Public finance management in Kenya involves the distribution of financial resources between the national and county governments. The process follows constitutional provisions to ensure equitable sharing of revenue for efficient service delivery at both levels.
The Division of Revenue and Allocation of Revenue are distinct but interconnected processes.
1️⃣ Division of Revenue in Kenya (Vertical Sharing)
Definition
🔹 Division of Revenue refers to the sharing of tax revenue raised nationally between the national government and the 47 county governments.
🔹 The process is also called vertical sharing because it involves distributing funds between the two levels of government.
Legal Basis
📌 Article 202 – Revenue raised nationally shall be shared equitably between the national and county governments.
📌 Article 218(1)(a) – Requires a Division of Revenue Bill to facilitate the process.
Process
1️⃣ The National Treasury drafts the Division of Revenue Bill and presents it to Parliament by February 15 each year.
2️⃣ Both the Senate and National Assembly debate and approve the bill.
3️⃣ If disagreements arise, a mediation committee resolves the issue under Article 113 of the Constitution.
4️⃣ Once approved, the bill is sent to the President for assent, becoming the Division of Revenue Act.
5️⃣ The funds are deposited into the Consolidated Fund for national government use and further allocation to counties.
Senate’s Role in Revenue Sharing
✔️ Article 217 – The Senate determines how national revenue allocated to counties will be shared among them.
✔️ Every five years, the Senate revises the revenue-sharing formula based on:
🔹 County population
🔹 Geographic size
🔹 Poverty levels
🔹 Fiscal responsibility
🔹 Other key factors
2️⃣ Allocation of Revenue in Kenya (Horizontal Sharing)
Definition
🔹 Allocation of Revenue refers to the distribution of the county share of national revenue among the 47 counties.
🔹 The process is also called horizontal sharing because it involves distributing funds among the counties after the vertical division is completed.
Legal Basis
📌 Article 218(1)(b) – Requires a County Allocation of Revenue Bill to facilitate the process.
Process
1️⃣ The National Treasury drafts the County Allocation of Revenue Bill and submits it to the Senate by February 15 each year.
2️⃣ The Senate discusses and approves the County Allocation of Revenue Bill.
3️⃣ Once approved, the bill becomes the County Allocation of Revenue Act.
4️⃣ The funds are distributed to counties based on the revenue-sharing formula determined under Article 217.
5️⃣ Each county’s share is deposited into the County Revenue Fund for budgeting and expenditure.
Key Differences: Division vs Allocation of Revenue
| Feature | Division of Revenue | Allocation of Revenue |
|---|---|---|
| Definition | Distribution of national revenue between the national and county governments | Distribution of the county share of revenue among the 47 counties |
| Process Type | Vertical sharing (between national and county governments) | Horizontal sharing (among county governments) |
| Governing Law | Article 202 & 218(1)(a) of the Constitution | Article 218(1)(b) of the Constitution |
| Legislative Process | Involves both National Assembly and Senate | Managed exclusively by the Senate |
| Bill/Act | Division of Revenue Bill → Division of Revenue Act | County Allocation of Revenue Bill → County Allocation of Revenue Act |
| Formula Considerations | Based on overall government needs | Based on county population, land size, poverty index, etc. |
| Responsible Body | National Treasury prepares the bill, and Parliament approves it | National Treasury prepares the bill, and Senate approves it |
| Final Destination of Funds | Consolidated Fund (for national & county government) | County Revenue Fund (for individual counties) |
Conclusion
✅ Division of Revenue occurs before Allocation of Revenue.
✅ Both processes ensure equitable distribution of resources in Kenya’s devolved system.
✅ The Senate plays a crucial role in both vertical and horizontal sharing.
Understanding these distinctions helps ensure transparency in government spending and accountability in public finance management. 💰⚖
