Administration

 

The administration of Kenya's Public Finance is expected to be professional, well planned and disciplined:

201. The following principles shall guide all aspects of public finance in the Republic—  (d) public money shall be used in a prudent and responsible way; and (e) financial management shall be responsible, and fiscal reporting shall be clear.

The New Constitution is clear about the consequences of irresponsible management of Public Funds:

226. (5) If the holder of a public office, including a political office, directs or approves the use of public funds contrary to law or instructions, the person is liable for any loss arising from that use and shall make good the loss, whether the person remains the holder of the office or not.

Good as these requirements may be, the New Constitution has placed checks and balances on the administration of Public Funds by requiring that oversight legislation (which essentially assigns national and sub-national assemblies the task of monitoring and oversight), be enacted. Given that Kenya's devolution encompasses the executive and legislative arms of government, the administration of Public Finance is subject to the cooperation between the National/County Executives  and Parliamentary/County Assemblies respectively. In other words, Public Finance will be managed under the respective Funds by either the national or county executive, while subject to National or County legislation and oversight as the case may be, or both. Parts II and IV of the Public Finance Management Act 2012 not only provide for the consequence of misuse or abuse of these monies by a public or State official, but provide for the oversight roles of national and county legislative bodies over the same.

A properly functioning Public Finance system will take time to mature given the rot in the Public Service and the Legislature. As the Judiciary undergoes a rebirth, and appointments in the Public Service follow merit and begin to reflect the face of Kenya, and (hopefully), cleaner lawmakers are ushered in after the 2013 elections and beyond, the Kenyan public is likely to witness a revamped Public Finance order - one that is better managed, with clear controls, and publishes timely and accurate reports. Additionally, an efficient Director of Public Prosecution and an effective Ethics and Anti-Corruption Commission will also play a critical role in the punishment and deterrence of those who may be inclined to dip their hand in the public till.

With everyone mandated to ensure responsible and transparent utilisation of public funds playing their rightful and constitutional roles, the public expects decisive action on those who have flouted procurement regulations and fleeced the public:

227. (2) An Act of Parliament shall prescribe a framework within which policies relating to procurement and asset disposal shall be implemented and may provide for all or any of the following— (c) sanctions against contractors that have not performed according to professionally regulated procedures, contractual agreements or legislation; and (d) sanctions against persons who have defaulted on their tax obligations, or have been guilty of corrupt practices or serious violations of fair employment laws and practices.

The Constitution stipulates that clear, specific legislation be enacted that compels regular reporting of fiscal administration of Public Finance to the people's elected representatives; timely reports on how Public Finance is being administered at every stage including how lower levels of sub-national governments are managing it. Excerpts from Article 225 and 226 in Part 6 - Control of Public Money:

225. (2) Parliament shall enact legislation to ensure both expenditure control and transparency in all governments and establish mechanisms to ensure their implementation.  

226. (1) An Act of Parliament shall provide for— (a) the keeping of financial records and the auditing of accounts of all governments and other public entities, and prescribe other measures for securing efficient and transparent fiscal management; ........

Once again, Articles 225. (2) and 226. (1) are effected via the detailed Public Finance Management Act 2012, especially in its Part IV. It is noteworthy that Public financial management reforms did not begin with the enactment of the New Constitution in 2010 and the Act. As a matter of fact, back in 2006, the National Treasury had launched a 5 year (2006-2011) public financial management strategic plan whose flagship project is the technology-based Integrated Financial Management Information System (IFMIS) that is expected to be rolled out to all National and County Government offices as devolution takes shape. IFMIS bundles all financial management functions into one suite of applications, thus enabling both levels of Government to employ a common end-to-end platform and standardised template, beginning from budget requests, to banking, to procurement, to fiscal management, to reporting and internal audit.

IFMIS is also designed to provide real-time financial information that can be accessed by key stakeholders such as the Controller of Budget, the Auditor-General, and Parliament. Thus by the time the New Constitution was enacted, Treasury was well on its way to fulfilling its mandate to develop and implement such an integrated financial system that could be used by all public offices and state organs. This mandate is operationalised in, Article 12. (1)(e) of the Public Finance Management Act of 2012:

12. (1) Subject to the Constitution and this Act, the National Treasury shall— (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:......

As key players in the Public Finance ecosystem, State bodies and Agencies are also expected to adhere to similar financial management and reporting regulations as Governments. Article 226 of the Constitution, excerpts:

226. (2) The accounting officer of a national public entity is accountable to the National Assembly for its financial management, and the accounting officer of a county public entity is accountable to the county assembly for its financial management.
(3) ........ the accounts of all governments and State organs shall be audited by the Auditor-General.

It will not be possible for County or National executives to make unilateral withdrawals out of a Public Fund. Generally, any withdrawals from any Fund must get the green light from the Controller of Budget. Chapter Twelve - Public Finance, Part 7 - Financial Officers and Institutions, Article 228:

228. (4) The Controller of Budget shall oversee the implementation of the budgets of the national and county governments by authorising  withdrawals from public funds .......
(5) The Controller shall not approve any withdrawal from a public fund unless satisfied that the withdrawal is authorised by law.

This is true especially where inter-Fund transfers are concerned - and which by default, involve large sums of money. For example, the COB must give the Cabinet Secretary for Treasury approval to instruct the Central Bank to release devolution Funds from the Consolidated Fund to the County Revenue Funds. Such approval would of course be anchored on the authority of the County Allocation of Revenue Act, and in tandem with the gazettement by the Transition Authority to the effect that particular functions are and have been properly transferred to a particular County.

The Act was not without controversy, however. Its Section 7. (6) seems to suggest that County Governments could, in the short term at least, get away with budget deficits:

7. (6) Where the allocation of monies to a county results in a county being allocated an amount that is less than the amount commensurate to the cost of the functions devolved to the county, the national government shall allocate part of its share of revenue to provide the additional resources needed.

Finally, when one keeps in mind that the Constitution of Kenya 2010 is a Constitution of devolution and of equalisation, then it is easy to understand the rational contained in Article 227. The attention of the reader is directed to keywords contained in the Article such as "equity", "preference", etc., and especially sub-clause (2) (b) that is unambiguous on affirmative action:

227. (1) When a State organ or any other public entity contracts for goods or services, it shall do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective.
(2) An Act of Parliament shall prescribe a framework within which policies relating to procurement and asset disposal shall be implemented and may provide for all or any of the following— (a) categories of preference in the allocation of contracts; (b) the protection or advancement of persons, categories of persons or groups previously disadvantaged by unfair competition or discrimination;

 

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