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Fiscal Management Cap 412D - as Plain Text by MWakili

LAWS OF KENYA The Fiscal ManageMenT acT Chapter 412D Revised Edition 2010 (2009) Published by the National Council for Law Reporting with the Authority of the Attorney General www.kenyalaw.org 2 CAP.

412D Fiscal Management [Rev.

2010 CHAPTER 412D THE FISCAL MANAGEMENT ACT ARRANGEMENT OF SECTIONS Section part IprelImInary 1Short title.

2Interpretation.

part IIaDmInIstratIon 3Parliamentary Budget Ofce.

4Functions of the Budget Ofce.

5Functions of the relevant committee.

part IIIoversIght of the BuDgetary proCess 6Principles of prudent scal management.

7Budget policy statement.

8Procedure for adoption of budget policy statement by the National Assembly.

9Laying of annual and supplementary estimates.

10Consideration of estimates by parliamentary committees.

11Minister to take into account recommendations of Assembly.

12Preparation of budget by public entities.

13Monthly publication of revenues.

14Compliance report.

15Pre-election scal report.

16Withholding of approval.

part Ivgeneral 17Transitional.

18Authority to obtain information.

19Regulations.

Fiscal Management CAP.

412D 3 Rev.

2010] CHAPTER 412D THE FISCAL MANAGEMENT ACT Commencement: 19th June, 2009 AN ACT of Parliament to provide for the regulation and oversight of the national budget process and the establishment of a parliamentary budget ofce for the oversight of the national budget process and for connected purposes ENACTED by the Parliament of Kenya, as follows: part IprelImInary 1.

This Act may be cited as the Fiscal Management Act.

Short title.

2.

In this Act, unless the context otherwise requires Interpretation.

budget means the process by which estimates of Government revenue and expenditures are set and includes scal priority setting and formulation of tax and spend policies, legislation, execution and audit of public nances; Budget Ofce means the Parliamentary Budget Ofce established by section 3; budget policy statement means the budget policy, statement prepared under section 7; compliance report means one of several reports submitted to the National Assembly by the Minister under section 14; departmental committee means the relevant select departmental committee established the Standing Orders of the National Assembly; nancial year means the period of twelve months ending on 30th June of each year; Minister means the Minister for the time being responsible for matters relating to nance; principles of prudent nancial management means to the principles of product nancial management established by section 6 (2); public entity means 4 CAP.

412D Fiscal Management [Rev.

2010 (a) the Government or any department of the Government; (b) the Courts; (c) the commissions established under the Constitution; Cap.

265.

(d) a local authority under the Local Government Act; Cap.

446.

(e) a state corporation within the meaning of the State Corporation Act; Cap.

491.

(f) the Central Bank of Kenya established under the Central Bank of Kenya Act; (g) a co-operative society established under the Co-operative (No.

2 of 1997) Societies Act, 1997; Cap.

211.

(h) a public school within the meaning of the Education Act; Cap.

210B.

(i) a public university within the meaning of the Universities Act; (j) a college or other educational institution maintained or assisted out of public funds; or (k) an entity prescribed as a public entity for the purpose of this paragraph; relevant committee means the departmental committee of the National Assembly responsible for economic and budgetary matters; Treasury Report means the report made by Treasury under section 9 (3).

part IIaDmInIstratIon Parliamentary Budget 3.

(1) There is established an ofce to be known as the Parliamentary Ofce.

Budget Ofce which shall be an ofce in the parliamentary service.

(2) The Budget Ofce shall consist of persons appointed on merit by virtue of their expertise in nance, economic and public policy matters.

Functions of the 4.

(1) The functions of the Budget Ofce shall be to provide the Budget Ofce.

National Assembly with timely and objective information and analysis in connection with the national budget and economy.

Fiscal Management CAP.

412D 5 Rev.

2010] (2) Without prejudice to the generality of subsection (1), the Budget Ofce shall (a) provide budget related information to the relevant committee, the departmental committees and other nancial select committees of the National Assembly; (b) provide service the committees referred to in paragraph (a) within their budgetary jurisdictions; (c) prepare reports on budgetary projections and economic forecasts and options to reduce the budget decit; (d) prepare analytic studies of specic subjects such as nancial risks posed by Government sponsored enterprises and nancial policies; (e) sponsor such national and international forums as it may consider necessary.

(f) study budget proposals and trends and where appropriate, suggest changes in the content or format of such proposals or trends; (g) propose, where necessary, alternative scenarios for various macro economic variables in respect of any nancial year; (h) establish and foster such relationships with the Treasury and with other national and international organisations, with interest in budgetary and economic matters, as it deems t for the efcient and effective discharge of its mandate; (i) undertake, independently or in collaboration with any appropriate person or institution, any other study or activity likely to assist in carrying out the functions specied in this subsection.

(3) The Budget Ofce shall ensure that its researches, studies, evaluations, ndings, recommendations and other relevant literature are presented in a readily intelligible and user-friendly form.

5.

(1) The relevant committee shall Functions of the (a) provide general direction and impetus in the realization of relevant committee.

the objectives of this Act; (b) study all economic and budgetary questions falling within 6 CAP.

412D Fiscal Management [Rev.

2010 the competence of the National Assembly and transmit its recommendations thereon to the Assembly; (c) study or consider any specic question or matter referred to it by the National Assembly and transmit its recommendations thereon to the Assembly; (d) subject to this Act and any other written law, take policy decisions for the efcient and harmonious functioning of the Budget Ofce; (e) ensure adherence by the Minister and public entities to the board principles of prudent scal management; (f) examine all reports relating to scal and economic performance tabled in the National Assembly by the Minister, including the budget policy statement, annual estimates of expenditure and the various compliance reports and report to the Assembly what improvements of form or substance, if any, should be made to those reports so as to achieve optimum value for the money foregone, received or spent on the target objectives of public entities; (g) be the link between the Budget Ofce and the National Assembly.

(2) In the performance of its functions under this section, the relevant committee shall be assisted by the Budget Ofce, which shall also serve as its secretariat.

part IIIoversIght of the BuDgetary proCess Principles of prudent 6.

(1) The Government and all public entities shall, in their policy objectives, adhere to the principles of prudent scal management.

scal management.

(2) The principles of prudent scal management shall include (a) a borrowing policy that ensures that public debt is sustainable; (b) a scal policy that will achieve and maintain an adequate buffer of the States total net worth in the future; (c) minimization of scal risk to the State in respect of guaranteed loans, pension obligations and pending bills; (d) a wage policy that is sustainable, attractive, not wasteful Fiscal Management CAP.

412D 7 Rev.

2010] pegged to the size of the economy, and ensures retention of competent staff; (e) policies that ensure a reasonable degree of future predictability about the level and stability in tax rates; (f) a national budget and budgetary process that promotes transparency, accountability and effective management of the economy and the public sector; (g) prioritization of productive expenditures rather than expenditures geared towards present consumption, in allocation of resources; (h) observance of the doctrine of separation of powers by ensuring that Parliament only gets involved in the management of public resources in the instances set out by the Constitution and any other written law.

(3) The Minister shall ensure that the principles of prudent nancial management are taken into account in the preparation of and reporting to the National Assembly on all the matters required to be reported under this Act.

(4) The Government may deviate from the principles of prudent scal management if the Minister (a) states the reasons for the departure including a plan of action and duration within which Government will revert to the principles of prudent nancial management; (b) tables such reasons, plan of action and duration of deviation to the National Assembly for approval before such scal management policies are implemented.

7.

(1) The Minister shall prepare and lay before the National Budget policy Assembly a paper to be referred to as a budget policy statement.

statement.

(2) The budget policy statement shall be laid before the National Assembly not later than 21st March each year or, in the event that the National Assembly is not in session on 21st March, within the rst week upon the reconvening of the Assembly.

(3) The budget policy statement shall state the broad strategic macroeconomic issues that will be the basis of the budget of the succeeding nancial year and the medium term and shall include 8 CAP.

412D Fiscal Management [Rev.

2010 (a) an assessment of the current nancial year and the projected state of the economy for the succeeding three years; (b) the macro economic and scal policies for the period specied under paragraph (a); (c) targets for overall revenues, total aggregate expenditure and domestic and external borrowing for the succeeding nancial year and the medium term; (d) the total resources to be allocated to individual programmes within a sector or Ministry for the period identied under paragraph (a) indicating the outputs expected from each such programme during that period; (e) the criteria used to allocate or apportion the available public resources among the various programmes; (f) the estimates of interest and debt servicing charges and loan repayments for the nancial year to which the budget relates and the next two nancial years; (g) proposal for nancing any decits for the nancial year; (h) indication of the intention regarding borrowing and actions that may increase public debt for the nancial year; (i) budgeted and actual revenue levels for the two preceding nancial years; (j) budgeted and actual expenditure for the two preceding nancial years by vote and main divisions; (k) forecast nancial position for the nancial year to which the budget relates and the next two nancial years; (l) statement of specic scal risks and contingent liabilities including guaranteed loans, pending bills, uninsured risks, promissory notes and other internationally accepted instruments, as at the day on which the forecast nancial statement are published and the rules that determine what constitutes current and future scal risks; (m) the policy objectives that will guide the Governments budget decisions during the nancial year and the policy areas that the Government will focus on during the nancial year.

Fiscal Management CAP.

412D 9 Rev.

2010] 8.

(1) Upon being laid before the National Assembly, the budget Procedure for policy statement shall stand committed to the relevant committee adoption of budget without question put.

policy statement by the National (2) In considering the budget policy statement, the relevant Assembly.

committee shall consult each departmental committee and shall, not later than 15th April, lay its report before the National Assembly.

(3) The National Assembly shall discuss the report of the relevant committee on a motion that this House do adopt the report of the Parliamentary Budget Committee on the budget policy statement.

9.

(1) The Minister shall, not later than 20th June of each year, Laying of annual lay before the National Assembly, the annual estimates of revenue and estimates.

expenditure for the succeeding nancial year.

(2) The annual estimates laid before the National Assembly under the provisions of sub-section (1) shall be accompanied by a Treasury Report specifying, by department, all the measures taken by the Government to implement the audit recommendations made by the National Assembly in the previous year.

10.

(1) Upon being laid before the National Assembly, the Consideration annual estimates shall stand committed to the respective departmental of estimates by committees according to their jurisdictions.

parliamentary (2) Each departmental committee shall consider, discuss and committees.

review the estimates apportioned to it by subsection (1) and submit its report thereon to the National Assembly within twenty-one days after the estimates were rst laid before the National Assembly.

(3) A departmental committee shall, in considering the departmental votes assigned to it under this section, consult with the Minister responsible for the vote under consideration by that departmental committee.

11.

Without prejudice to the generality of section 10, in preparing Minister to take into account the nal estimates of revenue and expenditure referred to in sub-section recommendations of 9 (1), the Minister shall take into consideration the comments and Assembly.

recommendations of the relevant committee as submitted to the National Assembly under section 10 (2).

12.

(1) Every public entity shall be required to prepare its budget Preparation of budget and submit to its parent Ministry by the 28th of February each year.

by public entities.

(2) The budget referred to under subsection (2) shall comprise estimates of 10 CAP.

412D Fiscal Management [Rev.

2010 (a) all revenue for the period: (b) expenditure divided into capital and recurrent.

(2) The approved budget by Treasury must be annexed to the annual estimates of expenditure and revenue listed before the National Assembly each year.

Monthly publication 13.

(1) Within twenty-one days after the end of each month the of revenues.

Minister shall publish in the Gazette a statement of actual revenues collected by category and net exchequer issues by Ministry.

Compliance report.

14.

(1) The Minister shall, three months after the laying of the budget before the National Assembly, and every quarter thereafter, lay before the National Assembly, sequentially and cumulatively, a compliance report in such form and of such content as may be prescribed.

(2) Where the National Assembly is not in session on the date specied under subsection (1), the compliance report shall be laid before the National Assembly on the second day immediately after the reconvening of the National Assembly.

(3) A compliance report shall (a) indicate for the period under review, the extent to which the objectives and targets in the budget policy statement were met; (b) specify the following amounts and compare them with the corresponding targets for the period under review (i) the actual revenue for the relevant period and a comparison of the expected: (ii) the actual expenditure per vote, distinguishing between capital and current expenditure for that period, and for the nancial year up to the end of that period.

(iii) actual borrowing for that period, and for the nancial year up to the end of the nancial year.

(4) In the event that objectives and targets were not met, the compliance report shall state (a) the reasons why such objectives and targets were not met; Fiscal Management CAP.

412D 11 Rev.

2010] (b) the remedial measures being undertaken to ensure that objectives and targets not met will be made good in the next quarter; (c) any proposed Government policy decisions that may materially affect the objectives and targets in the budget statement of intent or the countrys overall scal and economic performance.

15.

The rst compliance report falling due between one hundred and eighty (180) days and one hundred and twenty (120) days to a Pre-election scal general election shall be styled The Pre-Election Fiscal Report and report.

shall, in addition to requirements in section 14, provide details (a) of all election related expenditure including but not limited to (i) direct election expenses such as allocations the Elector alCommission of Kenya for costs of the election and election materials: (ii) indirect election expenses such as allocations to the police and security forces for the election year: (iii) any other allocations as may be determined by the rules.

(b) if any, of all planned or anticipated material deviations from the objectives and targets laid out in the Budget Policy Statement of intent for the year and the next.

16.

(1) Where the National Assembly is satised that there has Withholding of been material failure to implement previous audit recommendations approval.

made by the National Assembly, the Assembly may withhold the withdrawal of specic line items on a vote on account, from the Consolidated Fund such monies as it may determine for the purpose of meeting any expenditure of such department.

(2) Where a department has willfully and persistently failed to implement or respond to audit questions and recommendations, the National Assembly may, subject to such conditions as it thinks expedient, with-hold such amounts from the departments vote for the year as are commensurate to the amounts in the audit queries regarding that department.

(3) If the National Assembly is satised that a department has 12 CAP.

412D Fiscal Management [Rev.

2010 wilfully and persistently failed to: (a) practice the principles of prudence and sound scal management; or (b) adhere to proper accounting and nancial management practices; or (c) meet scal objectives and goals, it may, subject to such conditions as it considers expedient, withhold any one or more of the line items in votes for the several services under that department.

(4) Where the waste and persistent failures of a department under this section have been shown to be caused by the persistent misconduct of any public ofcer, the National Assembly may, by a simple majority vote, and subject to such conditions as it may impose, withhold any of the emoluments and benets of such ofcer for such period as it deems t.

(5) If the department lays a report before the National Assembly showing that it has subsequently implemented the audit recommendations, the National Assembly may, if the Appropriation Act has not come into operation, authorize such withdrawals on a vote on account by that department as it may determine.

(6) The Controller and Auditor General may, in his report to the National Assembly, recommend to the National Assembly the withholding of any item in accordance with this section.

(7) In this section (a) with-holding means the with-holding, in part or in whole, temporarily or permanently, any one or more of the line items in the votes included in the annual estimates.

(b) department includes a Ministry or any of its sub-units.

part Ivgeneral Transitional.

17.

(1) Upon the coming into force of this Act, the consideration of the votes on account for the various departments that have not led compliance reports or implemented audit recommendations shall take place on the day after the annual estimates are laid before the National Assembly.

Fiscal Management CAP.

412D 13 Rev.

2010] (2) Departments shall request such amounts as are needed for the purpose of meeting the expenditure necessary to provide Government services before the coming into force of the Appropriations Act for the year.

(3) The National Assembly may limit amounts approved under votes on account to twenty ve per centum-or less-of the total sums in the estimates for the year if the requesting department has not complied with any of the provisions of section 18.

(4) In this Section, Government services means any of the services rendered and activities undertaken by any Government department whether such services are recurrent or not.

18.

(1) The Permanent Secretary for the time being in-charge of Authority to obtain the Treasury may from time to time request for information from any information.

public institution that is necessary for purposes of preparing any report that is required to be prepared by this Act.

(2) A request under subsection 1 must be in writing and may provide guidance in terms of the date by which, and the format in which, the information must be provided and any public institution, that is so requested, must comply with the request.

(3) Any ofcer of a public institution who without reasonable cause fails to provide information required under this section commits an offence and is liable to a ne not exceeding one million shillings or to imprisonment not exceeding three years or to both ne and imprisonment.

19.

(1) The Minister shall, on the recommendations of the relevant Regulations.

committee, make such regulations as necessary for the better carrying out of the provisions of this Act and, without prejudice to the generality of the foregoing, such regulations shall provide for (a) the contents and form of the various reports required under this Act: (b) the times in which the quarterly compliance reports shall be laid before the National Assembly; (c) the criteria by which the National Assembly determines that there has been persistent or wilful failure to comply with audit recommendations; (d) the formula or criteria to be used to determine what proportion of a departments vote on account is to be withheld 14 CAP.

412D Fiscal Management [Rev.

2010 for failure to comply with the provisions of this Act.

(2) The regulations under subsection (1) shall be made within three months from the date of coming into force of this Act and thereafter as may be necessary.

(3) Section 34 of the Interpretation and General Provisions Act shall apply with respect to regulations made under this Act.

Rev.

2010] Fiscal Management CAP.

412D 15 SUBSIDIARY LEGISLATION [Subsidiary] THE FISCAL MANAGEMENT REGULATIONS, 2009 L.N.

163/2009.

2009.

1.

These Regulations may be cited as the Fiscal Management Regulations, Citation.

2.

In these Regulations, unless the context otherwise requires Interpretation.

accounting ofcer has the meaning assigned thereto in the Government Financial Management Act, 2004.

No.

5 of 2004.

3.

Every accounting ofcer shall bring to the attention of every public Sensitization of ofcer working under him, the provisions of the Act and these Regulations public ofcers.

regarding the principles and practice of prudent nancial management.

4.

The Treasury shall not later than 1st September in every year, issue a Preparation of budget circular providing guidelines on the budget preparation and the calendar that policy statement etc.

leads to the budget policy statement and annual estimates in respect of the ensuing nancial year.

5.

(1) Where the audit recommendations made by the National Assembly Inclusion of action under section 9 (2) of the Act have been received by the Treasury after 31st taken on audit December of the preceding calendar year, the Treasury may not include a report recommendations in on the implementation of the recommendations in the immediate Treasury report Treasury report.

but shall include it in the subsequent report.

(2) Every accounting ofcer shall, within thirty days after every quarter of the nancial year, submit to the Treasury a report on the action taken to implement the audit recommendations made by the National Assembly.

6.

(1) Every public entity shall, by the 28th of February each year, Preparation of the prepare its budget and submit it to its parent Ministry in form FMR I set out annual budget by in Schedule.

public entities.

(2) A parent Ministry may, as long as the substance of the form relating to revenue and expenditure prescribed in the form is included, modify form FMR I submitted by a public entity falling under its mandate.

(3) A parent Ministry shall keep a detailed budget in each public entity falling under its mandate.

7.

For purposes of section 13 of the Act Forms for the publication of (a) the actual monthly revenue shall be published in form FMR II set monthly revenues out in the Schedule; and and net exchequer (b) the net exchequer issues shall be published in form FMR III set issues.

out in the Schedule.

16 CAP.

412D Fiscal Management [Rev.

2010 [Subsidiary] 8.

The Minister shall prepare the compliance report required under section Form and content of 14 (1) of the Act, in the form of a quarterly economic and budgetary review compliance report.

which shall contain the contents provided in section 14 (3) and 14 (4) of the Act, within forty-ve days after every quarter of the nancial year.

Criteria to determine 9.

(1) If the National Assembly decides to withhold the vote on account proportion of of a department, the withholding of such vote on account shall remain in force vote on account until the department has complied with such conditions accompanying the to be withheld withholding as the National assembly may impose, to the satisfaction of the etc.

National Assembly.

(2) If, at the time the Appropriation Act of a particular year comes into operation, there is failure to comply with such conditions as the National Assembly may impose under paragraph (1), the National Assembly shall invoke the provisions of section 16 (2) of the Act regarding withholding of amounts from the departments vote for the year as are commensurate to the amounts in the audit queries regarding the department, or such amount as the National Assembly may deem appropriate.

Cases not covered by 10.

Any case not covered by these Regulations shall be dealt with in Regulations.

accordance with such instructions as the Treasury may from time to time issue.

SCHEDULE FMRI: FORM OF BUDGET BY A PUBLIC ENTITY Income (i) Own generated income xx (ii) Government Resources Grants xx Loans xx (iii) Other Incomes Grants xx Loans xx total InCome XXX Expenditures Recurrent Expenditures xx Capital Expenditures xx total eXpenDItures XXX (Decit) or Surplus XXX Notes.Other incomes means all other incomes own generated not from the Government of Kenya.

Rev.

2010] Fiscal Management CAP.

412D 17 FMRII: FORM OF ACTUAL MONTHLY REVENUES [Subsidiary] Actual (KSh.) Total Revenue Ordinary Revenue Taxes on International Trade and Transactions (Import Duty) Excise Taxes Taxes on Income, Prots and Capital gains (Income Tax) Income Tax from Individuals (Pay As You Earn) Income tax from Corporations (Other Income Tax) Taxes on goods and services (Value Added Tax) VAT on Domestic goods and services VAT on Imported goods and services Other Revenue Investment Income (Central Bank of Kenya) Investment Income - Others Other taxes on goods and services Trafc Revenue Land Revenue Royalties (Forest and Mining Revenue) Fines and Forfeitures Loan Interest Receipts Loan Redemption Receipts Miscellaneous Revenue Taxes on Intl.

Trade & Transactions (IDF Fee) Reimbursements Ministerial AIA Grants from Foreign Govt.

through exchequer Loans from Foreign Govt.

through exchequer 18 CAP.

412D Fiscal Management [Rev.

2010 [Subsidiary] FMRIII: FORM OF NET EXCHEQUER ISSUES Vote Ministries/Departments Recurrent Development (KSh.) (KSh.).

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