Financing Local Government Development Programmes in Kenya. A Case Study of Bungoma Municipal Council.

This study aimed at analyzing and determining the financial management issues that beset the performance of local authorities in financing their development programmes, based on the situation at Bungoma Municipal Council. This has been through analysis of the revenue base of the Council in terms of potential and trends, stability and elasticity of actual revenue collection over a ten-year period. Besides, the expenditure practices of the council have been examined with view to get the relationship between revenue and expenditure on the one hand, and that between current and capital expenditure outlets on the other hand as a means of gauging the magnitude of budgetary "differentials and prioritization. Further the study has endeavored to examine the implications of the observed problems to the economic and spatial development of the center and its surrounding areas.

The study has used a set of both descriptive and inferential statistical techniques of analysis to analyze and interpret the research data". Through use of the student's T’Test and the ANOVA Test, the results of the logarithmic regression analysis, regression and correlation analysis and revenue- expenditure differentials have been tested for significance. This enabled the study to arrive at accept-or-reject judgments of the Null hypotheses used.

From the analysis, the following findings have been made:
(i)      That the revenue base potential is strong enough to take care of the council’s    current expenditure requirements, otherwise the problem arises out of inability to harness the existing resource base;
(ii)     The revenue collection of the council suffers from a significant degree of variability as a consequence of the poor system of collection due to both intra- and inter-institutional management slackness;
(iii)     The revenue base of the council does not suffer from instability with respect to adversities emanating from the natural socio-economic dynamics both at local and national levels;
(iv)     The revenue base of the council is quite elastic to variations in the economic base of the area;
(v)     The council's capital revenue generating projects have not had any significant positive impact on the revenue base of the council, on account of the failure to set the user-charges at economic rates;
(vi)     Property rates are some of the best net sources of revenue although the ratable area is low while the land rates are low and infrequently adjusted due to failure to update the valuation Rolls;
(vii)     The service charge levy has the potential of being the highest net source of revenue, albeit the limitation of its base in the modern sector of the local economy, and the difficulty of enforcing payments from the dominantly informal sector;
(viii)     The ability of the council to engage in capital formation activities is weak on account of the inefficiency of the Local Government Loans Authority in the administration of funds transfer and project prioritization; and,
(ix)     The council experiences huge budgetary deficits due to inability to control expenditures, while the expenditure prioritization is asymmetrically inclined to current as compared to capital expenditures.

Using the premise that, it is the ability of the local authorities to finance their development programmes that determine their degree of participation in the development process, the study concludes that the council is not effectively participating in the development of the local area. This is on account of both intra- and inters- institutional management problems that have got nothing to do with the strength of the revenue base.

The study further makes several policy recommendations which can be adopted by the various agencies involved in the local government system to remedy the maladies observed. An extensive bibliography and appendices are provided at the end of the dissertation for further reference.
 

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