Part IV – BUDGET PREPARATION · PFM Regulations

29Responsibility for preparing annual estimates of expenditure

(1) The accounting officer shall ensure that the draft estimates relating to her or his department are prepared in conformity with the Constitution, the Act and these Regulations.

(2) The accounting officer is responsible, in particular for ensuring that—

(a) all services which can be reasonably foreseen are included in the estimates and that they are within the capacity of her or his county government entity during the financial year;
(b) the estimates have been prepared are complete and accurate as possible;
(c) the estimates have been framed with regard to economy and efficiency;
(d) the requisite authority has been obtained, where necessary, before provision is made in the estimates; and
(e) the estimates are submitted to the County Treasury in the manner and format to be gazetted by the Cabinet Secretary.

30Budget preparation process

(1) The budget preparation process for the following financial year (N+1) shall start not later than the 30th August of the current financial year (N) with the issuance of the annual budget circular by the County Executive Committee Member and in compliance with formats and recommendations contained in the annual budget preparation circular or guidelines, instructions and the financial manual—

(a) on the basis of budget sector ceilings contained in the County Budget Review and Outlook Paper (C-BROP), the budget sector working groups shall submit by January of each year (N) the sector reports to the County Treasury which shall include printed estimates for the current year (N) and for the forthcoming financial year (N+1) and two outer years on a rolling basis (N+2), (N+3);
(b) the estimates for the sector referred to in paragraph (a) shall be consistent with regulation (27); and
(c) budget proposals shall be submitted in the prescribed formats that support program-based budgeting and classification of expenditure in economic classes.

(2) All budget Proposals shall be supported by the county government entity strategic plan.

(3) The preparation and submission of estimates shall be done exclusively through prescribed automated integrated financial management systems.

(4) The proposed sector ceilings for the next three financial years contained in C-BROP, may be firmed up or readjusted in the County Fiscal Strategy Paper submitted in February of financial year (N) and adopted by County Assembly by the 15th March of same financial year (N).

(5) The approved County Fiscal Strategy Paper shall be published on the County Treasury website.

(6) County government entities, or agencies when required, shall readjust their estimates following the approval of the County Fiscal Strategy Paper and finalize and submit their estimates for years (N+1), (N+2) and (N+3) by the 10th April of financial year (N) to the County Executive Committee Member.

(7) Budget estimates shall be reviewed and consolidated and the draft budget estimates submitted to County Executive Committee by April the 20th of the financial year (N).

(8) Budget estimates of county government entities shall be reviewed and consolidated and the annual budget estimates submitted to the County Assembly, by April the 30th of financial year (N).

31Budget guidelines

Unless provided otherwise in the Act, these Regulations or any other guidelines developed in furtherance of the Act or these Regulations, the following guidelines shall be observed at all times during budget formulation and approval—

(a) all revenue and expenditure shall be entered into the county government budget estimates;

(b) expenditure entered in county government budget estimates shall be authorised for one financial year only;

(d) the Kenyan Shillings shall be the unit of account for drawing up and implementation of the county government budgets, as well as the presentation of those accounts;

(e) total budget revenue shall cover total budget expenditure and therefore—
(i) except as provided by legislation, there shall be no use of specific revenue to finance specific expenditure; and (ii) appropriation shall be for a specific purpose or a specific programme or item of expenditure; and

(f) budget estimates, shall take into account expenditure priorities, which contributes to the realization of the required output and desired policy outcome.

32Determination of budget ceilings

The budget ceiling contained in the County Fiscal Strategy Paper shall take into account—

(a) the aggregate resource envelope following the forecast of major revenue (including the equitable share) and expenditure categories (the latter according to both, economic and administrative classification);

(b) the non-discretionary expenditure (debt service, wages and other related items);

(d) breakdown of the overall expenditure into recurrent and development expenditure by sector ceilings; and

(e) expenditure priorities as set out in county government policies.

33Audit of Budget Estimates

(1) Each Accounting Officer may cause any proposed budget estimates to be examined and reported on by the internal audit unit of that county government entity.

(2) The Accounting Officer in paragraph (1) shall take into account any recommendations made in respect thereto before submitting estimates to the County Treasury.

(3) A person who fails under paragraph (1) to provide information, or submits information which that person knows to be misleading or incorrect shall have committed an offence under the Act.

34Budget hearing processes

(1) On receipt of estimates from Accounting Officers, the County Executive Committee Member shall cause to be conducted budget hearings to review strategic plans and estimates of the entities concerned in order to ensure that these plans and estimates are in accordance with the county economic policy and fiscal framework.

(2) Where the budget hearings in paragraph (1) necessitates changes, the County Executive Committee Member may require an Accounting Officer to make adjustments to his or her estimates.

35Provisions in Appropriation Bills

County Appropriation Bills shall provide for—

(a) the Votes and programs of the financial year;

(b) financial provision in respect of certain activities of the county governments during that financial year; and

36Vote on account

(1) Where the County Appropriation Act is not assented to or is not likely to be assented to before the first working day of the financial year, the Speaker to the County Assembly, with approval of County Assembly, shall communicate to the County Executive Committee Member grant of authority to withdraw from the County Revenue Fund of monies of an amount not exceeding one-half of the amount included in the estimates in accordance with section 134 of the Act.

(2) Accounting officers shall make necessary entries in their books in respect of the amount of the vote on account approved.

(3) Moneys withdrawn under paragraph (1) shall be for the purpose of meeting expenditure on the county government's programmes and activities in respect of the financial year—

(a) up to fifty (50%) percent of the estimates of budget for the financial year submitted to the County Assembly; or
(b) until such a time the Appropriation Act is assented to, whichever is earlier.

(4) Funds withdrawn from the County Revenue Fund under this regulation may be utilized only for services for which funds have been provided for in the budget estimates submitted to County Assembly.

(5) The funds provided for in paragraph (2) shall be regarded as forming part of the funds appropriated in the relevant annual budget estimates for that financial year.

37Approval of the Annual Budget Estimates by the County Assembly

(1) Where a county assembly approves any changes in the annual estimates of budget under section 131 of the Act, any increase or reduction in expenditure of a Vote, shall not exceed one (1%) percent of the Vote's ceilings'.

(2) Following the approval of any changes in the annual estimates of budget envisaged under paragraph (1)—

(a) the speaker of the County Assembly shall submit a copy of annual budget estimates to the County Executive Committee Member within seven days of its approval; and
(b) the County executive Committee Member shall in turn submit a copy of the approved budget estimates to the National Treasury and the Controller of Budget within 14 days of its approval.

38Expenditure before approval of budget estimates by County Assembly

(1) If estimates of budget submitted to the County Assembly for a financial year have not been approved by the County Assembly or are not likely to be approved by the County Assembly, by the beginning of the financial year, the Controller of Budget may authorize withdrawals from the County Revenue Fund based on the last approved budget by the County Assembly up to fifty (50%) percent for the purposes of meeting expenditure of the County government for the financial year.

(2) The authority under paragraph (1) shall cease upon assent of the Appropriation Act for the financial year.

(3) The expenditure incurred under paragraph (1), shall form part of expenditures for the financial year.

39Supplementary budgets estimates

(1) Each Accounting Officer shall within the guidelines of the supplementary budget circular and in conformity with budget guidelines issued by the County Executive Committee Member, prepare revised budget estimates in the format to be issued by the Cabinet Secretary.

(2) Prior to incurring any expenditure under paragraph (1), Accounting Officers shall seek the approval of the County Treasury, and if approval is granted by the County Executive Committee Member, it shall be communicated to the Accounting Officers through a notification which shall be copied to the Auditor-General and the Controller of Budget.

(3) The purpose for which approval is sought for a supplementary budget shall be—

(a) unforeseen and unavoidable, in circumstances where no budget provision was made; or
(b) unavoidable, in circumstances where there is an existing budgetary provision which, however, is inadequate.

(4) For purposes of paragraph (3), the following shall not be considered unforeseen and unavoidable expenditure—

(a) expenditure that, although known when finalizing the estimates of the original budget, could not be accommodated within allocations; and
(b) tariff adjustments and price increases.

(5) Accounting Officers may seek supplementary budget if the expenditure cannot be met by budget reallocation under section 154 of the Act.

(6) The request for supplementary budget in paragraph (5) shall be presented in a format that facilitates comparison with the original budget and shall contain all the information necessary to enable a decision on the application to be reached and shall include—

(a) the Vote, program, sub-programme and broad expenditure category which it is desired to supplement, the original sum voted thereon and any supplements which may have since been added;
(b) the actual expenditure and the outstanding liabilities or commitments against the item on the date when the request is made;
(c) the amount of the supplement required, the reasons why the supplement is necessary and why it has not been possible to keep within the voted provision;
(d) the basis for the calculation underpinning the supplementary;
(e) the proposed source of financing of the additional expenditure;
(f) an analysis of the fiscal impact of the additional expenditure, or of the implications, if any, for the planned outputs and outcomes of the affected programmes;
(g) any implied deviation from the Medium Term Expenditure Framework (MTEF) and the financial objectives; and
(h) the latest fiscal projections.

(7) The county government entity requesting additional funds through a supplementary budget process shall submit a memorandum to the County Treasury, on a date determined by County Treasury.

(8) For avoidance of doubt, budget allocations for new policy options and service delivery initiatives shall only be considered when introduced in the annual estimates of budget in accordance with the procedure laid down in the Act and these Regulations.

(9) In approving any estimates under sections 135 and 154 of the Act, that County Assembly approval shall not exceed ten (10%) percent of the approved budget estimates of a program of Sub-Vote unless it is for an unforeseen and unavoidable need as defined in section 112 of the Act.

(10) The County Executive Committee member shall submit a copy of the budget estimates approved under this regulation to the National Treasury.

40Budget classification and the standard chart of accounts

(1) Each county government's budget estimates shall be prepared, accounted for and reported in accordance with the Government of Kenya budget classification and standard chart of accounts issued by the National Treasury.

(2) As much as practicable, these classifications shall be designed to support financial and economic reporting requirements in the Act and generally accepted international standards.

PFM Regulations

Part IV – BUDGET PREPARATION