Fighting corruption at the subnational level Risks and opportunities www.pwc.com/publicsector in devolved states Introduction

Over the past few decades, several sovereign governments have begun a > trend towards devolution – the system of decentralizing some power and authority from national levels in favor of subnational level governments. Some of the most significant examples of comparatively recent devolution include: the gradual empowerment of Colombian municipalities in the 1980’s; the creation of 47 new administrative counties in by the 2010 Constitution; and the movement to decentralize political authority in Indonesia following the election of President Susilo Bambang Yudhoyono in 1999. In these and other similar countries, issues with corruption may persist, despite the various anti-corruption regimes deployed by the national level governments. Regardless of national level capacity, countries undergoing devolution can work to combat widespread and systemic corruption by endowing the newly empowered local and regional governments with the governance tools required to effect meaningful change. In this article, we identify some reasons why devolved governments may be vulnerable to corruption issues, and through exploration of the Kenyan example, we highlight how corruption has taken shape under this devolved state. Finally, we offer a few recommendations that may help address corruption that occurs at the subnational level. The advantages of devolution As devolution has progressed, newly empowered subnational level governments have assumed responsibility for a range of activities including direct revenue collection, infrastructure improvement, and the provision of health, education, and security services. Devolved governments may be better positioned to provide such services for several reasons. In countries with heterogeneous populations, for example, locally controlled governments can more accurately target the needs of their particular populations and provide for their welfare. Additionally, where local governments exercise significant power and authority, those in power can be more closely tied to the outcomes resulting from the policies they enact. This close association with outcomes enables local electorates to use their political franchises (voting, etc.) to hold their local government officials accountable for the outcomes.

1 PwC Fighting corruption at the subnational level - Risks and opportunities in devolved states The risks of corruption in a devolved state At the same time, while subnational governments operate at a level closer to the citizens they govern, some have begun to experience new and distinct challenges to their governance and integrity goals. Corruption issues at the subnational level may surface for a number of reasons including:

Fighting corruption at the subnational level - Risks and opportunities in devolved states PwC 2 The Kenyan example

Before the historic referendum of August 2010, Kenya’s Even though devolution may provide a greater political landscape was marked by a strong presidency opportunity for citizens to hold their local governments with unchecked power, blurred division between accountable, corruption has remained a challenge executive and judiciary branches, and violence stemming in Kenyan political life, at both the national and sub- from land ownership battles and ethnic tension.1 national level. According to a recent study, approximately However, in August 2010, 67% of the country’s eligible two-thirds of Kenyans believe corruption increased voters supported a constitutional referendum that sought between 2014 and 2015, and many believe the majority to address these issues through new political and legal of government officials are complicit.8 In their 2014- frameworks.2 Notably, the constitution established 47 2015 assessment, the Ethics and Anti-Corruption popularly elected county governments that derived Commission (EACC) identified and reviewed 5600 power from the presidency and would