The Equalisation Fund (Administration) Bill, 2023

Background

Article 204 of the Constitution of Kenya establishes the Equalisation Fund, funded by one-half percent (0.5%) of all revenue collected by the National Government each year, calculated on the basis of the most recent audited accounts. The fund is designated to provide basic services—including water, roads, health facilities, and electricity—to marginalized areas. The Equalisation Fund (Administration) Bill, 2023 provides a robust statutory and administrative framework to replace previous regulations and ensure efficient, transparent, and devolved project implementation.

Key Amendments

• Extension of the Fund (Clause 32): The Bill suspends the application of Article 204(6) and extends the lifespan of the Fund for a further non-renewable term of ten (10) years.
• Repeal of Regulations (Clause 34): The Bill officially repeals the Public Finance Management (Equalisation Fund Administration) Regulations, 2021 (Legal Notice No. 54 of 2021).

New Obligations

The Equalisation Fund Advisory Board

Clause 6 establishes the Equalisation Fund Advisory Board, consisting of:

• A Chairperson appointed by the Cabinet Secretary for Finance;
• Principal Secretaries for Finance and Devolution;
• Representatives from pastoralist communities, marginalized areas, and persons with disabilities;
• The Chairperson of the Commission on Revenue Allocation (CRA).

Local Administrative Structures

To devolve project management, the Bill creates three tiers of local administration:

1. County Technical Committees (Clause 17): Co-chaired by the County Commissioner and the County Governor. They are responsible for approving all projects financed by the Fund within their respective counties.
2. Sub-county Technical Committees (Clause 19): Co-chaired by the Deputy County Commissioner and Sub-county Administrator to evaluate, prioritize, and monitor development projects.
3. Project Identification and Implementation Committees (Clause 21): Chaired by the Assistant Sub-County Commissioner, tasked with undertaking local public participation and identifying village-level projects.

Financial Management and Reporting

• The Administrator of the Fund is required to open a separate account at the Central Bank of Kenya (Clause 13).
• The Administrator must submit quarterly financial and project status reports to the Cabinet Secretary, the Commission on Revenue Allocation, and the Controller of Budget (Clause 23).

Penalties and Cost Caps

• Administrative Cost Cap (Clause 12): The administrative costs and expenses of the Advisory Board are legally restricted and must not exceed three percent (3%) of the approved annual allocation of the Fund.

Transitional Provisions

• Transition of Board and Staff (Clauses 35-38): All rights, obligations, assets, and liabilities of the previous Advisory Board transfer to the new Board. Members and staff of the previous Board will serve out their unexpired tenures under the new administration. Ongoing projects under the repealed 2021 Regulations must be finalized in accordance with this Act.