Category: Budget

Budget estimates are policy documents that outline the government’s proposed revenues, expenditures, and priorities for a specific financial year. The estimates are prepared in accordance with provisions of the Public Finance Management Act of 2012. The process of preparing budget estimates takes place at national and county levels and is guided by the Constitution of Kenya 2010  and the Public Finance Management Act, 2012. Various documents are prepared by both county and national governments during the budget-making process. Here are 11 that are crucial in the budget-making process:

1. Budget Circulars

These are scheduled for preparing budget estimates with indications of key dates for the completion of various steps. The schedules also contain procedures for projections, expenditures, and revenue reviews. Budget circulars provide the format and procedure for submitting budget documents as well as key areas to be considered when preparing the budget. In addition, they contain procedures for citizens to participate in the budget process and any other information that may assist in the budget-making process according to the Cabinet Secretary or County Executive Committee Member (CEC). The Cabinet Secretary and County Executive Committee Member (CEC) at the National and County levels must issue budget circulars to government departments on 30th August every year.

2. Annual Development Plans (ADPs)

These are produced annually by each of the 47 county governments. ADPs contain medium-term priorities to be achieved during the year. The priorities in ADPs are drawn from the County Integrated Development Plan (CIDP). ADPs also contains all government programs with performance indicators, descriptions of major projects to be undertaken, and explanations of any major changes in projects. In the ADP, you will also find overall budgets and estimated costs for major projects. ADPs are similar to county budget estimates, the only difference is that ADPs have overall estimated costs while Budget Estimates have itemized costs. These plans are developed and table in the county assembly on or before September 1 and the law requires they be made public within 7 days of tabling. 

3. The Budget Review and Outlook Paper

This document is prepared both at the National and county levels. At the County level, it contains details of actual financial performance for the previous financial year and compares that performance to appropriation for the year. It also has updated financial forecasts and changes in the recent County Fiscal Strategy Paper (CFSP) e.g inflation, growth, etc. It explains how actual financial performance for the year before affected fiscal performance and gives reasons for deviation from financial objectives in the CFSP.

At the National level, it contains the actual financial performance for the year before compared to the current year. It also has updated financial forecasts and changes in the most recent Budget Policy Statement. It explains how actual financial performance for the previous financial year affected fiscal performance and gives reasons for deviation from financial objectives in the Budget Policy Statement. It also explains deviations from the financial objectives and proposals for addressing them. The National and county budget review and outlook papers must be tabled in the National assembly and county assembly respectively on 21st October after approval by the cabinet.

4. Division of Revenue Bill

This document is tabled at the National level and determines the equitable share of National revenue raised between the National government and the 47 County governments in Kenya. The bill is tabled by the Commission of Revenue Allocation (CRA), in parliament annually by February 15th. 

5. The County Allocation of Revenue Bill

This document is tabled at the National level and determines the equitable share allocated to counties using a formula currently developed by CRA. The next formulas will be prepared by the Senate and will be revised every 5 years. It also indicates other allocations to counties from the National government’s share of revenue and the conditions for allocations. CRA must table this bill in parliament annually by February 15th

6. The Budget Policy Statement

This document lays out strategic priorities as well as policy goals to guide national and county governments in developing budgets for the upcoming financial year and over the medium term, usually three years. The National Treasury includes in the Budget Policy Statement, an assessment of the current state of the economy, the financial outlook with respect to government revenue, expenditure, and borrowing, and the fiscal responsibilities principles. The National Treasury is required to table this document in parliament by 15th February and approval is done within 14 days.

7. The County Fiscal Strategy Paper (CFSP)

At the county level, the CFSP is the equivalent of the Budget Policy statement tabled at the national level. The CFSP is prepared in accordance with national objectives laid out in the Budget Policy Statement. During the preparation of the CFSP, the County Treasury specifies strategic priorities as well as policy goals that guide County governments in preparing the budget. It also includes financial projections for the next 2 years with respect to county government revenues, expenditure, and borrowing and sets final ceilings for every county department. County Treasuries use the CFSP to prepare county budget estimates and are expected to table CFSP in county assembly by 28th February and approval done within 14 days. 

8. The Finance Bill

This document lays out measures that national and county governments use to raise revenue. It also sets out a policy statement that expounds on the measures laid out for both governments. The finance bill is normally tabled in National and County assemblies in June and should be approved within 90 days of approval of the appropriation bill at both levels. 

8. Appropriation Act

At the end of every financial year, on 30th June, National and county assemblies are required to pass the Appropriation Bill. These bills authorize the governments to withdraw and spend funds from consolidated fund accounts against the approved budget.

These reports are to be published on a quarterly basis and tabled in assemblies at both the National and County level. Counties are required to develop a report within 30 days after the end of each quarter while the national government has 45 days to prepare the report. Each financial year, the first National and County Budget Implementation Report should be produced by the 31st of October and 15th of November respectively.

9. Budget Implementation Reports

These reports are to be published on a quarterly basis and tabled in assemblies at both the National and County levels. Counties are required to develop a report within 30 days after the end of each quarter while the national government has 45 days to prepare the report. Each financial year, the first National and County Budget Implementation Report should be produced by the 31st of October and 15th of November respectively.

10. Audit Reports by the Auditor General

Audit reports confirm whether or not public funds have been spent lawfully and effectively. The Kenya National Audit Office prescribes measures for securing efficient and transparent fiscal management after auditing the accounts of both governments and other public entities. The Auditor General should prepare and publish an audit report for the previous financial year within 6 months after the financial year comes to an end.  

The County Fiscal Strategy Paper (CFSP) is a document that is prepared every year to guide the county budget making process. The purpose of developing the CFSP is to dissect the past and present situation of the budget process with a view of informing the county budget for the next financial year. The CFSP provides strategic priorities and policy goals that a county government follows in preparing the budget for the coming financial year and over the medium term, 3-5 years. 

Who Prepares the CFSP? 

The CFSP is prepared by the County Treasury and submitted to the County Executive Committee (CEC) in charge of Finance and Economic Planning. Upon review, the CEC submits the CFSP to the County Assembly by 28th February each year. The County Assembly is required to make the CFSP public 7 days after the submission, for public input and approve it by 14th March. Upon approval, the CFSP can then be used by the County Treasury to prepare budget estimates.

What are the Components of a CFSP?

The CFSP has 4 key components namely  performance, projections, priorities and ceilings. Studying the CFSP entails scrutinizing each of these components. 

In most cases information relating to performance, projections, and ceilings is provided in table format because it contains figures. On the other hand, priorities are often presented in narrative form because they explain choices made in the sector ceilings as explained below:

1. Performance

This section provides up-to-date information on expenditure incurred and revenue collected by a county government. It helps to determine whether decisions made going forward on revenue collection and expenditure are realistic. Performance is usually presented per sector based on the previous financial year and the recent budget implementation reports produced during the 2nd quarter of the current financial year.

2. Projections

These constitute a key aspect of the CFSP and give an indication of the overall revenue and expenditure expected in the next financial year.  The CFSP indicates expected deficit, how much revenue a county government expects to receive from the national government and how much it expects to raise from local sources. 

It also indicates amounts a county expects to receive in form of donor funding, grants, and internal or external borrowing in the next financial year. In terms of projected expenditure, the CFSP indicated costs relating to recurrent expenditure, capital or development expenditure, debt repayment among others. The figures used in projecting revenue and expenditure ought to be as reasonable as possible.

3. Priorities

This section of the CFSP shows the priority needs identified for financing by a county government. Often, this section explains choices made in the next financial year for the various sectors and shows how funds will be distributed to meet priority needs across sectors. CFSP priorities are informed by decisions made during sector hearings where citizens participate. 

4. Budget Ceilings

These represent budget limits per sector. Budget ceilings determine the amount of money allocated to each sector and show how funds are distributed across different sectors. Ideally, budget ceilings should show the specific amounts a county will spend in meeting the identified priorities. In this section of the CFSP you will find sector allocations that enable you to identify areas or sectors with the highest as well as lowest allocations. 

With new county administrations taking office, the law requires that counties develop County Integrated Development Plan (CIDP). Here are four key features of a CIDP that you need to be aware of:

1. It is prepared by the County Executive 

The CIDP is prepared by the County executive through the directorate of economic planning which is under the department of finance.  All directorates in every department contributes to the process, submitting their priorities to the directorate of economic planning. The directorate of economic planning also receives inputs from citizens and integrates them in the CIDP before it is tabled at the county assembly for approval.

 

2. Citizens must participate in its preparation 

The law states that “county planning shall provide for citizen participation” and anticipates that the participation of citizens would be meaningful. While all departments in the county get to make submissions that inform the draft CIDP, the document must be subjected to public participation so that citizens can have an opportunity to input into the plan and  determine the priority issues to be included in the CIDP. Citizen participation forums should be conducted in the lowest decentralized units possible so that citizens can be able to attend the forums. 

3. It is approved by the County Assembly

After subjecting the draft CIDP to public participation, the executive compiles the final version and tables it in the county assembly for approval. Members of the county assembly are expected to review the CIDP and ensure that the priorities of citizens they represent have been captured before approving it.

4. It informs Annual Development Plans

As a 5-year plan, the CIDP provides the framework within which county annual plans should be developed. In simple terms, the annual development plans that counties are expected to develop every financial year are a breakdown or pull-outs of the CIDPs. This makes it possible to implement the CIDP on an annual basis. 

5. It determines how county resources are utilized

A CIDP is a county plan that outlines sector priorities which a county government hopes to address over a five-year period. It contains sector commitments by the county government plans to deliver to county residents and determines how county resources are utilized in order to deliver on those commitments. This means that the budgets prepared by the county executive and approved by the county assembly ought to be aligned  to the priorities contained in the CIDP. In this sense, the CIDP informs all development and spending decisions within the county over a period of 5 years with the aim of ensuring that the priority needs of citizens in terms of service delivery are met.