Examining the Influence of the Budget Formulation Structures and Processes on the Efficiency of County Health Systems in Kenya

Introduction Public Finance Management (PFM) processes guide the translation of government resources to services and determine health system efficiency. PFM processes are implemented within the budget cycle which entails the formulation, execution, and evaluation of government budgets. We examined how the budget formulation structure and processes influence health system efficiency at the county level in Kenya. Methods We conducted a mixed methods case study using counties classified as relatively efficient (n=2) and relatively inefficient (n=2) as our cases. We collected qualitative data through document reviews, and in-depth interviews (n=70). We collected quantitative data from secondary sources, including budgets and budget reports. We analyzed qualitative data using the thematic approach and carried out descriptive analyses on quantitative data. Results Budget ceilings were historically allocated, insufficient, late, or not availed at all. This led to development of budgets that were unresponsive to health system needs. Counties developed both programme-based and line budgets with line budgets as the functional budgets. Line budgets limited accountability and flexibility to reallocate resources. County health funds were fragmented resulting in duplications and wastage. Limited stakeholder participation compromised priority setting and social accountability. Priority setting that was not evidence-informed limited efficiency. Finally, budget changes at the budget approval process compromised alignment of plans to budgets. Conclusion This study has highlighted six aspects of the budget formulation process in Kenyan counties that ought to be strengthened to enhance health system efficiency: budget ceilings, budget structure, participatory budget formulation, pooling of health funds, priority setting processes and the budget approval process. Highlights Late and Insufficient budget ceilings lead to development of poorly formulated budgets Poorly developed and unused programme-based budgets limit health system performance Fragmented health system funding results in duplication and wastage Limited stakeholder involvement compromised priority setting and accountability