Part XVI – COUNTY CORPORATIONS

200Definitions

For the purposes of this Part—

"governing body" in relation to a public entity means a commission, a board of directors, a board of trustees, board of governors, and council.;

"government owned enterprise" means an organisation which—

• (a) is a legal person under the ownership and control of a county government;

• (b) has been assigned financial and operational powers to carry on a business activity;

• (c) as its main business, supplies goods or services in accordance with ordinary commercial principles; and

• (d) is financed wholly or substantially from sources that do not require annual appropriation by County Assembly, or imposition of a tax, levy or other charge under legislation.

201Declaration of County government entities and classification of state corporation

(1) Pursuant to section 5 of the Act, the County Committee Member may by notice in the Gazette declare and classify county government entities in accordance with the Schedules as indicated in this Regulation.

(2) County Government owned enterprises operating on the basis of commercial principles shall be listed as Schedule 2 county government entities.

(3) Regulatory agencies shall be categorised as Schedule 3 county government entities.

(4) Executive agencies, and county referral health institutions, boards and commissions fully or partially funded through the county government budget shall be categorised as Schedule 4 county government entities.

(5) County Public Funds established under the county legislation or subsidiary county legislation shall be classified as Schedule 5 county government entities.

(6) The County Executive Committee Member for Finance shall have powers to amend the Schedules classified under this regulation in accordance with the provisions of the Act and this regulation.

202Guiding principles for the establishment of county corporations

The following principles shall apply when determining the need for the establishment of a county corporation under section 182 of the Act—

• (a) there shall be a role for a county government entity to fill a gap left by the market forces through—
• (i) social inclusion, where the county government entity addresses social inequity by redistributing resources in ways that improve opportunity and support for individuals, families and communities, allowing them to participate in the economy and society consistent with the county government's social inclusion agenda; or (ii) correction of market failure, where the county government entity's activity shall address market failures by improving social and economic welfare through improved resource allocation, where the benefits of county government intervention outweigh its cost;

• (b) activities promoted by the county corporation shall have clear and consistent objectives and be effective in achieving their county objectives and represent value for money for the expenditure of taxpayer funds;

• (c) a county government owned enterprise shall operate on commercial principles and with a defined commercial income stream that substantially supports the associated commercial activities;

• (d) where activities involving tax expenditures demonstrate that public expenditure is less effective in achieving the county government objective but can effectively be undertaken on a commercial basis; and

• (e) there is no overlap or duplication of functions when establishing a county corporation within the county government.

203Criteria for establishing county corporations

(1) In exercising the powers under section 182 of the Act, the County Executive Committee and County Assembly shall be guided by regulation 202, this regulation and any other relevant regulation of these Regulations.

(2) A County corporation may be established only with the prior approval of the County Executive Committee, with reference to a legislation enacted to govern the establishment, management and dissolution of such county corporation.

(3) In order to establish a county corporation or a subsidiary of a county corporation—

• (a) the responsible County Executive Committee Member shall submit a written business case to the County Executive Committee Member, with detailed justification for establishing the county corporation or the subsidiary; and
• (b) the business case in paragraph 3(a) shall be informed by a feasibility assessment of the proposed county corporation or the subsidiary for the purpose of ascertaining—
• (i) the economic and financial viability of establishing a county corporation; (ii) whether the proposed activity cannot be conducted through an existing corporation or the parent department; (iii) whether or not there is need to establish a new corporation; (iv) the functions and objective that its establishment is supposed to attain;
• (v) how the activities of the proposed corporation will fit in the county department's legislative mandate and medium term strategy, and aid the realization of the objectives of the programmes associated with that department; (vi) how the activities of the proposed county corporation will fit in the overall medium term plan of county government; (vii) how they impact the fiscal position of the county government; and (viii) the amount of county government share.

(4) The feasibility and viability assessment conducted under paragraph (3)(b) of this regulation shall be submitted to the County Executive Committee for approval.

(5) Upon approval of the business case by the County Executive Committee, the necessary establishment processes shall be undertaken by the relevant department as required by a legislation on formation, management and dissolution of County corporations to allow it perform the functions stipulated in the instruments for incorporation.

(6) The county government entity responsible for investment portfolio management in the County Treasury shall be constantly updated on the progress of a county corporation.

(7) The County Executive Committee Member responsible for investment portfolio management in the County Treasury shall conduct regular review of county corporation to assess the relevance of the mandate and the justification for their continued existence and where necessary make recommendations to the County Executive Committee for the dissolution or merger of corporations.

204Dissolution of County corporations

(1) A County corporation may be dissolved only with the prior approval of the County Executive Committee, with reference to a legislation enacted to govern the establishment, management and dissolution of such county corporation.

(2) Subject to the provisions of a legislation enacted for the formation, management and dissolution of a county corporation, a county corporation may be dissolved—

• (a) upon expiry of the lifespan of the county corporation as may be defined in the instrument of establishment;
• (b) where a county corporation has carried out the mandate for which it was created;
• (c) upon reorganization of the corporation and associated government functions; and
• (d) upon a merger of the corporation with another.

(3) The accounting officer responsible for the corporation in question shall follow-up implementation of the findings and eventual recommendations for dissolution to ensure compliance.

(4) The County Executive Committee member may by notice in the gazette prescribe guidelines for dissolution and mergers of county corporations.

(5) Upon approval by County Executive Committee of the recommendations to dissolve or merge a county corporation, the County Executive Committee Member shall cause the dissolution or merge the corporation with another.

(6) Upon dissolution of a county corporation, the funds corresponding to county government equity in the county corporation shall be deposited into the County Revenue Fund.

(7) Upon ceasing of an entity to be a public entity, the County Executive Committee Member shall vest all the assets and liabilities of the county government entity concerned to the responsible county government entity.

(8) No county corporation shall vest its assets in another entity without prior approval of the County Executive Committee Member.

205Annual budget

(1) The County Executive Committee Member responsible for the county corporation shall approve the estimates of budget of the county corporation and shall, not later than end of January every year, submit to the County Treasury for approval of those estimates for the following financial year.

(2) The National Treasury shall provide guidelines and the format on which the budget shall be prepared

(3) Budget estimates submitted under paragraph (1) of this regulation shall be classified as follows—

• (a) compensation of employees;
• (b) use of goods and services;
• (c) transfers to other levels of government; and
• (d) capital.

206Dividend policy and surplus funds

(1) The County Treasury shall prepare and issue dividend policy guidelines on how county government entities shall declare and remit dividends and surplus funds to the County Treasury.

(2) A regulatory authority established by an Act of Parliament and referred to under regulation, shall remit into County Revenue Fund, ninety per centum of its surplus funds reported in the audited financial statements after the end of each financial year.

(3) A regulatory authority to which this section applies shall be exempt from the income tax.

(4) The governing body of a public entity listed in Schedule 2 referred to under regulation 201(2), shall formulate an appropriate dividend policy in line with the policy guidelines referred under paragraph (1) of this regulation, and submit to the National Treasury and the respective County Treasury.

207Quarterly reporting by county corporations

(1) An accounting officer of a county corporation shall prepare and submit quarterly financial and non-financial statements in the format gazetted by the Cabinet Secretary within 15 days after the end of each quarter to the County Executive Committee Member responsible for the county corporation with a copy to the County Treasury and the Auditor-General.

(2) The quarterly reports prepared under paragraph (1) of this regulation shall include information on—

• (a) revenue, including funding from grants;
• (b) expenditure;
• (c) borrowing, including any outstanding loan arrears; and
• (d) amount of profit or loss of the county corporation for the quarter.

208Annual financial statements

Pursuant to section 165(5) of the Act, the accounting officer for a county corporation shall prepare and submit annual financial and non-financial statements in the format gazetted by the Cabinet Secretary within three months after the end of the financial year to the Auditor-General with copies to the responsible County Executive Committee member and the County Treasury.