Public Sector Governance and Accountability Series: Budgeting and ...

Country Case Study: Kenya 491
BOX 14.3 Budget Comprehensiveness and the Constituency
Development Fund
The Constituency Development Fund was established by an act of the legislature
to take development projects to the citizens at the grassroots level. The strategy
was conceptualized as complementary to the government’s other development
activities, funded through the recurrent and development budgets. The
act, drafted by the legislature when the new government came into power,
stipulates that 2.5 percent of ordinary revenue must be set aside for the fund.
The act stipulates that members of the legislature are responsible for establishing
constituency development committees that will prioritize project
proposals from each constituency. Allocations per constituency are based on
a population poverty index, with each constituency receiving a base allocation
plus a variable portion in line with constituencies’ index scores.
Although allocation of some funds by constituencies to constituency
priorities can have benefits in terms of local participation, accountability, and
effectiveness, the fund’s link to the legislators may trigger some of the governance
problems associated with poorly managed participatory processes.
Reports have circulated of legislators using the funds as an instrument of local
patronage and of local elites capturing decision making regarding use of
funds. Monitoring and reporting mechanisms that have been set up centrally
are not functioning well enough to counter these types of problems.
As discussed in the 2005 public expenditure review (Republic of Kenya
2005), the establishment of various special funds by members of the legislature
poses a number of public finance management problems. These funds
are not subject to the same control, reporting, and accountability procedures
as spending under the main budget. More significantly, this process fragments
public spending, thereby hindering a comprehensive consideration of all
claims on spending against the complete pool of available funds. In practice,
the projects undertaken are not accounted for in recurrent budget allocations:
when a constituency uses its funds to build a secondary school, no mechanism
exists to ensure that the school is adequately staffed on completion. Of course,
the fund also affects the efficiency of public resource use: the location of
roads, schools, and other public infrastructure funded by the Constituency
Development Fund—with a forward effect on the recurrent budget—is not
determined by a consideration of cost and benefits across localities and of
economies of scale. Although 2.5 percent of ordinary revenue is not a huge
proportion on its face, it grows in significance when taken as a proportion of
spending after interest and short-term rigid spending, such as salaries.
In addition, the legislature has called to increase the proportion of ordinary
revenue earmarked for the fund.
Source: Republic of Kenya 2005.