Part IV – BUDGET PREPARATION · PFM Regulations

31Responsibility 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 national 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 National Treasury in the manner and format to be issued by the Cabinet Secretary.

32Budget 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 Cabinet Secretary and in compliance with formats and recommendations contained in these circulars or guidelines, instructions and the financial manual.

(2) The budget sector working groups shall, on the basis of budget sector ceilings contained in the Budget Review and Outlook Paper (BROP), submit by January of each year (N) the sector reports to the National 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).

(3) The estimates for the sector referred to in paragraph (1) shall be consistent with regulation 29.

(4) Budget proposals shall be submitted in the prescribed formats that support program- based budgeting and classification of expenditure in economic classes.

(5) All budget proposals shall be supported by the national government entity' strategic plan.

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

(7) On receipt of sector reports from sector chairs, the Cabinet Secretary shall convene public sector forums to receive inputs from the public.

(8) The proposed sector ceilings for the next three financial years contained in the Budget Review and Outlook Paper (BROP) may be firmed up or readjusted in the Budget Policy Statement submitted in February of financial year (N) and adopted by Parliament by February 28 of same financial year (N).

(9) The approved Budget Policy statement shall be published on the National Treasury website.

(10) Following the approval of the Budget Policy Statement, the national government entities, or agencies shall finalize their estimates for years (N+I), (N+2) and (N+3) by March 31 of Financial year (N) and submit to the Cabinet Secretary.

(11) Budget estimates shall be reviewed and consolidated and the draft budget estimates submitted to Cabinet by April 15th of the financial year (N).

(12) Budget estimates of the national government entities, or agencies shall be reviewed and consolidated and the annual budget estimates submitted to Parliament, by April 30 of financial year (N).

33Budget 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 national government budget estimates;

(b) expenditure entered in national 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 national 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.

34Determination of budget ceilings

The budget ceiling contained in the Budget Policy Statement shall take into account—

(a) the aggregate resource envelope following the forecast of major revenue 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 national government policies.

35Budget estimates audit

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

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

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

36Budget review process

(1) On receipt of estimates from Accounting Officers the Cabinet Secretary shall cause to be conducted Budget discussions to review estimates of the entities concerned in order to ensure that these plans and estimates are in accordance with the macro-economic policy and fiscal framework.

(2) Where the budget hearings in paragraph (1) necessitates changes, the Cabinet Secretary, may require an Accounting Officer to make adjustments to the estimates.

37Provisions in Appropriation Bills

Appropriation Bills shall provide for—

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

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

38Vote on account

(1) Where the Appropriations Act is not assented to or is not likely to be assented before the first working day of the financial year, the Speaker to the National Assembly, with approval of National Assembly, shall communicate to the Cabinet Secretary grant of authority to withdraw from the Consolidated Fund of monies of an amount not exceeding one-half of the amount included in the estimates in accordance with section 39(7) 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 government's programmes and activities in respect of the financial year —

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

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

39[Deleted by L.N. 229/2015 , r. 5.]

40Supplementary budgets estimates

(1) Each Accounting Officer shall, within the guidelines of the supplementary budget circular and in conformity with budget guidelines issued by the Cabinet Secretary, 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 National Treasury, and if approval is granted by the Cabinet Secretary, 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 43 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 national government entity requesting additional funds through a supplementary budget process shall submit a memorandum to the National Treasury on a date determined by National 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 43 and 44 of the Act, the National Assembly approval shall not exceed ten (10) percent of the total approved budget unless it is for unforeseen and unavoidable need as defined in section 21 of the Act. [ L.N. 229/2015, r. 6.]

41Budget classification and the standard chart of accounts

(1) The national government budget estimates and each county government's budget estimates shall be prepared, accounted for and reported in accordance with the Government of Kenya budget classification and 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