payable by the party filing complaints and therefore the second criterion is not met. The PEFA criteria related to this component are reported in Table 3.21. Table 3.21: Procurement complaints management Complaints are reviewed by a body which: Compliance Justification (Yes/No) (1) is not involved in any capacity in Yes Section 27 of the PPADA establishes an procurement transactions or in the process independent PPARB to ensure the proper and leading to contract award decisions effective performance of the functions of the PPRA. (2) does not charge fees that prohibit access No Fees are required for procurement complaints. by concerned parties The schedule of fees can be extracted from the Public Procurement and Disposal Regulations, 2013. 10 http://www.ppoa.go.ke/2015-08-24-14-47-43/the-act. 11 http://www.ppoa.go.ke/2015-08-24-14-47-13/pparb-decisions 58 (3) follows processes for submission and Yes The process for submission and resolution of resolution of complaints that are clearly complaints is clearly provided for in the PPADA defined and publicly available (Section 27) which is publicly available. (4) exercises the authority to suspend the Yes The PPADA provides grounds for debarment of procurement process a person from participating in procurement or asset disposal proceedings. (5) issues decisions within the time frame Yes The PPADA requires the PPARB to make a specified in the rules/regulations decision within thirty days of the date of submission of an application for review. The PPARB report for 2015/16 states that all cases lodged were heard and determined within an average of 22.5 days. (6) issues decisions that are binding on every Yes The Procurement Regulations state that “a party (without precluding subsequent access decision by the Review Board is binding on all to an external higher authority) parties concerned subject to judicial review where the parties so appeal.� In summary, the procurement complaint system meets the first criterion and four of the other criteria. Dimension rating = B PI-25. Internal controls on non-salary expenditure Summary of scores and performance table PI-25. Internal controls on non-salary C Brief justification for score expenditure (M2) 25.1. Segregation of duties B Segregation of duties is prescribed throughout the expenditure process. Responsibilities are clearly laid down for all steps. The County Assembly uses the IFMIS payment system but has no SOPs customized for its operations. Further details may be needed in a few areas. 25.2. Effectiveness of expenditure C Expenditure commitment controls are in place and effectively commitment controls limit commitments to approved budget allocations for most types of expenditure but not to projected cash availability. 25.3. Compliance with payment rules D* Information of noncompliance with payment rules and and procedures procedures has not been obtained yet. PI-25.1. Segregation of duties The legislations about segregation of duties are respectively: (a) the Constitution of Kenya of 2010, (b) the PFM Act 2012, (c) Circulars from the National Treasury, and (d) PPADA 2015. The different responsibilities about internal controls are (a) planning, (b) budgeting, (c) procurement, (d) accounting, (e) M&E, and (f) internal auditing. The county uses the IFMIS payment system which is the same as that of the national government, in which separation of duties is clearly specified. The County Treasury uses the National Treasury guidelines for counties on liabilities and assets. There is a register of IFMIS users including their roles. The Principal Finance Officer has assigned clear and documented duties to the respective officer in the finance department. Practically, the different phases of budget execution in the IFMIS are as follows: 59 • Requisition from departments • Confirmation of budgets • Approval of requisitions • Voucher preparation • Voucher certification • Voucher authorization and approval • Voucher examination • Voucher invoicing validation and payment through the IFMIS platform • Collection of cash from cash office The Financial Accounting and Reporting Manual (March 2015) prepared by the National Treasury clearly stipulates separation of duties in asset management and liabilities. Section 7.2.5 on Disposal of Fixed Assets states that “Subject to specific rules that may be issued by an independent government institution dedicated to assets management and disposal, such as Public Procurement Authority, the Chief Officer is required to adhere to the following policy guidelines: • Any disposal of government assets must be conducted in a manner that achieves the best return to government. As much as possible, government assets should be disposed by centralized open public tender/auction; • Following a comprehensive physical verification of fixed assets, the Chief Officer Finance has the responsibility to identify and recommend assets for disposal; • No disposal of any property can be conducted without the prior authorization of the Transition Authority and the Department of Devolution; • Fixed assets are disposed in accordance with Public Procurement Oversight Authority (PPOA, which is currently PPRA) of Kenya regulations.� Section 7.11.3 on borrowing indicates that “the counties must prepare a debt register for all borrowings including borrowings guaranteed by the national government.� This note has to be annexed in the AFS. However, the County Assembly does not have an SOP for Asset Management. In summary, segregation of duties is clearly defined in law and there is a clear segregation of duties for approval of vouchers, mandates in the IFMIS, and internet banking. The county uses the IFMIS payment system but has no SOPs customized for its specific operations, which means that further details may be needed in a few areas. Dimension rating = B PI-25.2. Effectiveness of expenditure commitment controls The Constitution under Article 201 (a) requires that “there shall be openness in public financial matters� Further, section 46(2) of the PFM Act, 2012, requires the Cabinet Secretary to the National Treasury to publish in the Kenya Gazette, revenue collections and exchequer issues by the National Treasury. 60 Pursuant to the CARA, 2015, and in consultation with the COB, the National Treasury uses the IFMIS to complete the exchequer release of the equitable share of revenue to county governments generally on a quarterly basis, taking into account the county governments’ bank balances at the CBK. The COB oversees the implementation of the budgets of the national and county governments by authorizing withdrawals from public funds under Articles 204, 206, and 207 of the Constitution. However, no policy on expenditure commitment has been set up yet. In summary, expenditure commitments are only limited to the amount of funding in the approved budget; therefore expenditures cannot exceed the amount approved but there is no control of committing funds against cash flow projection, because no cash flow projection is carried out at the county level, which provides only partial coverage and is partially effective. Dimension rating = C PI-25.3. Compliance with payment rules and procedures The IFMIS is the responsibility of the National Treasury. The county also uses the IFMIS to ensure that only expenses committed and budgeted for are paid. The IFMIS modules’ implementation in the county is as follows: • Records to report: in use • Plan to budget: still manual • Procure to pay: partly in use • Revenue to collect: not implemented • Cash Management Module: not operational yet • E-procurement: yet to be adopted In summary, no information on the amount related to fast-tracked payments has been provided to score the component. A data extraction from the IFMIS for the last three fiscal years is yet to be obtained. Dimension rating = D* Ongoing reforms The IFMIS has been re-engineered for the benefit of both levels of government. Key highlights include: • Integration of the budget preparation process in the IFMIS through ‘Plan to Budget’ by including a budget module (Hyperion). • Establishment of a general ledger in the IFMIS to allow for budget execution, reporting, and accounting. PI-26. Internal audit Summary of scores and performance table PI-26. Internal audit (M1) D+ Brief justification for score 61 26.1. Coverage of internal audit B The internal audit covers all departments in the County Executive and the County Assembly. It is operational for entities representing most total budgeted expenditures and for central government entities collecting most budgeted government revenue. 26.2. Nature of audits and C Internal audit departments apply the International Professional standards applied Practice Framework (IPPF), but no quality control reports have been disclosed. 26.3. Implementation of A The reports released have been matched to the program to ensure internal audits and reporting that the audit designed is undertaken. 26.4. Response to internal D* Responses to the internal audit reports are provided within one audits month of the report being issued. The Internal Audit Department follows up to ensure implementation, but no evidence on responses to the internal audit reports by the audited entities has been provided. PI-26.1. Coverage of internal audit The Internal Audit Department was established in March 2014 in compliance with Section 155 of the PFM Act, 2012. The internal audit covers all the departments in the County Executive and the County Assembly and work plans have been provided, but internal function has not been implemented in SAGAs yet. According to the reports and financial statements for the year ended June 30, 2015, transfers to SAGAs accounted for Ksh 3.78 million, which corresponds to 1.46 percent of the total expenditure for the same year. However, the budget of SAGAs also include their own revenue. Based on estimations made on the ground, it was assumed that the budget of SAGAs is less than 25 percent of the total budget expenditure of county governments. The department prepares and submits an annual work plan to the County Executive. The annual work plan defines the high risks of the county operation, specifies the audit and the advisory related to areas to be covered, and identifies audit topics, the objectives, and time schedule. High-risk areas identified, including revenue and liquid cash, cut across all the county departments. The practice maintained by the department is to group the entities to be audited by risk exposure and to carry out audit with a follow-up of high-risk entities every year. The internal audit carries out at least one full audit in a year and a follow- up visit in year two for the medium-risk entities and at least one audit every three years for the low-risk entities. In summary, the internal audit covers all departments in the County Executive. Evidence on the auditing of public establishment was not provided but an assumption is made that the budget of SAGAs is less than 5 percent of the total budget expenditure of county governments. Dimension rating = B PI-26.2. Nature of audits and standards applied The internal audit departments reportedly apply the IPPF as stipulated in the law. Audit activities are focused on evaluation of the adequacy and effectiveness of financial and internal controls. There are three levels of review before reports are released. The Internal Audit Department usually requests senior county officers to fill in a risk-based assessment questionnaire to help in creating a risk-conscious climate and a risk-based internal audit plan. The identification and classification of risk is as follows: 62 • Cash management: High • Budgeting: Medium • Payroll management: High • Staff attendance: High • MCAs sitting allowance: High • IFMIS security: High • Contract management: Medium • Transport management: High Over the last three fiscal years, the audits performed were related to: cash management, HRM, payroll management, transport management, procurement and contract management, committee services and MCAs management, and training and staff development. Guidelines for the establishment of audit committees have been delayed, hence audit committees were not created. No quality controls reports have been provided to verify that the nature of audits performed are compliant with the new audit practices. The OAG report on the FY2015/16 underlined the lack of an independent internal audit function and the failure to establish an audit committee. Box 3.1: Extract from OAG audit report on the AFS of County Executive West Pokot FY2015–16 Lack of Independent Internal Audit Function A review of the internal audit function revealed establishment of an internal audit function with six audit staff including a head of internal audit. However, the head of internal audit reports to the Governor instead of the audit committee and therefore does not enjoy operational independence through the reporting structure, contrary to Regulation 155(1) of the Public Finance Management (County Government) Regulations 2015, which states that the head of the internal audit unit in a county government entity shall enjoy operational independence through the reporting structure by reporting administratively to the accounting officer and functionally to the audit committee. Consequently, the unit lacks operational independence to execute its mandate. Failure to Establish an Audit Committee The County Executive of West Pokot has not established an audit committee contrary to Section 167(1) of the Public Finance Management (County Government) Regulations, 2015, which requires each county government entity to establish an audit committee in accordance with prescribed regulations to monitor the entity governance process, accountability process, and control systems of the entity and offer objective advice on issues concerning risk, control, regulatory requirement, and governance of the County. The County Executive is therefore in breach of the law. Source: Report of the Auditor General on the financial statements of the County Executive of West Pokot for the year ended June 30, 2016. In summary, according to the Law, internal audit activities are focused on evaluations of the adequacy and effectiveness of internal controls, but, in practice, audit is still mainly focused on financial and regularity controls. Dimension rating = C PI-26.3. Implementation of internal audits and reporting The audit activity timetable for FY2015–16 is reported in Table 3.22. 63 Table 3.22: Audit activity timetable by departments for FY2015–16 Department Scope of audit work Audit days Month Date of report and required response All departments Review Of development 2 Weeks October No report projects 2015 Department of Finance and Procurement and stores 30 Days October– Report produced Economic Planning management/inspection November 2015 Cash management 30 Days October– Report produced November 2015 Imprest issue and surrender 30 days November Report produced 2015 Revenue 30 days December Report produced 2015 Fuel management 30 days December Report produced 2015 Department of Water and Fuel management Natural Resources Cash and imprest 20 days January Report produced management 2016 Development projects Department of Trade Cash/imprest management Cooperative and Industry Fuel management January Development projects and 20 days 2016 Report produced others Department of Agriculture Cash management Report produced And Irrigation Fuel management 15 Days February Development projects and 2016 others Department of Roads, Fuel management 20 Days February Report produced Public Works and Transport Cash management 2016 Development projects and others Fuel management 20 Days March Report produced Department of Health and Cash management 2016 Sanitation Development projects and others Hospitals and dispensaries Department of Education Cash management 30 Days March Report produced and ICT Fuel management 2016 Development projects Department of Tourism, Fuel management 30 Days April 2016 Report produced Culture And Sports Cash management Development projects Department of Lands, Fuel management 30 Days April 2016 Report produced Housing and Urban Cash management Development Development projects Cash management Report produced Department of Livestock Fuel management 30 Days May 2016 Development projects and others 64 Office of the Governor Financial audit 20 Days Source: Internal Audit Department. This table indicates that the reports released have been matched to the program for all audits undertaken. Dimension rating = A PI-26.4. Response to internal audits The only specific system is place is the one specified by PFM Regulation No. 164 (3a) of 2015, which states that “when updating the management of the progress of an audit assignment, the internal auditor shall give an oral preliminary report which shall be confirmed in writing within seven (7) days �. In practice, response to internal audit reports are generally provided within one month of the report being issued and the department follows up on implementation of audit recommendations. However, no evidence was provided on responses to internal audits and the OAG audit reports do not refer to the responses to internal audit reports by the audited entities. In summary, files are maintained for completed audit reports but responses to internal audits are not disclosed. Dimension rating = D* 3.6. Pillar VI. Accounting and reporting Indicators under this pillar measure whether accurate and reliable records are maintained, and information is produced and disseminated at appropriate times to meet decision-making, management, and reporting needs. There are three indicators under this pillar: financial data integrity, in-year budget reports and annual financial reports. PI-27. Financial data integrity Summary of scores and performance table PI-27. Financial B Brief justification for score data integrity (M2) 27.1. Bank D* Soft copies of monthly bank reconciliations to active bank accounts and sample account hard copies prepared by 10th of the following month were obtained. However, reconciliation the total number of bank accounts could not be verified and bank reconciliation regarding extra budgetary units is unknown. 27.2. Suspense A Suspense account reconciliation is done monthly and is cleared before the end accounts of the fiscal year, with some exceptions. 27.3. Advance A Reconciliations to advance accounts/imprest reconciliations are done monthly. accounts Reconciliation of advance accounts takes place at least monthly, within a month from the end of each month. All advance accounts are cleared on time. 27.4. Financial B Access and changes to records is restricted and recorded, and verification can data integrity be made through an audit trail. The internal audit unit is in charge of verifying processes the financial data integrity, but no evidence was produced by this unit. 65 PI-27.1. Bank account reconciliation PFM Regulation No. 90 (1) of 2015 requires bank reconciliations to all active accounts to be prepared every month and submitted to the County Treasury with a copy to the OAG not later than 10th of the subsequent month. Any discrepancy noted during reconciliation should be investigated immediately. The county has three main bank accounts: • CBK CRF • CBK recurrent account • CBK development account Monthly bank reconciliations to main accounts are prepared by the 10th of the following month. The County Assembly has one recurrent account which is reconciled before the 10th of the following month. The Head of Treasury Accounting maintains reconciliations for departments’ operations accounts monthly. The IFMIS is not being used to carry out bank reconciliations at the county. Bank reconciliations are carried out outside the IFMIS. Nevertheless, soft copies of monthly bank reconciliations to active bank accounts and sample hard copies prepared by the 10th of the following month were obtained. The county continues to operate bank accounts of the defunct local authorities even after opening the county bank accounts. According to the report of the OAG January–June 2013, “The five bank accounts of the defunct County Council of Pokot, four and two accounts of the defunct Municipal Council of Kapenguria and Town Council of Chepareria, respectively, had not been closed as at the time of conclusion of the audit exercise on September 14, 2013 which is a contradiction of the requirements of the County Governments Public Finance Management Transition Act, 2013. It could not be ascertained whether these bank accounts were all closed and balances transferred to CRF account. Further, no report was available about expenditure incurred on these bank accounts.� In summary, the OAG checks all monthly reconciliation statements that are provided with the AFS. It seems that the county has 17 bank accounts in commercial banks, but the total number of bank accounts could not be verified and bank reconciliation regarding extra budgetary units is unknown. Dimension rating = D* PI-27.2. Suspense accounts According to PFM Regulation No. 107(2b), 2015, the accounting officer must ensure that monthly reconciliations are performed to confirm the balance of each account. The County Treasury maintains a suspense account which is reconciled monthly. The suspense account records customer deposits, that is, retentions on service contract. Clearance of the suspense account is done monthly. Thus, there are no outstanding customer deposits at the end of financial year. The County Assembly does not have suspense accounts. In summary, the suspense account reconciliation is done monthly and is cleared before the end of the fiscal year. Dimension rating = A 66 PI-27.3. Advance accounts PFM Regulation No. 93(1&5), 2015 classifies imprests into temporary (safari) imprests, which should be accounted for within seven days after returning to the duty station, and standing imprests. The county has authorized travel advances (accounted for within seven days after return to the duty station) and standing imprests held by authority to incur expenditure (AIE) holders (replenished upon surrender). The imprest account in the County Treasury is reconciled on a monthly basis. The IFMIS generates a monthly list of defaulters/outstanding imprests. A follow-up is made by the head of the treasury (accounting) to facilitate imprest retirement/accounting. Standing imprests are restricted toward the end of the fiscal year to minimize the outstanding imprest balances. Advances are usually cleared by the end of the financial year. The County Assembly reconciles imprest accounts at the end of the financial year. No outstanding advances were observed on the financial statement for 2015/16 submitted on September 30, 2016. In summary, reconciliation of advance accounts takes place at least monthly, within a month from the end of each month. All advance accounts are cleared in a timely way. Dimension rating = A PI-27.4. Financial data integrity processes PFM Regulation No. 109 (1) and 110, 2015, requires the establishment of an IFMIS, with appropriate access controls put in place in the system to minimize breach of information confidentiality and data integrity. The County Treasury uses the IFMIS to facilitate transaction processes and reporting. System users have passwords and the system maintains a log of users (audit trail) together with their functions. A copy of a letter dated December 17, 2015, and request to upload budget 2015/16 in the IFMIS (July 23, 2015) were provided. Restricted access to systems, segregation of duties, and utilization of appropriate password length or log in is in place. Changes to reports must be approved by departmental heads. The Internal Audit Department verifies data integrity. There is LAIFOMS that was previously used by the defunct local authorities. The IFMIS revenue module has not been fully exploited since the rollout has only been done in the county headquarters. The county has sealed an agreement with the mobile phone service provider Safaricom, to provide an automated revenue collection system but the module is not in full operation yet. Fully fledged revenue automation in all the four subcounties through partnership with Safaricom Kenya Limited is ongoing. The internal audit unit, which is in charge of verifying the financial data integrity, did not provide evidence of the controls that were performed. In summary, access and changes to records is restricted and recorded and results in an audit trail, and an internal audit unit is in charge of verifying the financial data integrity, but no audit reports or evidence of the controls performed was provided. Dimension rating = B 67 Ongoing reforms Some reforms initiatives by the County Treasury in this area include maintenance of bank reconciliations in a file (hard copies) to establish timelines of preparation and review. PI-28. In-year budget reports Summary of scores and performance table PI-28. In-year budget reports (M1) D+ Brief justification for score 28.1. Coverage and comparability C Coverage and classification of data allows direct comparison to the of reports original budget with a certain degree of aggregation. Transfers to deconcentrated units are included into the reports but the information is not disclosed in detail. 28.2. Timing of in-year budget D The only evidence obtained that could be used were the quarterly reports BIRRs published by the COB about three months after the end of the period. 28.3. Accuracy of in-year budget C There may be some concerns regarding data accuracy. Data is reports useful for analysis of budget execution. Expenditure is captured at the payment stage. PI-28.1. Coverage and comparability of reports The PFM Act, 2012, requires budget execution monthly financial statements and nonfinancial budgetary reports to be submitted to the County Treasury. According to Section 118 of the PFM Act, 2012, the county should prepare quarterly implementation reports to give an overview of budget execution. They should give comparisons between budget estimates and actual expenditures among departments and the County Assembly. Transfers to deconcentrated units are included into the reports but the information is not disclosed in detail. In addition, the total amount of transfers to other government entities is disclosed in the AFS. Comparison can also be made by the reader by referring to other reports such as the CBROP that present the original budget. According to Article 228 (6) of the 2010 Constitution OCOB is required to submit quarterly BIRRs to Parliament. Quarterly BIRRs are posted on OCOB’s website. Coverage and classification of data allows direct comparison of actual expenditure to the original approved budget according to administrative, sector, and programme classification. The original approved budget is not prepared on a GFS-consistent economic classification basis, mainly because there is no explicit capital budget. Much of the capital spending is covered by the development budget, but it also includes some items of recurrent expenditure. In summary, the coverage and classification of data allows direct comparison to the original budget according to administrative breakdown by vote and economic classification partial aggregation. Dimension rating = C PI-28.2. Timing of in-year budget reports OCOB requires counties to submit financial reports by 10th of the month following the end of each quarter, but they are generally not submitted on time. The County Executive establishes and disseminates 68 the quarterly BIRRs among departments in Excel format. It was stated that it takes generally two weeks to produce reports after the end of the period, but these reports are not published. These reports are disseminated to the departments though the respective COs but they are not always timely reported to the COB or National Treasury. Quarterly BIRRs are generally finalized about three months after the end of the period (for example, annual county governments budget implementation review report FY2015/16 was published in September 2016). The reports produced by OCOB point out delays in the submission of financial reports to OCOB. In summary, quarterly reports produced by the County Executive are not published, and BIRR reports are published by the COB about three months after the end of the period. Dimension rating = D PI-28.3. Accuracy of in-year budget reports There are some concerns regarding data accuracy. The BIRR for FY2015/16 raises various issues regarding timing and data accuracy. The report of the OAG for FY2015/16 revealed various differences between IFMIS reports and AFSs, as reported in Table 3.23: Table 3.23: Differences between various IFMIS reports and AFSs for FY2015/16 (KSh, millions) Item Amounts as per financial Amounts as per financial Amounts as per financial statements statements statements Receipts 4,544.3 4,544.3 Payments 4,502.0 4,470.8 31.2 Cash and bank 449.5 4,627.9 −4,178.4 Receivables 84.3 −84.3 Payables 203.6 9,131.3 −8,927.7 Source: Report of the Auditor General on the financial statements of the West Pokot County Executive for the year ended June 2016. Because no explanation or reconciliation was provided to the Auditor General in support of the above variances, the later was not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Consequently, the Auditor General did not express an opinion on the financial statements for the FY2015/16. In summary, data provided from the quarterly BIRR is useful for monitoring budget implementation. Data are presented at the payment stage. Dimension rating = C Ongoing reforms The county has started preparing monthly expenditure reports for 2016/17 and a report showing actual budget absorption against the approved budget estimates per line department (de-categorized units). 69 PI-29. Annual financial reports Summary of scores and performance table PI-29. Annual financial reports (M1) D+ Brief justification for score 29.1. Completeness of annual B Financial reports for the county are prepared annually and are financial reports comparable with the approved budget. They include information on revenue, expenditures, and cash balances. 29.2. Submission of reports for D Financial reports are generally submitted for external audit more external audit than nine months after the end of the fiscal year. The financial statements for 2015/16 were submitted on September 30, 2016, but the external audit was complete only on May 10, 2017. 29.3. Accounting standards C Accounting standards applied to all financial reports are consistent with International Public Sector Accounting Standards (IPSAS) cash and ensure consistency of reporting over time. The standards used in preparing annual financial reports are disclosed. PI-29.1. Completeness of annual financial reports In accordance with the PFM Act, 2012, financial statements should be prepared annually and submitted every year within three months after the end of the fiscal year (for example, by September 30) and submitted to the OAG for audit, with a copy to the National Treasury. AFSs are prepared annually and are comparable with the approved budget. They contain information on revenue, expenditure, financial and tangible assets, and liabilities and are supported by an annual cash flow statement. Dimension rating = B PI-29.2. Submission of reports for external audit According to the PFM Act, 2012, counties are required to submit their draft AFS to the OAG no later than three months after the end of the fiscal year. They generally comply with this regulation in due date, but their AFSs are not complete by this time, so they need to make revisions, which may continue for a few months. Financial statements were submitted within three months after the end of fiscal year as per the PFM Act, 2012. The financial statements for FY2015/16 were submitted on September 30, 2016 but were considered as complete by the OAG only on May 10, 2017. In summary, financial reports are generally submitted for external audit more than nine months after the end of the fiscal year. Financial statements for 2015/16 were submitted on September 30, 2016 but were considered as complete by OAG only on May 10, 2017. Dimension rating = D 70 PI-29.3. Accounting standards According to the law, the county should apply cash-basis IPSAS to produce its AFS. The standards used in the preparation of the statements are also disclosed. AFSs enhance comprehensive and transparent financial reporting of cash receipts, cash payments, and cash balances of the government. Compliance implies comparability of the government's financial statements over time. Most of the IPSAS cash standards have been incorporated into the national standards but variations between international and national standards are not disclosed and gaps are not explained. Indeed, counties are not able to prepare their financial statements using the IFMIS because the system does not have complete sets of financial data. In addition, the SCOA on the system does not provide sufficient disaggregation to facilitate the level of analysis that the counties require for preparation of the financial reports. In summary, accounting standards applied to all financial reports are more or less consistent with IPSAS cash standards and ensure consistency of reporting over time. The standards used in preparing annual financial reports are disclosed but gaps between international and national standards are not explained. Dimension rating = C 3.7. Pillar VII. External scrutiny and audit There are two indicators under this pillar, namely, external audit and legislative scrutiny of audit reports. These indicators assess the arrangements for scrutiny of public finances and follow-up on the implementation of recommendations by the executive. PI-30. External audit Summary of scores and performance table PI-30. External Audit (M1) D+ Brief justification for score 30.1. Audit coverage and C Financial reports of the county government representing most total standards expenditures and revenues have been audited using International Standards on Supreme Audit Institutions (ISSAI) during the last three completed fiscal years. The audits have highlighted relevant material issues but not systemic and control risks. 30.2. Submission of audit reports D* The date on which the external auditor considers the financial reports to the legislature complete and available for audit is unknown for the period under review. The OAG can meet the 6-month deadline, but only if the AFS have been correctly prepared on time in the first place. 30.3. External audit follow-up D A response was made by the executive or the audited entity on audits for which follow-up was expected, during the last three completed fiscal years, but not in a formal way. The OAG report for 2015/16 does not present any recommendation follow-up. 30.4. Supreme Audit Institution A The Supreme Audit Institution (SAI) operates independently from the independence executive with respect to procedures for the appointment and removal of the Head of the SAI, the planning of audit engagements, arrangements for publicizing reports, and the approval and execution of the SAI’s budget. This independence is assured by law. The SAI has 71 unrestricted and timely access to records, documentation, and information. PI 30.1. Audit coverage and standards The Constitution and Public Audit Act, 2015, specify that the OAG must, within six months of the end of the fiscal year, audit and report on the accounts of all county government entities, covering revenue, expenditure, assets, and liabilities, using ISSAI or consistent national auditing standards. The OAG, headed by the Auditor General, has the primary oversight role of ensuring accountability in the use of public resources. The OAG may audit the accounts of any entity that is funded from public funds, including SAGAs. The audit reports should highlight relevant material issues and systemic and control risks. In-depth audits should be carried out on the basis of risk analysis methods. The OAG annually audits all county government MDAs that are linked to the IFMIS. No special audit has been conducted on public establishments during the last three completed fiscal years as they are not connected to the IFMIS. The reports are individually posted on the OAG’s website. Audits are supposed to be performed according to ISSAI. More emphasis is given to performance audits and procurement/asset disposal than under the previous law (sections 34–38 of the Public Audit Act, 2015). Thus, financial reports of the County Executive and County Assembly, whose budget represents more than 75 percent of total expenditures and revenues, have been audited using ISSAI during the last three completed fiscal years. The audit report of the OAG for FY2013/14 has not expressly highlighted any relevant material issues but stated that it could not give an opinion. The audit report on the AFS for FY2014/15 has not been issued. The OAG expressed a non-qualified opinion in its audit report on the AFS for FY2015/16. Consequently, audits reports have not highlighted any relevant material issues and systemic and control risks. In summary, reports of the OAG refer to the County Executive and the County Assembly, whose budget is very likely more than 75 percent of the total budget of the central administration but the calculation could not be done very precisely because the annual budget of SAGAs is unknown. Dimension rating = C PI-30.2. Submission of audit reports to the legislature The OAG audits and reports on the accounts of any entity that is funded from public funds should be submitted within six months after the end of each fiscal year. It is not the responsibility of the County Executive to forward audit reports to the County Assembly, and this tasKshould be done directly by the OAG. Every four months, the COB should also submit to each House of Parliament (National Assembly and the Senate) a report on the implementation of the budgets of the national and county governments. Table 3.24 provides dates when the AFSs were completed and received by the OAG and when these statements were submitted to the County Assembly. 72 Table 3.24: Reports audited by the OAG during FY2013/14, FY2014/15, and FY2015/16 Fiscal Year Date AFS signed by CE Date AFS considered to Date audited AFS submitted to the be complete legislature 2012/13 September 30, 2013 n.a. May 25, 2015 2013/14 September 30, 2014 n.a. May 25, 2015 2014/15 September 30, 2015 n.a. August 30, 2016 Source: OAG. The dates on which AFSs are considered to be complete are unknown. Indeed, only the date of completion for the 2015/16 AFS is indicated on the OAG’s report. AFSs were considered complete by the OAG on May 10, 2017. The OAG’s report on the AFS was sent to the County Assembly on August 30, 2017, which is within the 6-month period. However, this date is out of the scope. In summary, the date on which the external auditor considers the financial reports complete and available for audit is unknown for the period under review. The OAG can meet the 6-month deadline, but only if the AFSs have been correctly prepared on time in the first place. Dimension rating = D* PI-30.3. External audit follow-up The Public Audit Act, 2015, covers the audit process, including response and follow-up. The audit process is prescribed in Section 31 of Part IV of the Public Audit Act, 2015, on ‘Audit Process and Types of Audit’. The Public Sector Accounting Standards Board (PSASB) located in the National Treasury has prepared a template. Section 27 of the template (available on the National Treasury’s website) provides for monitoring the actions taken by MDAs in response to the recommendations of audit reports. A matrix contains the following in column form: list of issues raised by the OAG in its Management Letter to the respective MDA; management comments; name of the MDA staff in charge of resolving the issue; status of resolving the issue; and expected date for resolving the issue. The template came into effect for FY2016/17. The OAG officers use the software Team Mate as a tool for managing audit activities but no evidence was produced. As the audit process is still ongoing, it is not possible to assess how well this new process has worked. To summarize, it was stated that a formal response was provided to audit findings, but no evidence was presented. Furthermore, the OAG report for 2015/16 does not present any recommendation follow-up. Dimension rating = D PI-30.4. Supreme Audit Institution independence The OAG is established as an independent office under Articles 229, 248, and 253 of the Constitution. In accordance with the Constitution, the Auditor General is nominated and appointed by the President with the approval of the National Assembly. The statutory duties and responsibilities of the position are provided in Article 229 of the Constitution and in the Public Audit Act, 2015. The OAG operates independently from the executive with respect to procedures for the appointment and removal of the head of the OAG, the planning of audit engagements, arrangements for publicizing reports, and the approval and execution of the OAG’s budget. This independence assures unrestricted and timely access to records, documentation, and information. 73 In Kenya, the OAG’s annual budget estimates are prepared and submitted to the Cabinet Secretary responsible for finance who then submits to the National Assembly estimates of the revenue and expenditure of the national government entities. The OAG's budget is negotiated with officials of the National Treasury. To assure better budget independence, the Public Audit Law may provide for direct submission of the Auditor General’s annual budget estimates to the National Assembly, but this is not a specific prerequisite of the PEFA methodology. On the other hand, it was verified that no pressure was made on the OAG and resulted in the withholding of necessary funds thus compromising its independence. In summary, the Public Audit Act, 2015, confirms the OAG’s independence from the executive branch of the national government. Thus, OAG independence is assured by the Constitution and law. Dimension rating = A PI-31. Legislative scrutiny of audit reports Summary of scores and performance table PI-31. Legislative scrutiny of audit reports D Brief justification for score (M2) 31.1. Timing of audit report scrutiny D* The scrutiny of audit reports is generally completed over a period of two months, but the dates have not been provided. 31.2. Hearings on audit findings D* In-depth hearing is carried out on the audit findings but no evidence has been provided. 31.3. Recommendations on audit by the D* The County Assembly usually makes recommendations to legislature the County Executive for implementation but reports were not provided. 31.4. Transparency of legislative scrutiny D Hearings are conducted in public. Committee reports are of audit reports provided to the full chamber of the County Assembly. They are not published on the County Assembly website. PI-31.1. Timing of audit report scrutiny According to the Law, audit reports must be submitted to Parliament or the relevant County Assembly. Parliament or the County Assembly should debate and consider the report and take appropriate action within three months after receiving an audit report. In practice, there is no specific timeline for scrutinization of audit reports by the County Assembly. The time for scrutiny depends on the program of the committee. It has been said during meetings that the scrutiny was completed over a period of two months, but no evidence was provided. In summary, there is no specific timeline for scrutinization of audit reports by the County Assembly. Audit reports are generally scrutinized over a two-month period. Dimension rating = D* PI-31.2. Hearings on audit findings Article 96 (3) of the Constitution states that “the Senate determines the allocation of national revenue among counties, as provided in Article 217, and exercises oversight over national revenue allocated to the 74 county governments.� In addition, Article 185 (3) gives the County Assembly oversight role over the County Executive. Hearing is carried out twice by the County Assembly on the audit findings. It was stated that audit reports for Chepareria Town council and Kapenguria Municipality were produced, but no evidence was provided. In summary, an in-depth hearing is carried out on the audit findings, but evidence provided was not sufficient to score the component. Dimension rating = D* PI-31.3. Recommendations on audit by the legislature The audit reports usually contain recommendations to the executive for implementation. The County Assembly generally uses these for follow-up, but no evidence was provided. It was indicated that the OAG refers to these recommendations in its annual report, but no evidence was found either. In summary, the County Assembly usually makes recommendations to the executive for implementation, but no evidence was provided. Dimension rating = D* PI-31.4. Transparency of legislative scrutiny of audit reports Articles 196 and 201 of the Constitution and Section 115 of the County Government Act, 2012, states that there shall be openness and accountability, including public participation in financial matters and a County Assembly shall conduct its business in an open manner, and hold its sittings and those of its committees in public and facilitate public participation and involvement in the legislative and business of the County Assembly and its committees. The hearings are held in public but reports of the committee are not published on the official website, even though they are easily accessible to the public. Only the Report of the Sectoral Committee on ECD and Vocational Training on the consideration of the proposal to establish Kapenguria University College was available on the website. In summary, committee reports are provided to the full chamber of the County Assembly but they are not published on the County Assembly website. Dimension rating = D 75 4. Conclusions of the analysis of PFM systems 4.1. Integrated assessment of PFM performance Budget reliability Budget reliability appears to be good because variances between aggregate and functional votes were small. However, variance was high in FY2013/14 because it was the first year of implementation of the devolved system of government. Variances between budgeted and actual expenditures were relatively small at the aggregate and functional levels, but large at the economic level because of the low absorption rate of the development budget. The Department of Health had the largest variance in terms of functional classification. The county does not have a contingency fund yet, but a disaster fund has been captured as a regular budget item in the budgets. On the revenue side (PI-3), about 95 percent of the revenue of the county originates from the national government transfers as equitable share. This makes the actual revenue to be close to the budgeted amount. Discrepancy was nevertheless observed for conditional grants, due to the fact that donor agreements were disconnected from budget preparation. In a nutshell, the reliability of the budget is acceptable, at least at the aggregate level, and budget execution is well managed in the county because it is supported by the IFMIS. Transparency of public finances Budget classification is comprehensive and the county follows guidelines provided by the National Treasury which requires counties to present their budgets according to the administrative, economic, PBB format. This is as per the SCOA derived from GFS standards. However, budget execution and reporting does not take into account the PBB format. Fiscal information available to the public is not comprehensive because it lacks key information such as macroeconomic assumptions, and fiscal risks are not available in budget documents. Budget estimates do not present the previous year’s budget outturn in the same format as the budget proposal. Only the previous year’s budget estimates are presented in the budget documentation. The CBROP and CFSP present an aggregated budget for both revenue and expenditure according to the main heads of budget classifications but only partially. There is a lack of consistency with the classification used in the budget proposals. Nonetheless, transparency of public finance resources is acceptable because all types of resources and expenditure are presented in the budget and reported in the AFS, except for extrabudgetary units, such as ECDE schools. Performance plans for service delivery are established for all delivery units (departments) and are reflected in the PBB prepared by the county, containing information about specific programs by specific delivery unit and expected outputs. However, deliverables are not translated into quantifiable units and the indicators do not meet the specific, measurable, achievable, realistic, and time-bound (SMART) criteria. The public can access documents such as the CIDP, ADP, CFSP, CBROP, and PBBs and these are produced in a timely manner. Nonetheless, audited AFSs take more than one year to be available to the public and there no citizens’ budgets available to the public. Management of assets and liabilities The county has the KWSC though it is still under the control of the national government. However, there is no structured way of monitoring its operations. Significant contingent liabilities are presented in financial reports. With regard to economic analysis of investment projects, annual progress reports for major investment projects are provided, including total costs of major investment projects; recurrent 76 costs are not captured. The county does not have a CPU and there are no standard project selection criteria. No economic analysis of investment projects is done but the county has established an M&E unit although with only one staff at the time of the assessment to monitor investment execution. The projects are usually selected from a wish list generated through public participation at the grassroots level. The government maintains a partial record of its holdings in major categories of financial and nonfinancial assets. The land register is not yet complete. The county has not contracted any debt, as no policies and procedures to provide guidance for undertaking borrowing have been set up. However, the county has inherited debts from the previous defunct local government, but they are not published and not updated, because there is no debt management entity. The county has a medium-term debt management strategy, but this strategy is limited and does not present risk indicators such as interest rates and refinancing, and foreign currency risks. Policy-based fiscal strategy and budgeting The government prepares forecasts of revenue and expenditure for the budget year and the next two fiscal years but does not present the underlying assumptions for the forecasts. The County Executive does not prepare its own macroeconomic forecasts or carry out any sensitivity analysis with assumptions. No fiscal impact analysis is performed in the CFSP, which is presented in February to the County Assembly, to explain the potential impact of policy decisions. Ceilings are established during the CFSP preparation but are fixed only after the budget calendar has been issued. The budget preparation process is based on a comprehensive and clear budget calendar circular. The annual budget presents estimates of expenditure for the budget year and the next two fiscal years allocated by administrative, economic, and program classifications. The CBROP briefly explains the reasons for deviation from the objectives and targets set but do not provide an explanation of the changes to expenditure estimates between the second year of the last medium-term budget and the first year of the current medium-term budget, even at the aggregate level. The County Assembly review covers fiscal policies, medium-term fiscal forecasts, and medium-term priorities as well as details of expenditure and revenue, following well-defined procedures that include specialized review committees, technical support, and negotiation procedures with the civil societies. Section 130 of the PFM Act, 2012, and Standing Order No. 106 provide guidelines for the preparation of the budget while Section 135 of the PFM Act, 2012, and Standing Order No. 127 provide rules for preparing a supplementary budget. Approval of budgets has not been done in a timely manner. Predictability and control in budget execution Revenue administration in the county is generally weak because the only source of information to taxpayers is the Finance Act which is not comprehensive since it does not include information such as revenue obligation areas and rights. In addition, the county has not put in place a comprehensive, structured, and systematic approach for assessing and prioritizing revenue-related risks. There are also no systems for revenue audit and investigation and for monitoring revenue arrears. No risk-based approach has been put in place by the county revenue unit to maximize public revenue collection. In addition, no independent body has been put in place to carry out revenue audits and fraud investigations The county is relatively strong in terms of accounting for revenue since revenue collection has been automated and reporting is done on a daily basis and a monthly report is prepared for all entities collecting revenue. Revenue collected is then transferred into a CRF every week, but the county has a weakness in 77 terms of revenue reconciliation. Reconciliation of revenue collections is done monthly, but they do not include arrears. Data on expenditure arrears is generated at the end of each fiscal year, but the stock of arrears is not available. Budgetary units plan their expenditure at least six months in advance and the IFMIS allows them to commit expenditure for the same period. Adjustments to budgets are done once a year by asking the County Assembly to vote for a supplementary budget. Control in payroll administration is generally strong and supported by the IPPD system which integrates the payroll and personnel databases. Changes to personnel records and payroll are updated at least monthly, generally in time for the following month’s payments. Staff hiring and promotion is controlled by a list of approved staff positions and is subject to payroll audit. The County Public Service Board and the County Assembly Service Board are allowed to change personnel records and payroll for the County Executive and County Assembly. The procurement function of the county is well managed. A database on procurements is maintained by the County Executive. It is complete for all procurement methods for goods, services, and works. According to this database, more than 90 percent of procurement is done according to competitive methods, but the number of contracts awarded through open tenders seems to have decreased during the last three years. The public can only have access to the legal and regulatory framework for procurement and bidding opportunities. A major point of weakness in procurement is that contract awards, data on resolution of procurement complaints, and annual procurement statistics are not made available. An independent procurement complaints body exists at the national level and it is supposed to resolve procurement. Internal controls on non-salary expenditures are generally effective. Segregation of duties is prescribed throughout the expenditure process. Responsibilities are clearly laid down for most key steps and the IFMIS is used in all departments for budget execution. The internal audit function is fairly strong given it has been recently created in the county. It applies the IPPF as stipulated in the PFM Act, 2012, with a risk analysis approach and covers all the departments in the County Executive. Three levels of reviews are applied before reports are released. Audit reports are compared with audit planning to verify whether planned audits have been undertaken. Responses to internal audit reports are provided within one month of the report being issued. Follow-up of the budget audit is ensured by the Internal Audit Department. Accounting and reporting Reconciliation of bank accounts of the county is done in a timely manner as required under the PFM Act, 2012. Reconciliation of suspense and advance accounts is done on time and financial data integrity is ensured by the use of the IFMIS. The County Treasury uses the IFMIS to facilitate transaction processes and reporting. System users have passwords and the system maintains a log of users together with their functions. Thus, use of the IFMIS and timely reconciliation of bank accounts enhances financial data integrity. Financial statements are submitted within three months after the end of the fiscal year. Advance and suspense accounts reconciliations are done monthly and should be cleared before the end of the year. Financial reports for budgetary units are prepared annually and budget implementation reports are prepared each quarter. Accounting standards, consistent with IPSAS cash, are applied to all financial reports and ensure consistency of reporting over time. Coverage and classification of data allows direct comparison to the original budget for the main administrative headings. They include information on 78 revenue, expenditure, and cash balances. According to the OAG reports, there are nevertheless concerns regarding data accuracy, but data is useful for analysis of budget execution. External scrutiny and audit The OAG operates at the national level and its independence from the County Executive is guaranteed by the Constitution and Public Audit Act, 2015. This independence is with respect to its mandate and procedures for appointment and removal of the head of the OAG. The OAG has unrestricted and timely access to records, documentation, and information. Financial reports of county government entities representing most total expenditures and revenues have been audited using ISSAI during the last three completed fiscal years. Nonetheless, audits have not highlighted relevant systemic and control risks. A response is generally made by the executive or the audited entity, but not in a formal way. The audit reports usually contain recommendations to the executive for implementation. Audit reports take more than one year to be completed. Hearings on audit findings ought to be conducted in public but no evidence was provided. Committee reports are provided to the full chamber of the County Assembly. They are not published on an official website but are easily accessible to the public. The scrutiny is supposed to be completed over a period of six months, but no evidence can be provided by the County Assembly. 4.2. Effectiveness of the internal control framework Control environment Based on the available information provided by the county, the internal control practice in place is not sufficient to contribute to the achievement of the four control objectives: (a) the execution of operations in an orderly, ethical, economical, efficient, and effective manner; (b) fulfilment of accountability obligations; (c) compliance with applicable laws and regulations; and (d) safeguarding resources against loss, misuse, and damage. The national-level internal control framework is to a large extent indicative for the county operation due to the fact that the subnational functions and operations mirror in regulation and practice with the establishment on the national level. The following paragraphs provide an overview of the internal control activities collected from the preceding sections of the report. They build on the description of the design of internal controls and the individual assessment of specific control activities as covered by the performance indicators (Chapter 3). Risk assessment The county’s decisions do not appear to be driven by risk assessment and management activities. Risks are not evaluated by their significance or the degree of likelihood of occurring almost at all budget processes. Having no risk profile of the county functions, no risk responses are to be made to reduce the likelihood or downside outcomes for key operations. Thus, potential future events that create uncertainty are not catered for. The following risks, which are not provided for, exist in all stages of PFM: • Pillar 2. Transparency of public finances: the county is not able to capture expenditure and revenue outside financial reports (PI-6); this creates the risk of having an incomplete budget environment, potential misuse of funds, and poor service to the public. 79 • Pillar 3. Management of assets and liabilities: with no economic analysis of investment proposals (PI-11), no costing of investment, and no written procedures for monitoring of the investment performance, there is a huge risk of abuse and loss of funds in loss-making investments. Further, there is no established practice of inherited debt reconciliation with creditors (PI-13). • Pillar 4. Policy-based fiscal strategy and budgeting: with no practice to provide for uncertain economic events and the lack of sensitivity analysis, the county fails to link policy formulation and programmed activities with the budget estimate; the risk of having an inadequate and prone-to- amendment budget is not treated. • Pillar 5. Predictability and control in budget execution: the revenue administration practice fails to have an integrated revenue management system in place to detect and arrest potential revenue risks and to manage arrears (PI-19). The county fails to keep proper accounting of expenditure arrears, tolerating a risk of accumulation (PI-22). Approved staff establishment is not linked to the IPPD, which is also not linked to the IFMIS (PI-23). This creates a risk of ghost workers, nonetheless the payment control is well formalized and applied for. Procurement practice shows that non-competitive selection methods are at times applied, which creates the risk of discrimination, reduced control on the quality of procured services or works, misuse of funds, and hence poor public service delivery (PI-24). There is clear segregation of duties with non-salary expenditure which are electronically set up in the IFMIS with various authorization levels and roles assigned to different functions and operational staff. This arrangement provides for all phases of budget implementation to be executed in the IFMIS (PI-25) but there could be possibilities of some operations being executed outside the IFMIS. Control activities The lack of a risk profile of the county and the failure to define responses to the risk lead to inadequate and insufficient control activities that can treat, share, avoid, or intercept the risk. The risk-related activities for both the budget process and the service delivery exist for the functions related to budget implementation which are executed in the IFMIS with clear segregation of duties. There are risks which are not covered for by appropriate control activities in the area of transparency of public finances and are related to non-captured expenditure and revenue outside financial reports (PI-6). No controls exist for the selection of investment activities (PI-11) or on aging of nonfinancial assets (PI-12). There are control activities in place for budget execution with clear control of payment rules for all operations captured by the IFMIS. However, those outside the system are not all covered for. The control is not sufficient for the record of actual staff in IPPD and human resource personnel records. Some staff are paid through a manual system outside the records and the payroll. Lack of or even a poor internal control system with time leads to unreliable financial records and can cause loss of organizational integrity, which may affect not only the execution of the budget but also the implementation of projects and county priorities, be they of development or recurrent nature. Information and communication The channels of information and communication of the county are all budget-related documents produced and disseminated to other budget users and the public. Despite the legal requirement for all documents related to use of public funds to be easily available, not all reach the public. The channels of internal information and communication are the orders and management letters issued by the respective 80 management function and the County Assembly. None of the basic elements of fiscal information to be made public and publicized is complied with, except for the external audit report which is issued with significant delay (PI-9). The county is in the process of adopting legislation on public participation which will set the rules for interaction with the public at all stages of budget formulation and service delivery. Monitoring Monitoring, in the Committee of Sponsoring Organizations (COSO) terms means the process of assessing the quality of internal control performance over time. In the context of the county, this aspect can be expanded to encompass also the monitoring practices of the PFM process in general. Performance monitoring at the county is weak, the main tool of budget utilization monitoring being the quarterly reports and the budget execution reports. The CBROP is a kind of economic assessment paper. There are no specific reports elaborating on consistency of performance planned outputs and achieved outcomes and explaining any deviation. The internal control framework of the county as described having in place only isolated control activities is not efficient to ensure against irregularities and errors. It also highlights areas insufficiently addressed such as (a) performance information for service delivery; (b) public access to fiscal information; (c) monitoring of fiscal risk; (d) monitoring on public investment; and (e) poor public asset management information. In terms of assessment of the quality of the internal control system, the county has established the Internal Audit Department. It is still in the process of establishing its practice. The focus of internal audit is mainly on compliance and regulatory issues and is not yet developed to provide full oversight (of all budget users) of the effectiveness of the internal control system. The practice of the external audit which is far more advanced is focused on financial audit with elements of internal control. Apart from their usual financial report mandate, the external auditors check the processes related to the accounting function, salary and payroll, and procurement practice. The interaction between the external and the internal audit as far as the oversight of the internal control system is concerned has not been evidenced during the field work and the respective indicators’ assessment. Apart from the OAG, external oversight mechanisms which are supposed to contribute to monitoring and effectiveness of the internal control system are the review of audits by the County Assembly, the follow- up systems for the County Executive’s implementation of remedial measures, and providing public access to relevant reports and debates (PI-31). As the respective assessment of the oversight activities of the County Assembly of West Pokot (see PI-31) shows, the control practice in this respect has not been found to be effective. There is no evidence of recommendations to the County Executive. 4.3. PFM strengths and weaknesses 1. Aggregate fiscal discipline The Constitution and PFM Act, 2012, have set conditions for counties in terms of borrowing. Counties should not borrow above 5 percent of their latest audited accounts and such borrowings must be approved by the County Assembly and guaranteed by the National Treasury. However, the county had not yet borrowed over the period under review. The budget in the first of operation (FY2013/14) was affected by overoptimistic revenue forecasts. The domestic revenue base is small and only accounted for 2 percent of the county’s total revenue for FY2015/16. Efficiency of revenue collection has been enhanced through automation using POS gadgets. Increased revenue collection will enhance the credibility of budgets. Expenditure and contingency liabilities can compromise fiscal discipline if not well monitored. 81 The use of the IFMIS for budget execution and reporting has significantly reduced chances of expenditures outside prescribed rules and procedures. Nonetheless, the IFMIS is yet to be integrated with procurement procedures and the IPPD. 2. Strategic allocation of resources Resources and expenditures are guided by a CIDP which should be implemented through the ADP and departmental strategic plan, but these three planning documents appear not to be closely linked with the budgets and national development plan—Vision 2030. Linking planning and budgeting at county and national levels is important to ensure overall and synchronized development. Economic analysis is not performed for major projects except some funded by donors. The differentiation between recurrent and capital expenditures in the budget elaboration and reporting hampers the visibility of resource allocation. It is difficult to establish whether recurrent expenditures associated with capital expenditure are included in the budget. Capital expenditures may be prioritized during budget execution, at the expense of non- wage recurrent expenditure in one year and the other way in another year. This discrepancy may reduce the rate of investment realization and disbursements of external support. However, the county existence is still nascent to draw a final conclusion in this domain. Even though the economic analysis of investment projects is not undertaken, projects to be implemented are identified and prioritized at the grassroots level using public participation forums. This is likely to enhance the effectiveness of investment projects. The county needs to pay more attention to pastoralism and farming to ensure that greatest economic and social benefits can be realized and poverty reduced as a result. Equally important is availing of clean water to the greater majority of citizens in the county over time. 3. Efficient use of resources for service delivery Public services management is carried out by departments which have their own strategy and view of the best way to reach the targets. It was difficult to establish whether there was harmony of view in terms of development. The efficiency and effectiveness of use of public resources is not subject to systematic review by the county government. The County Executive has the necessary tools such as the PBBs to evaluate service delivery properly. For the same reason, the performance targets are not yet linked with overall targets defined by the departments that provide the basic public services. Even if West Pokot county’s budget management is based on a cash basis accounting system, performance indicators have been defined to analyze the performance of public service delivery and make comparisons among schools, hospitals, health centers and other service delivery units. However, no follow-up is being done because of lack of staff to perform these tasks. In spite of the existence of a programming budget, the programmatic responsibility, which conditions the quality of the provision of public services to citizens, is still emergent and so information on the performance of the system remains limited in the county. While a database on procurement is available, public access to information is limited. The public does not have access to procurement statistics, and complaint management must be done at the national level. There is a need to have a clear mechanism of complaints at the county level and more information for the public on procurement. A yearly report on overall functioning of the procurement system has not been produced yet, nor an annual report on the performance of the procurement system. No specific inspection unit has been put in place, to monitor procurement performance of public procurement entities. Performance of the procurement system is still limited, and no electronic portal has been set up to disseminate information on public procurement. 82 More generally, analytical accounting, budgets, and performance reports are not yet regularly published or systematically used. The main reason is not the lack of transparency, but the management of budget elaboration that does not follow a performance approach. The AFSs are audited each year by the OAG and the adoption of a programming budget and the IFMIS budget management system is expected to provide data for the calculation of unit costs and other measures of efficiency in the delivery of public services that should also enable internal and external audit to focus much more on performance audit. 83 5. Government PFM reform process 5.1. Approach to PFM reforms In Kenya, the national government through the National Treasury takes the lead in initiating and implementing PFM reforms. The Government of Kenya has undertaken PFM reforms since 2006 and this has been elaborated in Vision 2030.The current PFM reform strategy is elaborated in the PFMR Strategy in Kenya 2013–2018. The overall goal of this reform strategy is to ensure “A public finance management system that promotes transparency, accountability, equity, fiscal discipline and efficiency in the management and use of public resources for improved service delivery and economic development�. The main areas of emphasis in the strategy include: (a) macroeconomic management and resource mobilization, (b) strategic planning and resource allocation, (c) budget execution, accounting, and reporting and review, (d) independent audit and oversight, (e) fiscal decentralization and intergovernmental fiscal relations, (f) legal and institutional framework, and (g) the IFMIS and other PFM Systems. 5.2. Recent and ongoing reform actions At the county level, priorities will be given to improve governance, administration, and decision-making processes for an improved social, economic, and political environment. New accounting standards and financial statement formats currently being introduced across government will bring consistency and reliability to annual accounts. It will also facilitate consolidation of general government data. Once the new norms have been established, the publication of AFSs, as required by the PFM Act, 2012, will be required to achieve accountability and transparency. Completion of decentralized units’ offices, disaster management, and county coordination will also be given priority, as well as the development of policies, legislations, and regulations that support full implementation of the subsector mandates. These policies and legislation include the County Disaster Management Bill, Civic Education Bill, County Training Policy, and Public Participation Bill. Other ongoing reform actions concern ensuring coordination, preparation, and timely implementation of the county budget, improving internal revenue collection, developing and implementing effective and efficient procurement systems for improved service delivery and value for money, undertaking effective financial management, and strengthening internal control systems to safeguard public resources. As most corruption is usually in the area of public procurement, Business Code of Ethics has been domiciled in the PPOA. Accounting officers, AIE holders, and supply chain officers are personally liable for doing government business with companies and are required to comply with the approved Code of Ethics. The national government plans to introduce compulsory and continuous ethics and integrity training across all levels of the public service. In addition, the County TSAs are being implemented at the CBK. 5.3. Institutional considerations The devolution system as envisaged by the Constitution is ambitious and may have major challenges in the initial stages of implementation. The IFMIS has been implemented at the national and county levels to reinforce accountability but has not proved to be a solution to the procurement-related issues. At the county level, there is need for better appropriation and reinforcement of controls. The implementation of a single treasury account should ensure the national and county governments have a better checking 84 on the movement of funds. The PFM Act, 2012, allows for the establishment of a committee to check on the use of funds and disciplinary measures that can be taken. However, proper monitoring of public resources is only possible if the IFMIS is fully used at the county level and a ‘Business Intelligence’ layer is implemented to facilitate data analysis and visualization. 85 Annex 1. Performance indicator summary This annex provides a summary table of the performance indicators. The table specifies the scores with a brief explanation for the scoring for each indicator and dimension of the current and previous assessment. Indicator/component Score Explantation HLG-1. Transfers from a higher-level D+ government (M1) HLG-1.1. Outturn of transfers from higher- B Transfers have represented at least 90% of the original budget estimate in all the last three years. level government HLG-1.2. Earmarked grants outturn C The difference between the original budget estimate and actual earmarked grants was less than 10 percent in two of the last three years. HLG-1.3. Timeliness of transfers from higher- D* Quarterly transfers should be released quarterly through the IFMIS, but the effective dates were not level government provided, and important delays were reported in the CFSP and in the press. PI-1. Aggregate expenditure outturn (M1) B PI-1.1. Aggregate expenditure outturn B Aggregate expenditure outturn for the last two financial years ranged between 90% and 110% of initial budget PI-2. Expenditure composition outturn (M1) B+ PI-2.1. Expenditure composition outturn by A Variation in expenditure composition outturn by function was below 5% of total expenditure in two of the function last three years. PI-2.2. Expenditure composition outturn by B Variance in expenditure composition by economic classification was below 10% for the last two financial economic type years (3.6% in 2014/15 and 8.6% in 2015/16) PI-2.3. Expenditure from contingency reserve A There is no contingency fund scheduled in the budget yet. PI-3. Revenue outturn (M2) D PI-3.1. Aggregate revenue outturn D The county met 92% and 116% of the budgeted revenue in only one of the three financial years. PI-3.2. Revenue composition outturn D Variance in revenue composition was less than 15% in only one of the last three years. PI-4. Budget classification (M1) C PI-4.1. Budget classification C Budget formulation is based on administrative, programming, and economic classifications using GFS standards though not consistently applied. Budget execution and reporting is made only on the basis of administrative and economic classification. PI-5. Budget documentation (M1) D PI-5.1. Budget documentation D Budget documentation does not fulfil at least 3 basic elements. PI-6. County government operations outside D financial reports (M2) PI-6.1. Expenditure outside financial reports D* The financials of ECD colleges have not been made available. PI-6.2. Revenue outside financial reports D* No information about revenue outside financial reports has been provided. 2 PI-6.3. Financial reports of extra budgetary D No financial report of extra budgetary unit has been provided by the county. units PI-7 Transfers to subnational governments N/A (M2) PI-7.1. Transparency and objectivity in the N/A There is no subgovernment under the county level. horizontal allocation of central government grants to LGUs PI-7.2. Timeliness of reliable information to N/A There is no subgovernment under the county level. LGUs on their allocations PI-8. Performance information for service D+ delivery (M2) PI-8.1. Performance plans for service delivery B Information is published annually on the activities to be performed under the policies or programs for the majority of departments. PI-8.2. Performance achieved for service C The midterm progress report presents activities performed and indicates the achievements obtained. delivery PI-8.3. Resources received by service delivery D No survey carried out in one of the last three years provides estimates of the resources received by units service delivery units for at least one large department. PI-8.4. Performance evaluation for service D Performance evaluation is done by an internal department and even the external evaluation done by the delivery COB is not available. No independent evaluation was performed. PI-9. Public access to fiscal information (M1) D PI-9.1. Public access to fiscal information D The county meets two basic elements and one other element but does not meet four basic elements. PI-10. Fiscal risk reporting (M2) D PI-10.1. Monitoring of public corporations N/A There are no public corporations to be monitored. Full transfer of the KWSC from the national government is yet to take place. PI-10.2. Monitoring of subcounty N/A There are no further devolved units below the county government level. governments PI-10.3. Contingent liabilities and other fiscal D County Executive quantifies some significant contingent liabilities, but no information has been provided, risks including the debt left by the defunct authorities. PI-11. Public investment management (M2) D PI-11.1. Economic analysis of investment D* No evidence of objective criteria of economic analysis of investment projects. proposals PI-11.2. Investment project selection D* The county does not have a CPU and there are no standard project selection criteria. PI-11.3. Investment project costing D Capital expenditure is costed by programs for each ministry in budget documents, but investment projects are not costed. PI-11.4. Investment project monitoring D Monitoring is done by county departments. Annual Progress Reports presenting some rudimentary investment projects’ follow-up are published, but they do not mention total cost or execution rate. PI-12 Public asset management (M2) D+ 3 PI-12.1. Financial asset monitoring C The government maintains a record of its holdings in financial assets in its AFSs, which is published on the website of the county government. PI-12.2. Nonfinancial asset monitoring D Registers contain only partial information on nonfinancial assets and do not indicate their utilization or age. PI-12.3. Transparency of asset disposal D The county has not disposed of any assets except cash and cash equivalents. The county has not set up any rule related to transfers of assets for the defunct authorities. PI-13. Debt management (M2) D PI-13.1. Recording and reporting of debt and D The records of the inherited debts from the defunct local authorities is not updated. guarantees PI-13.2. Approval of debt and guarantees N/A The National Treasury had barred the counties from borrowing until after August 2017 General Elections. PI-13.3. Debt management strategy D The county has a medium-term debt management strategy. However, the strategy does not indicate at least the preferred evolution of risk indicators such as interest rates and refinancing, and foreign currency risks. PI-14. Macroeconomic and fiscal forecasting D+ (M2) PI-14.1. Macroeconomic forecasts C The county does not prepare its own macroeconomic forecasts but uses projections made at the national level. PI-14.2. Fiscal forecasts C The government prepares forecasts of revenue and expenditure for the budget year and the two following fiscal years but does not present the underlying assumptions for the forecasts. PI-14.3. Macro fiscal sensitivity analysis D The county does not carry out any sensitivity analysis with assumptions. PI-15. Fiscal strategy (M2) C+ PI-15.1. Fiscal impact of policy proposals D There is no evidence of fiscal impact analysis to explain deviations of the fiscal impact as explained in the CFSP for FY2014/15 and FY2015/16. PI-15.2. Fiscal strategy adoption B CFSP 2016, which is presented to the County Assembly, presents explicitly time-based fiscal goals (breakdown of revenues and expenditure) and a list of qualitative or quantitative targets by ministries, associated with funding estimates. PI-15.3. Reporting on fiscal outcomes B The County Executive has submitted a report to the County Assembly that gives explanations on the reasons for deviations from the objectives and targets. PI-16. Medium-term perspective in D+ expenditure budgeting (M2) PI-16.1. Medium-term expenditure estimates A The annual budget presents estimates of expenditure for the budget year and the two following fiscal years, allocated by administrative, economic, and program/subprogram classification. PI-16.2. Medium-term expenditure ceilings D Cabinet approval evidence on medium-term expenditure ceilings has not been provided, and estimates in the CFSP FY2016/17 and the PBB FY2016/17 show strong discrepancies. PI-16.3. Alignment of strategic plans and D* Medium-term strategic plans are prepared for some departments. Some expenditure policy proposals in medium-term budgets the annual budget estimates align with the strategic plans but no evidence has been provided yet. 4 PI-16.4. Consistency of budgets with previous D The budget documents do not provide an explanation of some of the changes to expenditure estimates year’s estimates between the second year of the last medium-term budget and the first year of the current medium-term budget, even at the aggregate level. PI-17. Budget preparation process (M2) D PI-17.1. Budget calendar D Most of the departments adhere to the budget calendar but no budget calendar table has been provided and there is poor adherence to the budget calendar by the budget users. PI-17.2. Guidance on budget preparation D A comprehensive and clear budget circular is issued to budgetary units, but the ceilings are fixed during the CFSP preparation after the budget circular has been issued. PI-17.3. Budget submission to the legislature D The County Executive has submitted the annual budget proposal to the legislature less than one month before the start of the fiscal year in each of the last three years. PI-18. Legislative scrutiny of budgets (M1) C+ PI-18.1. Scope of budget scrutiny A The legislature’s review covers fiscal policies, medium -term fiscal forecasts, and medium-term priorities as well as details of expenditure and revenue. PI-18.2. Legislative procedures for budget C Section 130 of PFM Act, 2012, and the Standing Orders give the procedures for budget scrutiny. They scrutiny include internal organizational arrangements, such as specialized review committees, technical support, and negotiation procedures. However, the fact that the budget is presented to the County Assembly just one day before it is approved highlights the lack of budget scrutiny. PI-18.3. Timing of budget approval C The County Assembly has approved the annual budget before the start of the following year in one of the last three fiscal years. PI-18.4. Rules for budget adjustments by the C Section 135 of the PFM Act, 2012, and Standing Order No. 127 provide the rules for adjustment of the executive budget; which are allowing extensive administrative reallocations and expansion of total expenditure up to 10%. The rules are adhered to by all departments. PI-19. Revenue administration (M2) D PI-19.1. Rights and obligations for revenue D Entities collecting the revenues do not provide payers with access to information on the main revenue measures obligation areas and on rights including, as a minimum, redress processes and procedures. PI-19.2. Revenue risk management D The County Revenue Unit has not put in place a comprehensive, structured, and systematic approach for assessing and prioritizing compliance risks. PI-19.3. Revenue audit and investigation D The county government has not put in place an independent body to carry out revenue audits and fraud investigations. PI-19.4. Revenue arrears monitoring D* The stock of revenue arrears at the end of the last completed fiscal year is not available. PI-20. Accounting for revenue (M1) C+ PI-20.1. Information on revenue collections A A central agency collects monthly revenue data from entities collecting all county government revenue and consolidates this information into a report. PI-20.2. Transfer of revenue collections B Entities collecting government revenue transfer the collected funds to the County Treasury at least every week. 5 PI-20.3. Revenue accounts reconciliation C Reconciliation of revenue collections and transfers are carried out on a monthly basis, but they only cover collections and transfers to the County Treasury accounts. Reconciliations do not include assessments and arrears. PI-21. Predictability of in-year resource C allocation (M2 PI-21.1. Consolidation of cash balances D Records of balances are calculated separately and balances from the accounts are not transferred into a central consolidated account. PI-21.2. Cash forecasting and monitoring C West Pokot County prepares cash flow forecasts for the fiscal year, but these forecasts are not updated. PI-21.3. Information on commitment ceilings C Budgetary units plan and commit expenditure for at least six months in advance but no evidence was provided. In practice, budget users do not seem to have reliable information more than one month in advance. PI-21.4. Significance of in-year budget B Adjustments to budgets are done once in every fiscal year during the supplementary budget. The process adjustments is transparent but not predictable, because 10 percent of the budget can be increased two months before the supplementary budget PI-22. Expenditure arrears (M1) C PI-22.1. Stock of expenditure arrears C The stock of expenditure arrears is no more than 10% of total expenditure in at least two of the last three completed fiscal years. PI-22.2. Expenditure arrears monitoring C Data on the composition of expenditure arrears is generated at the end of each fiscal year in an AFS. PI-23. Payroll controls (M1) D+ PI-23.1. Integration of payroll and personnel D Staff hiring and promotion are checked against the approved budget prior to authorization. However, records staff hiring and promotion are controlled only by a list of drafted staff positions and reconciliation of the payroll with personnel records takes place only at the end of the year. PI-23.2. Management of payroll changes D* Changes to the personnel records and payroll are updated at least monthly, but only data related to arrears were produced for two months in 2017, not those related to retroactive adjustments. PI-23.3. Internal control of payroll C Authority and basis for changes to personnel records and the payroll are clear, and sufficient controls exist to ensure integrity of the payroll data of greatest importance, but no audit trail was provided to prove that these controls can ensure high integrity of data. PI-23.4. Payroll audit C A payroll audit has been conducted at least once in the last three completed fiscal years, but the materiality and information on scope and coverage of the audit was not provided. PI-24. Procurement management (M2) D+ PI-24.1. Procurement monitoring D* Databases or records are maintained for contracts and include data on what has been procured, value of procurement, and who has been awarded contracts. It was not possible to verify whether data are complete for all procurement methods for goods, services and works, services, and works. PI-24.2. Procurement methods D* Information provided was not sufficient to verify the materiality. PI-24.3. Public access to procurement D Only two elements of the six PEFA criteria were met by the county. information 6 PI-24.4. Procurement complaints B The procurement complaint system meets the first criterion and three of the other criteria. management PI-25. Internal controls on non-salary C expenditure (M2) PI-25.1. Segregation of duties B Segregation of duties is prescribed throughout the expenditure process. Responsibilities are clearly laid down for all steps. The County Assembly uses the IFMIS payment system but has no SOPs customized for its operations. Further details may be needed in a few areas. PI-25.2. Effectiveness of expenditure C Expenditure commitment controls are in place and effectively limit commitments to approved budget commitment controls allocations for most types of expenditure but not to projected cash availability. PI-25.3. Compliance with payment rules and D* Information of noncompliance with payment rules and procedures has not been obtained yet. procedures PI-26. Internal audit (M1) D+ PI-26.1. Coverage of internal audit B The internal audit covers all departments in the County Executive and the County Assembly. It is operational for entities representing most total budgeted expenditures and for central government entities collecting most budgeted government revenue. PI-26.2. Nature of audits and standards C Internal audit departments apply the IPPF, but no quality control reports have been disclosed. applied PI-26.3. Implementation of internal audits A The reports released have been matched to the program to ensure that the audit designed is undertaken. and reporting PI-26.4. Response to internal audits D* Responses to the internal audit reports are provided within one month of the report being issued. The Internal Audit Department follows up to ensure implementation, but no evidence on responses to the internal audit reports by the audited entities has been provided. PI-27. Financial data integrity (M2) B PI-27.1. Bank account reconciliation D* Soft copies of monthly bank reconciliations to active bank accounts and sample hard copies prepared by 10th of the following month were obtained. However, the total number of bank accounts could not be verified and bank reconciliation regarding extra budgetary units is unknown. PI-27.2. Suspense accounts A Suspense account reconciliation is done monthly and is cleared before the end of the fiscal year, with some exceptions. PI-27.3. Advance accounts A Reconciliations to advance accounts/imprest reconciliations are done monthly. Reconciliation of advance accounts takes place at least monthly, within a month from the end of each month. All advance accounts are cleared on time. PI-27.4. Financial data integrity processes B Access and changes to records is restricted and recorded, and verification can be made through an audit trail. The internal audit unit is in charge of verifying the financial data integrity, but no evidence was produced by this unit. PI-28. In-year budget reports (M1) D+ 7 PI-28.1. Coverage and comparability of C Coverage and classification of data allows direct comparison to the original budget with a certain degree reports of aggregation. Transfers to deconcentrated units are included into the reports but the information is not disclosed in detail. PI-28.2. Timing of in-year budget reports D The only evidence obtained that could be used were the quarterly BIRRs published by the COB about three months after the end of the period. PI-28.3. Accuracy of in-year budget reports C There may be some concerns regarding data accuracy. Data is useful for analysis of budget execution. Expenditure is captured at the payment stage. PI-29. Annual financial reports (M1) D+ PI-29.1. Completeness of annual financial B Financial reports for the county are prepared annually and are comparable with the approved budget. reports They include information on revenue, expenditures, and cash balances. PI-29.2. Submission of reports for external D Financial reports are generally submitted for external audit more than nine months after the end of the audit fiscal year. The financial statements for 2015/16 were submitted on September 30, 2016, but the external audit was complete only on May 10, 2017. PI-29.3. Accounting standards C Accounting standards applied to all financial reports are consistent with IPSAS cash and ensure consistency of reporting over time. The standards used in preparing annual financial reports are disclosed. PI-30. External audit (M1) D+ PI-30.1. Audit coverage and standards C Financial reports of the county government representing most total expenditures and revenues have been audited using ISSAI during the last three completed fiscal years. The audits have highlighted relevant material issues but not systemic and control risks. PI-30.2. Submission of audit reports to the D* The date on which the external auditor considers the financial reports complete and available for audit is legislature unknown for the period under review. OAG can meet the six-month deadline, but only if the AFSs have been correctly prepared on time in the first place. PI-30.3. External audit follow-up D A response was made by the executive or the audited entity on audits for which follow-up was expected, during the last three completed fiscal years, but not in a formal way. The OAG report for 2015/16 does not present any recommendation follow-up. PI-30.4. Supreme Audit Institution A The SAI operates independently from the executive with respect to procedures for the appointment and independence removal of the Head of the SAI, the planning of audit engagements, arrangements for publicizing reports, and the approval and execution of the SAI’s budget. This independence is assured by law. The SAI has unrestricted and timely access to records, documentation, and information. PI-31. Legislative scrutiny of audit reports D (M2) PI-31.1. Timing of audit report scrutiny D* The scrutiny of audit reports is generally completed over a period of two months, but the dates have not been provided. PI-31.2. Hearings on audit findings D* In-depth hearing is carried out on the audit findings but no evidence has been provided. PI-31.3. Recommendations on audit by the D* The County Assembly usually makes recommendations to the County Executive for implementation but legislature reports were not provided. 8 PI-31.4. Transparency of legislative scrutiny of D Hearings are conducted in public. Committee reports are provided to the full chamber of the County audit reports Assembly. They are not published on the County Assembly website. 9 Annex 2. Summary of observations on the internal control framework Internal control Summary of observations components and elements 1. Control environment The regulatory framework in the county derives from the national regulation, such as the Kenya Constitution 2010, the PFM Act 2012, and the PFM Regulations 2015. Government circulars are issued periodically to ensure compliance with the laws. An internal audit department has been set up recently with only one person, which is largely insufficient. Annual external audits are carried out by the OAG which is an independent body but operates at the national level. Audit reports are submitted to the County Assembly when completed. There are, however, delays in completion of the external audits. The last received audit reports were for 2014–15. 1.1 The personal and Chapter Six of the Kenya Constitution sets out the responsibilities of leadership professional integrity and of all public officers. This includes oath of office of state officers, conduct of ethical values of state officers, financial probity of state officers, restriction on activities of state management and staff, officers, citizenship and leadership, legislation to establish the ethics and anti- including a supportive corruption commission, and legislation on leadership. These appear to be attitude toward internal understood and internalized by the management and staff. control constantly throughout the organization 1.2. Commitment to With only one person working in the Internal Audit Department, the county competence does not have access to a pool of qualified professionals who would deliver excellence in service delivery. However, judging from the findings of the external auditor, because of lack of adequacy of County Assembly oversight the competence may not have been felt through results. 1.3. The ‘tone at the top’ The PFM Act paragraph 104 states that management must ensure proper (that is, management’s management and control of and accounting for the finances of the county philosophy and operating government and its entities to promote efficient and effective use of the style) county's budgetary resources. There is no leadership, such as management’s philosophy and operating style in the county, judging from the work of external auditors where audit findings are not acted upon. In addition, the assembly which is a key institution of control has not also played its oversight role effectively. 1.4. Organizational structure The county has an organizational structure for the Department of Finance. From our discussions with the management, the county structures have not been standardized. The staff expressed some concerns, for instance. the Revenue Department is not effective because the revenue officers are domiciled at the departments and hence it is difficult for the director of revenue to monitor access and reward performance. 1.5. Human resource The county organization policies are managed by the County Public Service policies and practices Board. The Board is responsible for recruitment, staff development, and discipline. The Public Service Commission is set up by Article 234 of the Constitution, which outlines the functions and powers of the Public Service Commission. One of the key mandate of this commission is to investigate, monitor, and evaluate the organization, administration, and personnel practices of the public service including the county government. 2. Risk assessment The PFM Regulation 165 sets out the role of the accounting officer in risk management. It requires the accounting officer to develop 10 (a) Risk management strategies, which include fraud prevention mechanism; and (b) A system of risk management and internal control that builds robust business operations. However, the county does not have a risk management policy and a risk register. 2.1 Risk identification Several PIs are related to the extent to which risks are identified, notably: (a) PI-11.1. Economic analysis of investment proposals: Proposed capital investment projects are submitted to the Public Investment Committee for appraisal before approval but are not supported by economic analysis. (b) PI-13.3. Debt management strategy: A medium-term debt strategy exists, but is supported by associated risk analysis, exchange rate, and interest rate factors. (c) PI-21.2. Cash forecasting and monitoring: A monthly cash flow is established and updated only annually. There is no revenue risk management policy implemented yet. 2.2 Risk assessment This item has not been considered because there is no risk management policy (significance and likelihood) implemented at the county level. 2.3 Risk evaluation Risk-based annual audit plans are approved by the entity’s audit committees (and copied to the accounting officer and are designed to progressively secure key risks in the control environment on time. This is yet to be effected in the county. 2.4 Risk appetite assessment The county does not make any risk assessment yet. 2.5 Responses to risk Not assessed (see 2.4). (transfer, tolerance, treatment, or termination) 3. Control activities The various functions of departments are set out in the PFM Regulations. The accounting division, in charge of recording and bookkeeping, is separate from the administrative roles, which normally handles the cashiering function. Procurement is also a separate function that works under the procurement committee. 3.1 Authorization and The Government Accounting Manual sets out the systems of authorization, approval procedures policies, standards, and accounting procedures and reports. An SCOA is used by all county departments. These procedures or activities are implemented to achieve the control objectives of safeguarding resources, ensuring the accuracy of data and enabling adherence to laws, policies, rules, and regulations. 3.2 Segregation of duties Appropriate segregation of duties exists, in accordance with SCOA, IFMIS, and (authorizing, processing, government circulars, which specifies clear responsibilities, but many operations recording, and reviewing) are made outside the IFMIS. 3.3 Controls over access to PI-25.3. Most payments are compliant with rules and procedures; variations do resources and records occur and are pointed out in the report of the OAG. PI-27.4. Access and changes to records are restricted and recorded. 3.4 Verifications The PFM Regulations and Finance Manual set out the usual internal control instructions for verification—review of transactions to check the propriety and reliability of documentation, costing, or mathematical computation. It includes checking the conformity of acquired goods and services with agreed quantity and quality specifications. The verification procedures are inbuilt in every transaction when the IFMIS is used. Outside the IFMIS, verification procedures are rather weak. 3.5 Reconciliations While monthly bank reconciliation statements are prescribed per law, issues of non-preparation, delayed submission, and non-recording of reconciling items are substantial. 11 3.6 Reviews of operating No review of operating performance has been implemented yet. performance 3.7 Reviews of operations, PI-24.1. Procurement monitoring is comprehensive, but no statistics are being processes, and activities published annually and the OAG reports many breaches in the law. PI-13.3. No debt strategy has been developed yet and the county does not have any debt, so no operation, processes, and activities can be recorded. 3.8 Supervision (assigning, No information available from the PEFA assessment. reviewing and approving, guidance and training) 4. Information and All county governments are required to report quarterly and annually to the communication COB, the OAG, and the National Treasury through the production of financial reports in a template provided by the PSASB. 5. Monitoring PI-26. Internal Audit. Internal audit has been formally established and audit programs are largely completed, but with delays. 5.1 Ongoing monitoring Ongoing monitoring in the county government is generally weak (PI-8.4 rated D PI-11.4 rated D, PI-12.2 rated D. 5.2 Evaluations PI-11.4. Major investment projects are not evaluated before they are included in the budget and performance achieved for service delivery is not evaluated either. 5.3 Management responses PI-26.4. Due to the lack of an audit committee and inadequate senior management support, there is no clear follow-up of the management actions. The management had not responded to the audit reports for the previous fiscal year. 12 Annex 3. Sources of information Annex 3A: List of related surveys and analytical work • IMF Country Report No. 17/25 February 02, 2017 - Kenya. First Review under the Twenty-Four Month Stand-By Arrangement and the Arrangement under the Standby Credit Facility and Requests for Waivers of Applicability. International Monetary Fund. African Department. • IMF Executive Board Completes First Review Under the Stand-By Arrangement and Standby Credit Facility Arrangement for Kenya. January 25, 2017. • Constitution of Kenya, 2010. • Government of Kenya Review of the PFMR Strategy 2013–2018 report (2016). • World Bank and Government of Kenya, In-depth Report Recommendations and Action Plan Following the Analysis of Financial Management, Procurement and Human Resource Management in Kenya County Governments (2015). • National Treasury 2015 Budget Review and Outlook Paper. • County Budget Review and Outlook Papers of the selected counties. • CFSPs of the selected counties. • World Bank Public Expenditure Review of 2015. • World Bank Kenya Economic Updates of 2015 and 2016. • World Bank Country Economic Memorandum 2016. • Government of Kenya National Capacity Building Framework Progress and Implementation Reports. • Kenya Economic Survey 2016. • 2016 BPS. • Budget Summary for FY2016–17 and Supporting Information. • DORA and CARA 2014, 2015, and 2016. • PFM Act, 2012, and related amendments. • The Constitution of Kenya, 2010. • End of assignment report to the National Treasury by PwC on the provision of technical assistance in the preparation of individual and consolidated financial statements for the county government entities for FY2014/15 (June 2016). • Integrated Fiduciary Assessment Report. Program for Results for the KDSP. December 21, 2015. • PEFA 2016. Framework for assessing PFM. • PEFA 2016. Supplementary guidance for subnational PEFA assessment. • KIPPRA Kenya Economic Report 2016. 13 Annex 3B: List of persons who have been interviewed and had provided information for the PFM Performance Report Name Function Telephone Email 1 Jackson K Pengat Agriculture County Secretary 722572230 pengat2000@gmail.com 2 Kennedy Tegercy Head of Economic Planning 725774567 tegeret@yahoo.com 3 Ritakou Y. Issac Head of M&E 726835183 yeko.isaac@gmail.com 4 Stephen Eritom Chief Accountant 725294293 eritom73@gmail.com 5 Pokor Zablon Internal Auditor 728599229 pokarzab@gmail.com 6 Jacob Kapelile Head of Revenue 720750391 kapelilejacob@yahoo.com 7 Thoms O Lotiaka Head of Internal Audit 726964081 tpkemoi@gmail.com 8 Kisang Amos Head of Accounting 721876918 a.kipsang@yahoo.com 9 Chebbet Munko Head of Budgeting 71148485 chebbet.muyo@gmail.com 10 Stephen Kapel HSCM 722981435 stevekapel@yahoo.com 11 Dennis P. Rotich Principal Finance Officer Assembly 720482493 plaps2013@gmail.com 12 Rosalyne Tomeyan Agriculture HRM 710691233 rosetomee@yahoo.com 14 Annex 3C: Sources of information used to extract evidence for scoring each indicator. PI-1. Aggregate expenditure outturn • PI1 and PI2 Expenditure calculation West Pokot PI-2. Expenditure composition outturn PI-3. Revenue outturn (M2) • PI3 2 rev outturn calculation april 9_ 2016_0 wp • PI3 2 rev outturn calculation april 9_ 2016_0 wp PI-4. Budget classification PI-5. Budget documentation • Budget estimates • County pbbfy2015_2016 • County pbbfy20132014 • County pbbfy20142015 • County PBB for FY2016–17 • CBROP • County Budget Review and Outlook Paper 2014 • County Budget Review and Outlook Paper 2015 • County Budget Review and Outlook Paper 2016 • CFSP 2014–2015 • CFSP 2015–16 • CFSP 2016–2017 • CFSP 2017–2018 • Forwarding letters • Budget forwarding FY2015–2016 • Forwarding supp ii letter FY2014–2015 • Vote books FY2016–2017 • Development • CBROP forwarding letter FY2013–2014 PI-6. Central overnment operations outside financial reports (M2) PI-7. Transfers to subnational governments PI-8. Performance information for service delivery (M2) • Progress reports • County annual progress report 2015–2016 • County cooperative performance evaluation • Midterm county progress report 2013–2015 15 PI-9. Public access to fiscal information PI-10. Fiscal risk reporting (M2) • 3rd quarter county assembly car loan and mortgage report PI-11. Public investment management (M2) • County annual progress report 2015–2016 • County cooperative performance evaluation • Field M&E report February 2017 • Integrated project public participation report 2014 • Midterm county progress report 2013–2015 PI-12. Public asset management • Asset register final • Copy of copy of zero draft West Pokot assets and liabilities ctc team leader • Narrative report on assets & liabilities draft ctc draft West Pokot ).doc PI-13. Debt management • Final debt management strategy paper 2016.doc • Final debt management strategy paper 2017 • Medium term debt management strategy 2015(3) PI-14. Macroeconomic and fiscal forecasting (M2) • CIDP final draft 2013–2017 • County ADP 2016–17 • West Pokot County ADP 2017–18 • County ADP 2015–2016 PI-15. Fiscal strategy • CFSP 2014–2015 • CFSP 2015–16 • CFSP 2016–2017 • CFSP 2017–2018 • Submission of CFSP PI-16. Medium-term perspective in expenditure budgeting • Preparation of MTEF PI-17. Budget preparation process (M2) • Budget circulars 16 • Treasury circular 2 2015 • Treasury circular 3 2015 (end of year) • Treasury circular 2014 final • Treasury circular 2015 • Treasury circular 2016 • Budget calendars • County budget calendar 2015–2016 • County budget calendar 2016–2017 • County budget calendar 2016 • County budget calendar 2017–2018 PI-18. Legislative scrutiny of budgets • Development • Pp reports • Final public participation report 2015–2016 • Final public participation report for FY2016–2017 • Public participation report 2014 • Recurrent • Agriculture cob • Assembly cob • CPSM cob • Education cob • GVN cob • Health cob • Lands cob • Livestock cob • Roads cob • Tourism cob • Trade cob • Water cob • Final public participation report 2015–2016 • Final public participation report for FY2016–2017 • Public participation report 2014 PI-19. Revenue administration • Valuation roll • CIDP final draft 2013–2017 • Own revenue sources • PI19 as at 13.04.17 PI-20. Accounting for revenue • Revenue books. • Revenue collection and banking 17 PI-21. Predictability of in-year resource allocation • Supplementary budgets • County supplementary programme-based budget for FY2016–2017 • County supplementary budget FY2015–2016 • County supplementary budget i FY2014–2015 • County supplementary budget ii 2014–2015 • West Pokot cash flow forecast FY2015–2016 • Final cash flow forecast 2016–17.doc • Revenue projections PI-22. Expenditure arrears PI-23. Payroll controls • Payroll control report PI-24. Procurement (M2) • General warrant for approval PI-25. Internal controls on non-salary expenditure (M2) • Assignment of duties and segregation of duties PI-26. Internal audit • Internal audit assembly • Annual risk-based work plan 2016–2017 • Internal audit executive • Audit CRD July–August 2014–2015 • Audit plan 2015–2016 • Audit plan 2016–2017 • Audit query principal clerks • Audit Sep–Feb 2015 • Final audit • Internal audit assessment questionnaire • Procurement query 003-2015 • Procurement query • Questionnaire internal audit • Work plan 2014–2015 • PI-26 county assembly internal audit PI-27. Financial data integrity (M2) • Financial data integrity • Bank reconciliations 18 • CBK county revenue fund reconciliations 2015–2016 • Br West Pokot revenue fund CBK August 2015 • Br West Pokot revenue fund CBK July 2015 • Br West Pokot revenue fund CBK June 2016 • Br West Pokot revenue fund CBK April 2016 • Br West Pokot revenue fund CBK December 2015 • Br West Pokot revenue fund CBK February 2016 • Br West Pokot revenue fund CBK January 2016 • Br West Pokot revenue fund CBK March 2016 • Br West Pokot revenue fund CBK May 2016 • Br West Pokot revenue fund CBK November 2015 • Br West Pokot revenue fund CBK October 2015 • Br West Pokot revenue fund CBK September 2015 • County assembly recurrent reconciliations 2015–2016 • August 2015.reconciliation • December.2015 • Feb.2016 reconciliation • Jan.2015.rec • July.2015.reconciliation • Nov.2015 • Oct.2015 • Recurrent CBK reconciliation • Reconciliation April.2016 • Reconciliation March.2016 • Reconciliation May.2016 • Sept 2015.reconciliation • County Executive operations reconciliations 2015–2016 • Br West Pokot deposit and suspense August 2015 • Br West Pokot deposit and suspense July 2015 • Br West Pokot deposit and suspense November 2015 • Br West Pokot deposit and suspense October 2015 • Br West Pokot deposit and suspense September 2015 • Br West Pokot deposit and suspense April 2016 • Br West Pokot deposit and suspense December 2015 • Br West Pokot deposit and suspense February 2016 • Br West Pokot deposit and suspense January 2016 • Br West Pokot deposit and suspense March 2016 • Br West Pokot deposit and suspense May 2016 • CBK development reconciliations 2015–2016 • CBK recurrent reconciliations 2015–2016 • Financial statements county assembly 2015–2016.doc • IFMIS mandate request • financial statements 2015–2016 • In year budget reports • County annual progress report 2015–2016 • Departmental progress report validation 19 • Development partners' progress report validation • Submission of supplementary budget estimates 2015–16 • Budget implementation report 2015–2016 • County pbbFY2015_2016 • County Budget Review and Outlook Paper 2016 • County supplementary budget FY2015–2016 • WPC 2016–2017 budget report first quarter • WPC final budget 2015–2016 • Controller of budget quarterly, biannual, and annual reports. • Auditor General Reports • Estimates of Revenues, Grants and Loans Book for FY2016–2017 PI-28. In-year budget reports • County Budget Review and Outlook Paper 2014 • County Budget Review and Outlook Paper 2015 • Quarterly economic and budgetary reviews 2015/16. • County annual progress report 2015–2016 • Departmental progress report validation • Development partners' progress report validation • Budget implementation report 2015–2016 • County pbbfy2015–2016 • County Budget Review and Outlook Paper 2016 • County supplementary budget FY2015–2016 • WPC 2016–2017 budget report first quarter • WPC final budget 2015–2016 • County annual progress report 2015–2016 • County cooperative performance evaluation • Mid-term county progress report 2013–2015 PI-29. Annual financial reports • AFSs signed • June 30, 2015 • June 30, 2016 • Audited accounts • County government of West Pokot financial statements 201314 final • County government of West Pokot financial statements 201415 final • County executive financial statements 2015–2016.doc • PI-29 financial statements submitted PI-30. External audit • Auditors report county assembly 2013–2014 • Auditors report county assembly 2014–2015 financials • Auditors report county operations Jan–June 2013 20 PI-31. Legislative scrutiny of audit reports (M2) • County assembly committee members • County assembly members • County market administration act, 2015 • County revenue administration act, 2016 • County valuation and rating act, 2015 • Public finance management (county mortgage scheme fund) regulations, 2014 • Supplementary appropriation bill 4 21 Annex 4. County profile West Pokot County is a county of Kenya. Its capital and largest town is Kapenguria. The county has a population of 512,690 people (male 49.7 percent and female 50.3 percent) according to the 2009 population and housing census and an area of 8,418.2 km². Kapenguria, Chepareria, Ortum, and Sigor are major urban centers found along the Kitale-Lodwar road. The county has four constituencies: • Kacheliba Constituency • Kapenguria Constituency • Sigor Constituency • Pokot South Constituency According to the KNBS in the five most rural counties (Baringo, Siaya, Pokot, Narok, and Tharaka Nithi), education levels are lower but the gap, while still large, is somewhat lower than that espoused in urban areas. If we look at Gini coefficient’s for the whole county, West Pokot is one of the most equal counties by income measure (ratio of top decile to bottom). 22 Annex 5. Calculation sheet for PFM performance indicators PI-1 and PI-2 Year 2013/14 (Ksh, millions andpercentage) Adjusted Absolute Administrative or Functional Head Budget Actual Deviation Percent Budget Deviation Office of the Governor 280.7 268.8 216.5 52.3 52.3 24.1 Office of Deputy Governor 163.0 139.6 125.7 13.9 13.9 11.1 Finance and Economic Planning 123.7 118.6 95.4 23.3 23.3 24.4 Roads, Public Works and Transport 648.2 491.0 500.0 −9.0 9.0 1.8 Health and Sanitation 1,158.6 821.2 893.7 −72.5 72.5 8.1 Education, Communication and ICT 145.7 142.1 112.4 29.7 29.7 26.4 Agriculture and Irrigation 125.4 104.9 96.8 8.1 8.1 8.4 Livestock, Fisheries and Veterinary Services 157.5 46.8 121.5 −74.7 74.7 61.5 Trade, Industry and Cooperatives 59.1 52.6 45.6 7.0 7.0 15.4 Land, Physical Planning and Urban 64.5 55.1 49.8 5.3 5.3 10.7 Development Water development, Environment and Natural 230.0 122.7 177.4 −54.7 54.7 30.8 Resources Tourism, culture, sports, 70.1 51.5 54.0 −2.6 2.6 4.8 County Assembly 404.8 386.2 312.3 73.9 73.9 23.7 Allocated expenditure 3,631.3 2,801.1 2,801.1 0.0 427.1 Interests Contingency Total expenditure 3,631.3 2,801.1 Overall (PI-1) variance 77.1 Composition (PI-2) variance 15.2 Contingency share of budget 0.0 Source: CBROP. Year 2014/15 (Ksh, millions and percentage) Adjusted Absolute Administrative or Functional Head Budget Actual Deviation Percent Budget Deviation Office of the Governor 1,362.3 1,344.3 1,310.1 34.1 34.1 3 Finance and economic planning 159.6 151.5 153.4 −1.9 1.9 0 Roads, public works and transport 422.3 422.1 406.2 15.9 15.9 4 23 Adjusted Absolute Administrative or Functional Head Budget Actual Deviation Percent Budget Deviation Health and sanitation 708.9 701.1 681.7 19.4 19.4 3 Agriculture and irrigation 187.3 182.6 180.2 2.5 2.5 1 Livestock, fisheries and veterinary services 130.0 118.5 125.0 −6.5 6.5 5 Trade, industry and cooperative development 130.7 130.2 125.7 4.5 4.5 4 Lands, housing, physical planning and urban development 156.6 156.5 150.6 5.9 5.9 4 Water development, environment and natural resources 208.8 163.2 200.8 −37.6 37.6 19 Education and ICT 298.1 274.5 286.7 −12.2 12.2 4 Tourism, culture, sports, youth and gender development 120.9 93.0 116.3 −23.3 23.3 20 West Pokot County Assembly 387.5 371.9 372.7 −0.8 0.8 0 Allocated expenditure 4,273.1 4,109.4 4,109.4 0.0 164.7 Interests Contingency Total expenditure 4,273.1 4,109.4 Overall (PI-1) variance 96.2 Composition (PI-2) variance 4.0 Contingency share of budget 0.0 Year 2015/16 (Ksh, millions and percentage) Adjusted Absolute Administrative/Functional Head Budget Actual Deviation Percent Budget Deviation County Executive 543.7 526.2 501.6 24.7 24.7 5 Finance and economic planning 188.4 148.6 173.8 −25.2 25.2 15 Roads, public works and transport 473.8 464.0 437.1 26.9 26.9 6 Health and sanitation 1,166.3 1,084.2 1,075.8 8.4 8.4 1 Agriculture and irrigation 304.9 299.6 281.3 18.3 18.3 7 Livestock, fisheries and veterinary services 216.8 183.5 200.0 −16.5 16.5 8 Trade, industry and cooperative development 110.7 92.5 102.1 −9.6 9.6 9 Education and ICT 630.7 566.7 581.7 −15.0 15.0 3 Lands, housing, physical planning and urban 92.2 90.4 85.0 5.4 5.4 6 development Water dev., environment and natural resources 256.4 216.3 236.5 −20.2 20.2 9 Tourism, culture, sports, youth and gender dev. 144.5 137.4 133.3 4.1 4.1 3 24 Adjusted Absolute Administrative/Functional Head Budget Actual Deviation Percent Budget Deviation West Pokot County Assembly 527.5 493.9 486.6 7.3 7.3 1 County public service management 174.6 152.5 161.0 −8.5 8.5 5 Allocated expenditure 4,830.5 4,455.8 4,455.8 0.0 190.1 Interests Contingency Total expenditure 4,830.5 4,455.8 Overall (PI-1) variance 92.2 Composition (PI-2) variance 4.3 Contingency share of budget 0.0 Year 2013/14 (Ksh, millions and percentage) Absolute Economic Head Budget Actual Adjusted Budget Deviation Percent Deviation Compensation of employees 939.0 919.3 724.4 195.0 195.0 26.9 Use of goods and services 622.5 578.4 480.2 98.2 98.2 20.5 Subsidies Transfers to other Government Units Other grants and transfers 190.6 190.4 147.0 43.5 43.5 29.6 Social security benefits Consumption of fixed capital 1,879.2 1,112.9 1,449.6 −336.7 336.7 0.0 Total expenditure 3,631.3 2,801.1 2,801.1 0.0 673.3 Overall variance 77.1 Composition variance 24.0 Source: AFS. 25 Year 2014/15 Ksh, millions and percentage) Economic Head Budget Actual Adjusted Budget Deviation Absolute Deviation Percent Compensation of employees 1,282.5 1,282.2 1,233.4 48.8 48.8 4.0 Use of goods and services 867.2 857.3 834.0 23.3 23.3 2.8 Subsidies 0.0 Transfers to other Government 0.0 Units Other grants and transfers 284.2 274.7 273.3 1.4 1.4 0.5 Social security benefits 0.0 Consumption of fixed capital 1,839.1 1,695.2 1,768.7 −73.4 73.4 0.0 Total expenditure 4,273.1 4,109.4 4,109.4 0.0 146.9 Overall variance 104.0 Composition variance 3.6 Source: AFS. 26 Year 2015/16 (Ksh, millions and percentage) Absolute Economic Head Budget Actual Adjusted Budget Deviation Percent Deviation Compensation of employees 1,301.9 1,299.0 1,200.9 98.1 98.1 8.2 Use of goods and services 745.2 696.8 687.4 9.4 9.4 1.4 Subsidies 527.5 507.7 486.6 21.1 21.1 0.0 Transfers to other Government Units 81.2 65.2 74.9 −9.7 9.7 0.0 Other grants and transfers 164.5 164.1 151.7 12.4 12.4 0.0 Social security benefits −0.4 0.0 −0.3 0.3 0.3 −100.0 Consumption of fixed capital 1,960.5 1,643.0 1,808.5 −165.5 165.5 0.0 Repayment of principal on Domestic and 0.0 74.1 0.0 74.1 74.1 0.0 Foreign borrowing Other expenses 50.0 5.7 46.1 −40.4 Total expenditure 4,830.5 4,455.8 4,455.8 0.0 390.7 Overall variance 92.2 Composition variance 8.8 Source: AFS. Calculation sheets for transfers from higher-level government Data for 2013/14 Absolute Economic Head Budget Actual Adjusted Budget Deviation Percent Deviation National Government Transfers (Kshs) Equitable share 3,155,124,840 3,155,124,840 2,770,688,730.2 384,436,109.8 384,436,109.8 13.9 Social contributions Social security contributions 0.0 0.0 0.0 — Other social contributions 0.0 0.0 0.0 — Conditional grants Road maintenance fuel levy fund — — 0.0 0.0 0.0 — Free maternal health care — — 0.0 0.0 0.0 — User fees forgone — — 0.0 0.0 0.0 — 27 Danida — — 0.0 0.0 0.0 — World Bank — — 0.0 0.0 0.0 v Other conditional grants 437,777,043 — 384,436,109.8 −384,436,109.8 384,436,109.8 100.0 Total revenue 3,592,901,883 3,155,124,840 3,155,124,840.0 0.0 768,872,219.6 Overall variance 87.8 Composition variance 24.4 Data for 2014/15 Absolute Economic Head Budget Actual Adjusted Budget Deviation Percent Deviation Equitable share of revenue 3,763,444,079 3,836,031,027 3,790,839,067.4 45,191,959.6 45,191,959.6 1.2 Social contributions Social security contributions 0.0 0.0 0.0 — Other social contributions 0.0 0.0 0.0 — Conditional Grants HSSF DANIDA -Health facilities 23,790,000 23,790,000 23,963,173.0 −173,173.0 173,173.0 0.7 Loans and Grants (WHO) 73,673,500 29,191,000 74,209,786.6 −45,018,786.6 45,018,786.6 60.7 World Bank Support to Health Facilities — — 0.0 0.0 0.0 — Compensation for Use Fees Forgone — — 0.0 0.0 0.0 — Roads Maintenance Fuel Levy Fund — — 0.0 0.0 0.0 — Total revenue 3,860,907,579 3,889,012,027 3,889,012,027.0 0.0 90,383,919.2 Overall variance 100.7 Composition variance 2.3 Data for 2015/16 Absolute Economic Head Budget Actual Adjusted Budget Deviation Percent Deviation Equitable share of revenue 4,313,692,404 4,138,293,328 4,020,696,438.9 117,596,889.1 117,596,889.1 2.9 Social contributions Social security contributions 0.0 0.0 0.0 — Other social contributions 0.0 0.0 0.0 — Conditional Grants Free maternity 65,759,400 51,262,500 61,292,869.5 −10,030,369.5 10,030,369.5 16.4 28 Leasing of medical equipment 95,744,681 — 89,241,480.8 −89,241,480.8 89,241,480.8 100.0 User charges — — 0.0 0.0 0.0 — HSSF DANIDA -Health facilities 25,970,000 — 24,206,057.5 −24,206,057.5 24,206,057.5 100.0 Loans and Grants(WHO) — — 0.0 0.0 0.0 — World Bank support to health facilities 17,224,300 17,224,300 16,054,385.7 1,169,914.3 1,169,914.3 7.3 Compensation for use fees forgone 12,950,107 12,950,107 12,070,505.8 879,601.2 879,601.2 7.3 Roads maintenance fuel levy fund 56,410,082 56,410,082 52,578,578.8 3,831,503.2 3,831,503.2 7.3 Total revenue 4,587,750,974 4,276,140,317 4,276,140,317.0 0.0 246,955,815.6 Overall variance 93.2 Composition variance 5.8 Results Matrix Year Total Revenue Deviation Composition Variance 2013/14 87.8% 24.4% 2014/15 100.7% 2.3% 2015/16 93.2% 5.8% 29 Contract awarded by type of procurement for the FY2015–2016 (Ksh) Type of Contract awarded Value of procurement Service provided procurement Open tender Supply and delivery of standby 9,997,035.00 Goods generator set Supply and delivery of laundry 10,000,000 .00 Goods equipment Installation of oxygen plant 15,515,600.00 Goods Installation of high mast community 31,773,350.00 Goods lightning arrestors Proposed construction of 7,655,140.00 Works administration block for Masol integrated project Proposed construction of health 14,793,150.00 Works center for Masol integrated project Proposed construction of classroom 11,996,950.00 Works block for Masol integrated project Proposed construction of Kokpor 14,232,450.00 Works water supply project Proposed completion of Sigor water 32,002,500.00 Works supply project Proposed construction of retail open 12,358,640.00 Works cloth market at Makutano Proposed construction of retail 10,936,654.00 Works market at Konyao Proposed construction of retail 11,534,419.00 Works market at Lomut Proposed construction of subcounty 64,048,936.00 Works office at Kapenguria phase II Proposed construction of hostels for 14,985,460.00 Works Masol integrated project Proposed construction works for 7,049,210.00 Works Mukowo irrigation scheme phase III Proposed construction works for 10,255,450.00 Works Soybei irrigation scheme phase II Proposed construction works for 6,124,072.00 Works Mrel irrigation scheme phase III Provision of comprehensive motor 8,771,802.00 Services vehicle insurance Restricted tender Proposed construction works for 3,969,440.00 Works Orwa irrigation scheme phase II Provision of medical insurance cover 5,591,592.34 Services for West Pokot County government state officers Supply and delivery of assorted 5,745,160.00 Goods building materials for ECD schools Supply and delivery of emergency 5,515,000.00 Goods food supplies to North Pokot subcounty 30 Supply and delivery of emergency 4,016,000.00 Goods food supplies to Pokot central subcounty Supply and delivery of relief food 5,480,000.00 Goods phase III Supply and delivery of relief food 5,220,000.00 Goods stuff phase I Construction of Lobiroy water supply 5,693,012.00 Works project Proposed construction of Kesot water 9,998,910.00 Works supply phase II Proposed construction of Kapkunyuk- 6,969,836.50 Works Kabichbich box culvert Supply and delivery of relief food 4,800,000.00 Goods Supply and delivery of borehole 5,693,600.00 Goods casings Proposed construction of Lotongot 4,949,500.00 Works water pan Proposed electrical installation works 5,767,323.00 Works (external) to governor's residence Proposed construction of Cheptonik 5,791,880.00 Works water supply project Supply and delivery of borehole 5,943,000.00 Works materials and casings Construction of Kaporowo dispensary 5,666,188.20 Works in Tapach ward Construction of Sebit dispensary in 5,999,800.00 Works Batei ward Construction of Kamelei dispensary in 5,775,628.40 Works Tapach ward Proposed construction of Porowo 5,998,858.80 Works dispensary Proposed construction of Mtembur 3,771,499.80 Works dispensary Proposed construction of Kerelwa 5,726,456.00 Works dispensary Proposed construction of Lokornoi 5,561,875.00 Works dispensary Proposed construction of wildlife 5,842,490.00 Works conservancy office at Masol Construction of staff house at 3,874,678.40 Works Kamayech dispensary Proposed construction of medical 3,971,688.40 Works staff house at Kalukuna dispensary Proposed construction of Wasat 5,369,210.08 Works dispensary Proposed construction of a twin staff 3,399,751.20 Works house at Tuwit dispensary Proposed construction of a 5,499,888.00 Works dispensary at Tuwit village 31 Proposed construction of a new 5,299,982.00 Works dispensary at Kalukuna Proposed construction of a staff 3,792,643.20 Works house at Chemakeu dispensary Proposed construction of Katopoton 5,999,462.00 Works dispensary Proposed construction of Auskion 5,599,865.20 Works dispensary Proposed construction of Lokilelian 5,626,580.00 Works dispensary Proposed construction of Lelmolo 5,369,210.08 Works dispensary Supply and delivery of vaccines 5,799,000.00 Works Proposed construction of Tirken 5,504,948.20 Works dispensary Proposed construction of Krengot 5,388,832.20 Works dispensary in Siyoi ward Proposed construction of septic tank, 5,890,708.00 Works sewer connections from public toilet, guard house, and renovated residence at governor's residence Proposed construction of two guard 4,656,203.20 Works houses, pit latrine, and electrical panel Proposed construction of public toilet 4,985,668.00 Works in West Pokot County (governor's residence) Supply and delivery of food stuff for 5,991,000.00 Works ECD feeding program Supply and delivery of furniture and 5,610,060.00 Works fittings for house block A (governor's residence) Supply and delivery of furniture and 4,677,243.00 Works fittings for house block B (governor's residence) Proposed fittings for kitchen, curtains 5,149,400.00 Works and sheers, and specialized works for electrical appliances and mechanical for house blocks a and b and provision of garden tents and chairs at governor’s residence Direct procurement Proposed renovation of Makutano 29,006,047.66 Works stadium phase II Proposed construction of ECD college 24,401,011.00 Works phase II Source: West Pokot County Executive. 32