Public Finances of Local Government in Kenya

Abstract

Gives an overview of the decentralization process in Kenya which has experienced little change since independence with the exception of Local Authority's (LA) responsibilities and resources which have been recentralized. The Kenya Local Government Reform Program (KLGRP) tried to correct this by increasing the LAs' financial resources, fostering citizens' participation in community life, and improving reliability of budgetary and accounting information. A new constitution was adopted in 2010 which reforms national institutions and intends to change the system of territorialized public institutions, but leaves issues of operation and financing of the new system unresolved. Currently, LA's freedom in regard to expenditure and revenue is extremely limited, but many of them do not comply with those rules. Principal elements of local taxation are the single business permit, property rates, contribution in lieu of rates (CILOR), and agricultural taxes. Even if the Local Government Act amendments bring changes for the current LAs, the new constitution maintains a centralizing tone.