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COUNTY COUNCIL OF NAROK

BUDGET ANALYSIS

7/26/2010


BUDGET FORMULATION PROCESS The budget development process, driven by the budget development calendar begins shortly after the start of the fiscal year (July 1 st). The Budget Committee, which is responsible for developing projections of expenditures and revenues, prepares a request for appropriations to the Ministry of Local Authorities every year. The Council will often set the parameters for anticipated expenditure growth as well as other budgetary assumptions. Enrollment projections and goals stated in the strategic plan are important factors in the development of projections. In addition, information is gathered from studying contemporary trends. The formulation period ought to be between 30 year as a practice in Public sector cycle.

th

of June each year to 1

st

of July the following


COUNTY COUNCIL OF NAROK BUDGET SUMMARY FOR THE FINANCIAL YEAR 2010/2011 ITEM

Approved Estimates (Last FY)

Actual Rev/Ex

Approved Estimates (Current FY)

Variance Analysis %

74,093,022

67,238,139

83,794,767

13% 0%

REVENUES Central Government LATF RMLF CILOR Sub Total

0% 74,093,022

67,238,139

83,794,767

Other Ext. Revenues (Grants/Loans) Other External Source 1 (specify)

13%

0%

Other External Source 2 (specify)

0%

Single Business Permit

8,000,000

2,850,000

4,600,500

-42%

Market and Slaughter Hse Fees

6,050,000

2,716,080

2,246,220

-63%

Property Rates and Plot Rent

4,210,000

696,040

696,040

-83%

Bus Parks/Vehicle Parking

0%

House and Stall Rent

578,160

1,163,662

820,485

42%

Cess Revenues

11,670,000

60,313,469

12,199,270

5%

Other Fees (Specify) Park entry fee

697,759,734

738,614,088

860,509,240

23%

Other Fees (Specify)misc.& other charges

10,126,000

7,133,418

2,120,894

-79%

Sub-Total

738,393,894

813,486,757

883,192,649

20%

Total Revenues

812,486,916

880,724,896

966,987,416

19%

EXPENDITURES

0%

Civic Expenditures

43,393,600

24,254,840

39,943,600

-8%

Personnel Costs

272,717,398

210,317,982

286,718,930

5%


Operations Costs

286,490,000

299,450,188

262,643,455

-8%

Maintenance Costs

88,331,000

34,578,490

85,152,492

-4%

Sub-Total Recurrent

690,931,998

568,601,500

674,458,477

-2%

Capital Projects

92,100,000

112,496,794

142,966,900

55%

Long Term Loan Repayments

0%

TOTAL EXPENDITURES

783,031,998

681,098,294

817,425,377

4%

Outstanding Debt Repayments

84,669,000

168,350,952

35,029,073

-59%

Deficit/Surplus

-55,214,082

31,275,650

114,532,966

-307%

EXTRACT VERBERIT IS M

Currently, the County Council of Narok has an active workforce of 1,023 employees in different capacities and on permanent basis, with an approximate monthly payroll budget of Kshs 24,000,000 (Twenty four million). Finance Committee Chairman, Mr. Martin Kirema, said the council would spend Sh140.1 million and expects a Sh2.2 million surplus. In Narok County Council, Sh16.5 million was allocated for education and additional bursaries. Finance Committee Chairman, Mr. Solomon Moriaso, said the council plans to raise Sh506million against expenditure of Sh520million.

ANALYSIS From this verbatim it shows that Narok county council normally incurs Expenses on their payroll of Kes 288,000,000 which is 35% of the approved estimates this financial year and the average worker earns per month salary of Kes 23,460.40.


SUR/DECIFIT TOTAL APPROVED

-55214082

CG

REVENUE REVENUE 812486916 74093022

ESTIMATES LAST FY ACTUAL REVENUE/EX APPROVED

EXP.

73839389

783031998

4 31275650 114532966

880724896 966987416

67238139

81348675

681098294

83794767

7 88319264

817425377

ESTIMATES CURRENT FY VARIANCE

INT. REV

6 -3.07

0.19

0.13

0.2

0.04

ANALYSIS Source: NCC BUDGET (2010) From Table 1 and supported by Budgetary summary for the financial year 2010/2011 there was an improvement of Revenue for the council in respect to the financial year 2010/2011 this may be attributed to improvement in tourism sector for Kenya and the net effects translated to a budget surplus of kes 114,532,966 as shown by the approved estimates figures for the current financial year 2010/2011.However ,when scrutinizing budgetary itemization on revenue collection ;single business permits decrease 42%,Market and Slaughter House Fees decrease by 63%,Property rates and plot rent decrease by 83% and other fees decrease by 79% Overall revenue from this source is not true since all the variables in this sector really improved tremendously this year (2009) since the World Bank Group in its survey Doing Business in Kenya 2010, ranked Narok District among the best entrepreneurship town Kenya and variables are directly related to this goodwill which mean in layman language it will have a positive effects both in the short run.


TABLE 2-SUMMARY OF THE DESCRIPTIVE STATISTICS SUR/DECIFIT TOTAL Mean 22648633 Median 15637823 Maximum 1.15 Minimum -55214082 Std. Dev. 70928883 Skewness 0.32 Kurtosis 1.90 Jarque-Bera 0.27 Probability 0.88 Observation 4 s

CG

INT

EXP.

REVENUE REVENUE REVENUE 6.65 56281482 6.09 5.70 8.47 70665580 7.76 7.32 9.67 83794767 8.83 8.17 0.19 0.13 0.20 0.04 4.48 38130851 4.10 3.85 -1.09 -1.04 -1.08 -1.08 2.28 2.25 2.28 2.27 0.87 0.82 0.87 0.87 0.65 0.66 0.65 0.65 4 4 4 4

The descriptive statistics are represented by Surplus/deficit ,Total Revenue which is made of central government revenue and internal revenue which a chuck is generated by the world famous Maasai Mara but in terms of Total which is negatively skewed as shown table 2 of a value of -1.09 while the same is true for other revenues.

CORRELATION MATRIX SUR/DECIFIT TOTAL

CG

INT

EXP.


SUR/DECIFIT 1.00 TOTAL 0.35 REVENUE CG REVENUE 0.31 EXT 0.35 REVENUE EXP. 0.25 Source: Research Findings (2010)

REVENUE REVENUE REVENUE 0.35 0.31 0.35 1.00 0.99 0.99

0.25 0.99

0.99 0.99

1.00 0.99

0.99 1.00

0.99 0.98

0.99

0.99

0.98

1.00

From the correlation matrix Table it means that all the variables are directly proportional to each other that is Budget surplus/deficit ,Total Revenue, External Revenue ,Internal revenue and expenditure of the budget.

Source: Research Findings (2010) From the above Graph the analysis of the various budgetary items were captured in respect to Surplus/deficit, Total Revenue, Central Government Revenue, Internal Revenue and Expenditure for the current and previous years for approved estimates and approved revenue /Expenditure.


Source: Research Findings (2010)


Source: Research Findings (2010)

From above Pie chart it shows the summary of the composition of all the variables affecting revenue in Narok county council which in turn translate into either a budget deficit or surplus where in economics sense a budget deficit is when total expenditure exceeds total revenue and reverse is true for a surplus budget.


Source:Research Findings(2010) The scatter diagram shows how the various variables are distributed that is approved estimates,actual revenue/expenditure and approved estimates current financial year .

POLICY IMPLICATIONS 1. Poor corporate governance especially in local authories in kenya is really affecting the delivery of services to wananchi thus even if the budget is as good as possible what matters is the implimentations of the same. 2. The other issue is mismanagement of scarce resources of the local authorities by the leadership of the council for selfish interest . 3. The management practice of the council is unwanting cause they tend to practice a management philosophy of MBWA(Management By Walking Around) and management incest. 4. Lack of budgetary policy and budgetary statements. 5. Lack of Revenue target year in year out which will in turn translate into budget hipcups and shortfall in budgets .


THE WAY FORWARD 1. Minimization of cost;ensuring that the benefits versus cost analysis are taken into considerations in order creat a balanced budget and thus a budget surplus. 2. Implentations of all projects budgeted for and ensuring they are finished within that financial year. 3. Participatory budgetary process by engaging proffessions in the preparation of budgets. 4. Budget reforms in order give a true and fair budget and also balanced budget. 5. Using the practice of International Public Sector Accounting Standards in the

preparation of other Financial statements i.e. Income statement, Balance sheet, Notes to the Accounts in order to enhance transparency.

QUESTIONS The following issues of critical importance should be addressed in order to achieve a good Budget; i.

As a senior policy analyst critique the Budget summary of county council of Narok for the financial Year 2010/2011.

ii.

Give a brief summary of the budget policy statement in the Budgeting process in the near future.

iii.

Critical areas of Revenue collection improvement,

iv.

Does the Budget capture expectation?

v.

Does the Budget fulfil the Time value of Money principle in Finance if so, in respect to elements of uncertainty?

vi.

Does the Budget show a balanced Budget?


GLOSSARY Account: A formalized grouping of revenues or expenditures, presented by pool level object codes and minor object codes. Within object codes the account reflects fiscal year budget, actual expenditures, encumbered expenditures and the available balance within pool object codes and in account total. Accrual Basis Accounting: The most commonly used accounting method, which reports income when earned and expenses when incurred, as opposed to cash basis accounting, which reports income when received and expenses when paid. Accrued Expense: An expense that is incurred, but not yet paid for, during a given accounting period. Accrued Revenue: Revenue earned during the current accounting period but which is not to be collected until a subsequent accounting period. Allocate: To divide a lump-sum appropriation into parts which are designated for expenditure by specific organization units and /or for specific purposes, activities, or objects. Accrue: To record revenues when earned and to record expenditures as soon as they result in liabilities for benefits received, although the receipt of cash or payment of cash may take place, in whole or in part, in another accounting period. Capital Asset: All tangible property which cannot easily be converted into cash and which is usually held for a long period, including real estate, equipment, etc. Capital Expenditure: Money spent to acquire or upgrade physical assets such as buildings and machinery, also called capital spending or capital expense. Expenditures: Expenditures are recorded when liabilities are incurred. If the accounts are kept on the accrual basis this term designates the cost of goods delivered or services rendered, whether paid or unpaid, including expenses, provision for debt retirement not reported as a liability of the fund from which retired, and capital outlays. Expenses: Charges incurred, whether paid or unpaid, for operation, maintenance, interest, and other charges that are presumed to benefit the current fiscal period. Grant: Funds provided by an outside private or governmental source, the acceptance of which creates a contractual agreement between the parties.


Revenues: Current year income which has accrued from Central government and fees, auxiliary enterprises, grants, contracts, gifts, investments, endowment, indirect cost recovery, or similar sources.


NAROK COUNTY COUNCIL BUDGET