Impact of Local Authorities Transfer Funds on the Distribution of Resources of Local Authorities in Kenya

Abstract

There has been a lot of criticism, from various quarters, on the way the LATF is managed and implemented. Grants to local governments may raise local government employment and contribute to expansion of local industries. But characteristics of the local government and the local economy also will determine how federal or central government grants are distributed. In Kenya, service provision in Local Authorities includes maintenance of local roads, public markets, bus parks, slaughter houses, municipal housing, solid waste management and social welfare programme, The study used cross sectional research design methodology with a population of 175 local authorities. Stratified random sampling technique was used to select the sample. From each stratum the study used simple random sampling in selecting 53 local authorities. The sources were obtained from the treasury, Kenya local governments reform programme, the ministry of local government. The study used secondary data and they include; local authority approved budget estimates, Statements of actuals receipts and expenditure and financial statements for a period of 5 years (2006-2010). Based on the findings, it is clear that most of the local authorities cannot finance fully the recurrent expenditure from the locally generated revenues. The locally generated revenues are not reliable to the extent of financing the necessary personnel, operations and maintenance and for that reason they literally depend on LATF to finance development expenditure. Going by the analysis, some of the funds on LATF allocation actually go to the performance so as to make LAs operate at optimum level. Without LATF most of the local authorities will be in deep debts and not offering any meaningful development to the local residents. As LATF funding increased over the years, the performance capacity of the LAs increased thereby increasing the locally generated revenue. This translated to more funds going to development expenditure and therefore LATF has a major impact on Local Authorities.