Our Contacts

(+254) 0722801991
(+254) 0780801991
[email protected]

Download our app

Public Finance Management Act

This Is An Act Of Parliament To Provide For:

  1. the Effective Management Of Public Finances By The National And County Governments;
  2. the Oversight Responsibility Of Parliament And County Assemblies;
  3.  the Different Responsibilities Of Government Entities And Other Bodies, And
  4. for Connected Purposes

The Provisions Of This Act Are Final And Prevail Over All Other Laws In Relation To:

 (a) Preparation And Submission Of Budget Estimates, Including The Time For Doing So;

(b) Preparation And Submission Of Accounts For Audit, Including The Time For Doing So;

(c) Borrowing, Lending And Loan Guarantees;

(d) Raising Of Revenue And Making Of Expenditures;

 (e) Banking Arrangements, Including Opening Of Bank Accounts And Investment Of Moneys;

(f) Establishment And Management Of Public Funds; And

 (g) Establishment And Dissolution Of State Corporations.

The Act applies to the accounting officer in the relevant government entity:

(a) an accounting officer of a national government entity referred to in section 67;

(b) an accounting officer of a county government entity referred to in section 148;

(c) in the case of the Judiciary, the Chief Registrar of the Judiciary; or

(d) in the case of the Parliamentary Service Commission, the Clerk of the Senate in respect of the Senate and the Clerk of the National Assembly in respect of the National Assembly;

The Budget and Appropriation Committees of the National Assembly established has responsibility for the following matters, in addition to the functions set out in the Standing Orders—

(a) discuss and review the Budget Policy Statement and budget estimates and make recommendations to the National Assembly;

(b) provide general direction on budgetary matters;

(c) monitor all budgetary matters falling within the competence of the National Assembly under this Act and report on those matters to the National Assembly;

(d) monitor adherence by Parliament, the Judiciary and the national government and its entities to the principles of public finance and others set out in the Constitution, and to the fiscal responsibility principles of this Act;

(e) review the Division of Revenue Bill presented to Parliament and ensure that it reflects the principles under Articles 187(2)(a), 201 and 203 of the Constitution;

(f) examine financial statements and other documents submitted to the National Assembly under Part III of this Act and make recommendations to the National Assembly for improving the management of Kenya’s public finances;

(g) in accordance with Articles 114, 218 and 221 of the Constitution— (i) make recommendations to the National Assembly on “money Bills”, after taking into account the views of the Cabinet Secretary; and (ii) table in the National Assembly a report containing the views of the Cabinet Secretary in subparagraph (i); and

 (h) introduce the Appropriations Bill in the National Assembly

The Role of the Office of the Controller of Budget is to:

  1. provide professional services in respect of budget, finance, and economic information to the committees of Parliament;
  2.  prepare reports on budgetary projections and economic forecasts and make proposals to Committees of Parliament responsible for budgetary matters;
  3.  prepare analyses of specific issues, including financial risks posed by Government policies and activities to guide Parliament;
  4.  consider budget proposals and economic trends and make recommendations to the relevant committee of Parliament with respect to those proposals and trends;
  5. establish and foster relationships with the National Treasury, county treasuries and other national and international organisations, with an interest in budgetary and socio-economic matters as it considers appropriate for the efficient and effective performance of its functions;
  6. subject to Article 35 of the Constitution, ensure that all reports and other documents produced by the Parliamentary Budget Office are prepared, published and publicised not later than fourteen days after production; and
  7. report to the relevant committees of Parliament on any Bill that is submitted to Parliament that has an economic and financial impact, making reference to the fiscal responsibility principles and to the financial objectives set out in the relevant Budget Policy Statement; and
  8.  propose, where necessary, alternative fiscal framework in respect of any financial year.

The Senate Budget Committee in addition to the functions set out in the Standing Orders—

  1. present to the Senate, subject to the exceptions in the Constitution, the proposal for the basis of allocating revenue among the Counties and consider any bill dealing with county financial matters;
  2. review the County Allocation of Revenue Bill and the Division of Revenue Bill in accordance with Article 218(1)(b) of the Constitution at least two months before the end of the financial year;
  3. examine financial statements and other documents submitted to the Senate, and make recommendations to the Senate for improving the management of government’s public finances; and
  4. monitor adherence by the Senate to the principles of public finance set out in the Constitution, and to the fiscal responsibility principles.
  5. the Committee shall consider recommendations from the Commission on Revenue Allocation, County Executive Committee member responsible for finance, the Intergovernmental Budget and Economic Council, the public and any other interested persons or groups.

The National Treasury consists of;

(a) the Cabinet Secretary (as the head);

(b) the Principal Secretary; and

(c) the department or departments, office or offices of the National Treasury responsible for economic and financial matters.

 

The Responsibilities of the National Treasury are to:

(a) formulate, implement and monitor macro-economic policies involving expenditure and revenue;

(b) manage the level and composition of national public debt, national guarantees and other financial obligations of national government within the framework of this Act and develop a framework for sustainable debt control;

(c) formulate, evaluate and promote economic and financial policies that facilitate social and economic development in conjunction with other national government entities;

 (d) mobilise domestic and external resources for financing national and county government budgetary requirements;

(e) design and prescribe an efficient financial management system for the national and county governments to ensure transparent financial management and standard financial reporting as contemplated by Article 226 of the Constitution:

(f) Prepare in consultation with the Accounting Standards Board, ensure that uniform accounting standards are applied by the national government and its entities;

(g) develop policy for the establishment, management, operation and winding up of public funds;

(h) within the framework of this Act and taking into consideration the recommendations of the Commission on Revenue Allocation and the Intergovernmental Budget and Economic Council, prepare the legislative proposals on annual Division of Revenue and County Allocation of Revenue;

(i) strengthen financial and fiscal relations between the national government and county governments and encourage support for county governments in terms of Article 190(1) of the Constitution in performing their functions; and

(j) assist county governments to develop their capacity for efficient, effective and transparent financial management in consultation with the Cabinet Secretary responsible for matters relating to intergovernmental relations.

(k) Formulate necessary regulations to give effect to its responsibilities.

In addition to its Responsibilities, the Functions of the National Treasury are to:

(a) promote transparency, effective management and accountability with regard to public finances in the national government;

 (b) ensure proper management and control of, and accounting for the finances of the national government and its entities in order to promote the efficient and effective use of budgetary resources at the national level;

(c) co-ordinate the preparation of annual appropriation accounts and other statutory financial reports by the national government and its entities;

(d) prepare annual estimates of revenue of the national government, and co-ordinate the preparation of the budget of the national government;

 (e) consolidate reports of annual appropriation accounts and other financial statements of the national government and county governments and their entities;

(f) report every four months to the National Assembly on the implementation of the annual national budget on areas not reported on by the Controller of Budget;

(g) be the custodian of an inventory of national government assets except as may be provided by other legislation or the Constitution;

(h) monitor the management of the finances of public enterprises and investments by the national government and its entities;

(i) monitor the financial aspects of risk management strategies and governance structures for the national government and national government entities;

 (j) monitor the financial performance of state corporations;

(k) issue guidelines to national government entities with respect to financial matters and monitoring their implementation and compliance; and

(3) Take such other action, not inconsistent with the Constitution, as will further the implementation of this Act.

The National Treasury has the following powers under Section 13 of the PFM Act 

(a) with prior notification to the entity, access any system of public financial management and control of national government entity;

 (b) where reasonably necessary in the execution, of its functions, access the premises of any national State Organ or other public entity and inspect the entity’s records and other documents relating to financial matters after giving notice;

(c) require national government entities to comply with any specified applicable norms or standards regarding accounting practices and budget classification systems;

(d) require any public officer in the national government to provide information and if necessary, explanations with respect to matters concerning public finance: Provided that a person providing information shall not be liable if at the time of providing the information that person, in writing, objected to providing such information on grounds that the information may incriminate him or her;

(e) provide any County Treasury with any information as it may require to carry out its responsibilities under the Constitution and this Act; and

 (f) perform any other act as the Cabinet Secretary may consider necessary including power to intervene where a state entity or state organ fails to operate a financial system that complies with requirements provided for under this Act or is in serious material breach under this Act or in accordance with Articles 190 and 225 of the Constitution.

The following are the Fiscal Management Principles guiding public finances under Section 15 of the Act:

  1.  Over the medium term (3-10 years) a minimum of thirty percent of the national and county governments budget shall be allocated to the development expenditure.
  2. The national government’s expenditure on wages and benefits for its public officers shall not exceed a percentage of the national government revenue as prescribed by regulations;
  3. Over the medium term(3-10 years), the national government’s borrowings shall be used only for the purpose of financing development expenditure and not for recurrent expenditure;
  4. Public debt and obligations shall be maintained at a sustainable level as approved by Parliament for the national government and the county assembly for county government;
  5. Fiscal risks shall be managed prudently; and
  6. A reasonable degree of predictability with respect to the level of tax rates and tax bases shall be maintained, taking into account any tax reforms that may be made in the future.

Subscribe to our Newsletter

x

Subscribe to our mailing list to get updates to your email inbox