Financing Budgets in Kenya

Presentation during a workshop on Innovative Financing for the

Water Sector

Elizabeth Nzyoka ,Principal Economist-Treasury

Introduction

• The Government of Kenya promulgated a new constitution on 27th August 2010.

• The new Constitution has fundamental effects on Public Finance Management and specifically the budget process.

Key changes to the Budget Process

• Commission on Revenue Allocation(art 215)– Make recommendations on equitable share of

revenue raised by national govrt• Between national and county governments• Among county governments

• Equalization Fund-one half of recent audited revenues(art 204)

– Equity in development

Key changes to the Budget Process Cont.

Budget Process for the County Governments(art 224)

• County governments to prepare and adopt their own budgets and appropriation

National and County Functions-4th Schedule• Distribution of functions between national and

county governments

County assembly• Approve plans and policies of county governments

Stages of Budgeting

• Planning

• Formulation

• Consolidation

• Approval

• Implementation

• Accounting

• Audit

Stages of Budgeting: Planning Stage

• National vision-Vision 2030-19 sectors

• Water and sanitation sector

• National plans- MTP 2008-2012-construction of water projects

Stages of Budgeting: Planning Stage (2)

• The ministry of water and other implementing agencies develop their strategic plans based on the national MTP

• Exercice cordinated by the ministry of planning to coordinate the planning process

Stages of Budgeting: Formulation

• Setting of broad fiscal parameters for the Medium Term that is consistent with Government policies and plans. –fiscal policies

• Include:– Total domestic revenue

• Tax revenue and non tax revenue

– Total external borrowing• Loans and grants

– Total available resources=total expenditures

Stages of Budgeting: Formulation(2)

• develop strategic policy priorities to be implemented by the government in the medium term.

• should provide indicative resource available for the water sector among other national government sector ceilings

• These strategies will be submitted to cabinet for approval

Stages of Budgeting: Formulation(3)

Development of sector budget proposal

• Water and sanitation and environment Sector Working Group embark on developing sector budget proposal in line with the policies set out in the budget outlook paper

• Mainly through consultations with line ministries and public participation

• All sub units under a line ministry should participate.

Stages of Budgeting: Formulation(4)

Development of Budget Policy Statement• Firming up of the fiscal framework• Consideration of budget proposals from the

sector working group• CRA to provide recommendations on equitable

share of revenue• Develop allocation of revenue bill

– National and county– Among county governments

Stages in budgeting:formulation

• Bills to take into account the budget proposals

• Submission of bills to parliament for approval

Stages of Budgeting: Formulation(5)

Determination of Revenue Allocation • The National Assembly will determine the

allocations between the county and national government.

Determination of the basis for revenue allocation among counties

• The senate will determine the mechanism for the revenue allocation between counties to ensure they all achieve same objective.

Stages of Budgeting: Formulation(6)

Development of and approval of Allocation Bills

• The BPS will include draft bills indicating the proposed allocation of revenue between the levels of Government and the allocation among county governments

Development of Ceiling at Accounting Unit Level.

• The National Treasury will develop ceilings for the accounting units based on the approved ceilings while the county Treasury will develop ceilings to the country accounting units.

Stages of Budgeting: Formulation(7)

Preparation of Budget Estimates• The accounting units will embark on preparation

of itemized/program budgets based on the ceilings provided.

Submission of Budget Estimates• The Executive, Judiciary and Parliament will

each submit the budget estimates to the National Assembly two months before the end of each financial year for approval while the County Executive will submit to the county assembly for approval.

Approval(1)

Review of Submission

• The National and County assemblies will each review the budget estimates through their relevant committees. The review will include participation of the public and other stakeholders.

Approval(2)

• Preparation and approval of the Vote on Account

• If the appropriation Act will not have been assented to by the beginning of the financial year, the National Treasury will prepare a vote on account for approval by the National Assembly and the County Treasury will submit to the County Assembly to authorize the spending of the Accounting units.

Approval(3)

Approval of Estimates• The National Treasury will develop an

Appropriation Bill for approval of the Estimates by the National assembly while the County Treasury will develop county Appropriation Bill for approval by the County Assembly.

Development of Appropriation Act• The National Treasury will develop an

Appropriation Act for the national estimates while the County Treasury will prepare the appropriation Act for the county estimates.

Approval(4)

Development and approval of the Supplementary Budgets

• The National executive, Judiciary and Parliament will develop supplementary budget to fund unforeseen and emergence expenditures during the budget preparation

• The supplementary budget will be submitted by the Treasury to the National Assembly for approval

Implementation

Development and submission of in year performance reports

• The National Treasury, Judiciary, Parliament and Controller of Budget will develop in year performance reports and submit by 45th day of the subsequent quarter for review by the National assembly.

Reporting

End Year reporting and auditing

• The National Executive, Judiciary, Parliament and County Executive will prepare and submit final accounts to the auditor general for review and processing

Accounting and Audit

Preparation and Submission of the final accounts

• The auditor general will prepare and submit the end year final accounts to the National Assembly while the accounts of the Auditor General will be and submitted to a professional accountant for review and recommendation.

• The auditor general will submit the audited accounts to Parliament and County assemblies for review

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