EXPERT COMMENT: Counties struggle to realise revenue potential

THE monitoring and evaluation exercise revealed persistent weaknesses undermining the effective administration and performance of own-source revenue in counties. These challenges fall under five main areas:

(a) Inefficient manual collection systems: Many counties still depend on manual revenue collection methods prone to leakages, under-reporting, and fraud due to weak controls and limited oversight. Automation efforts remain incomplete or fragmented, failing to cover all revenue streams comprehensively.

Baringo, Garissa, and Lamu counties, for example, have yet to fully automate their systems, affecting efficiency and accountability. Counties should prioritise full automation by adopting robust, integrated digital platforms to enable real-time collection, reconciliation, and reporting.

(b) Outdated taxpayer registers and valuation rolls: Several counties operate with outdated taxpayer databases and valuation rolls, undermining accurate billing and collection. This results in systematic under-collection and hampers forecasting and fiscal autonomy.

Baringo, Kajiado, and Lamu are particularly affected, with outdated valuation rolls limiting property rate collections. Counties should regularly update and maintain comprehensive registers and valuation rolls to ensure accurate assessment and broaden the OSR base.

(c) Weak enforcement and compliance monitoring: Revenue law enforcement and compliance monitoring remain weak. Penalties for non-compliance are unclear or poorly applied, while staff capacity gaps and a lack of modern tools persist. Baringo, Garissa, and Makueni were cited as affected counties. County treasuries should institute clear penalties, strengthen compliance frameworks, and enhance staff capacity through training and modern enforcement tools.

(d) Weak internal controls and accountability: Fragmented revenue streams, excessive cash handling, and poor reconciliation expose collections to misuse and loss. Delays in daily banking and weak oversight further heighten risks. Counties should adopt cashless payment systems, enforce timely banking, and strengthen internal controls and reconciliation procedures in line with the Public Finance Management Act.

(e) Unexploited OSR potential: Despite the Commission on Revenue Allocation estimating counties’ OSR potential at Sh250 billion annually, actual collections fall far below this mark. Most rely on traditional streams—property rates, market fees, and parking charges—while opportunities in outdoor advertising, natural resource royalties, entertainment taxes, and county-owned assets remain largely untapped.

Excerpt from the report of the Controller of Budget on the County Budget Implementation Review report for FY 2024-25.