Part X – EXPENDITURE MANAGEMENT AND CONTROL · PFM Regulations

112Consolidated Fund Services

(1) Where the Constitution or an Act of Parliament provides for some specific categories of expenditure to be a direct charge on the Consolidated Fund, such expenditures shall be included in the recurrent budget estimates of the national government as part of the Consolidated Fund Services.

(2) The Consolidated Fund Services shall be provided for in the recurrent estimates, but shall not be subject to Parliamentary debate nor to the expenditure limited by estimates nor vote on account.

(3) Consolidated Fund Services shall be administered by the National Treasury.

(4) The National Treasury may arrange for another Accounting Officer to make payment in the first place on its behalf against subsequent reimbursement from the appropriate Vote of the Consolidated Fund Services.

113Excess vote

If an Accounting Officer finds, after Appropriation Accounts are completed, that he or she has spent more than the total vote, that Accounting Officer shall seek Parliamentary approval of the National Assembly through the Cabinet Secretary for that Excess Vote.

114Payments to which an Accounting Officer objects

(1) An Accounting Officer who is instructed by his or her Cabinet Secretary to make payment which for any reasons the accounting officer has concerns, the Accounting Officer shall raise those concerns in writing to the Cabinet Secretary.

(2) In the event that the Cabinet Secretary approves in writing for the processing of the payment despite the concerns raised by the Accounting Officer under paragraph (1), the Accounting Officer shall obey the instructions without further responsibility.

(3) Upon payment, the accounting officer may proceed as provided for under section 68(3) of the Act, and may send a copy of the report to the Auditor-General.

115Goods, works and services to be procured according to an approved procurement plan

(1) All purchases of goods, works and services from suppliers, including capital investments, shall comply with the provisions prescribed in the Public Procurement and Asset Disposals Act (Cap. 412C) and the Regulations made thereunder and shall have the prior approval of the Accounting Officer.

(2) Every year a procurement plan shall be prepared by Accounting Officers to form the basis for procurement activities undertaken by government entities in the fiscal year.

(3) The procurement plan in paragraph (2) shall, where necessary, include estimated costs of procurement, insurance, clearing, forwarding, warehousing and demurrage charges for goods imported and have to undergo clearing and forwarding through ports of entry into the country.

116Recovery, disallowance and adjustment of payments

(1) Amounts charged to Voted Funds, which are recovered in the financial year in which payment was made, shall on or before the closing of books of that financial year, be allocated to the budget item that was originally debited.

(2) Such amounts which are recovered after the closing of books of a financial year shall be paid to the Consolidated Fund, provided that such amounts have not been allocated to a clearing or suspense account during the financial year in which payment was made.

117Re-Vote of Budget

(1) Where an A.I.E holder observes that it will not be possible to utilize all the funds allocated for a particular project in a given financial year, the AIE holder shall inform the accounting officer not later than February.

(2) The Accounting Officer will then surrender the resources to the National Treasury and the National Treasury shall ensure that the funds are re-voted for the project in the following financial year in order to continue the implementation of the project.

118Accountable documents

(1) Accountable documents whether manual or electronic shall be under strict control at all times and they shall include—

(a) indent forms (for supplies from government printer or government stores);
(b) local purchase order;
(c) local service order;
(d) authority to incur expenditure;
(e) cheques;
(f) receipt books; and
(g) imprest warrants.

(2) The Accounting officer shall keep his or her stock of accountable documents whether manual under lock and key, issuing them in accordance with the daily needs of the service, and keeping an accurate up-to-date record of their use by means of continuity control sheets.

(3) Where the accountable documents are in electronic form, the accounting officer shall ensure appropriate mechanism are put in place for safeguarding and tracking them.

119Preservation of accountable documents, books and records

(1) Accounting Officers shall, subject to the provisions of the relevant national legislation, retain certain documents, of whatever kind and such documents shall be preserved in the following circumstances—

(a) where they may be of value to the national archives; or
(b) if they are the subject of unfinished audit enquiries; or
(c) if they are likely to be needed for pension purposes.

(2) After the expiry of the retention periods under paragraph (3) of this regulation, the information may, if required, be secured in an alternative form that ensures the integrity and reliability of the data and ensures that the information can be reproduced, where necessary.

(3) Subject to the overriding consideration under paragraph (1), certain class of documents and records are to be preserved for a stipulated minimum period of time as detailed in the Table below–

120Expenditure in relation to human resources

(1) Personnel management activities relating to the authorization of appointments, the authorization of payments and the recording of those payments may not be performed by the same officer.

(2) The budgetary allocation for personnel costs shall be determined on the basis of a detailed costing of a human capital plan of a national government entity as approved by the state department responsible for public service management matters, the Public Service Commission and National Treasury.

(3) The Accounting Officer of a government entity shall ensure that the personnel cost of all appointees, as well as promotion and salary increases, can be met within the budgetary allocation voted for the national government entity.

(4) The responsible national government state department responsible for public service management matter, the public service commission, shall only approve establishment of new public service positions after getting confirmation of availability of budgetary provisions from the National Treasury.

(5) For purposes of ensuring sustainable wage bill, where the Cabinet Secretary intends to approve any changes under this regulation, he or she may consult the Salaries and Remuneration Commission.

(6) No change relating to the above matters shall be introduced into the expenditure estimates of the respective national government entity without the requisite authority.

121Payroll certification by accounting officer

(1) Personnel costs shall be classified based on the Government Finance Statistics Manual and the standard chart of accounts used in capturing government expenditure.

(2) Each employee shall be linked to a program in the budget of a national government entity's Vote.

(3) At least once every month, the accounting officer shall certify the correctness of the payroll.

122Deduction codes to be assigned to all payroll deductions

(1) The National Treasury shall set requirements for issuing payroll deduction codes for all discretionary and non-discretionary deductions.

(2) The Accounting Officer shall specify the purpose for which the code is applied for.

(3) The National Treasury may levy a fee on the discretionary deductions which shall be paid by the receiving institution.

123Remuneration of members of committees and commissions of inquiry

(1) Remunerative benefits and other allowances for members and the staff of the secretariat of special committees and commissions of enquiry shall be determined by, the national government entity responsible for matters relating to public service management in consultation with the Public Service Commission and the Cabinet Secretary taking into account the recommendations by the Salaries and Remuneration Commission.

(2) The remuneration of all members of a commission or committee shall be disclosed as foot notes to the financial statements of the national government entity by the accounting officer.

124Services rendered by members during private time

Where the chairperson requests a non-official member of a commission or committee to render services in his or her private time, other than the normal preparations for meetings, the person may be paid an allowance as determined by the relevant Accounting Officer.

125Compensation and ex-gratia payment

No offer of compensation in settlement of any claim against the Government or ex-gratia payment may be made without a prior authority of the National Treasury, except where powers are available to the Accounting Officer.

━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

BENEFITS AND ALLOWANCES OF PUBLIC OFFICERS

126Authority for loans and advances

(1) The accounting officer may only authorize salary advances for public officers under him or her to be paid if there exists a budgetary provision in his or her Vote.

(2) No staff loan or advance which is properly chargeable to a head of expenditure shall be debited to a salary advance expenditure item.

127Benefits and allowances for Public Officers

(1) The Cabinet Secretary may by way of a gazette establish a mechanism for public officers to access loans including car loans, mortgage housing loans, motor cycle and bicycle loans.

(2) Despite the provisions of paragraph (1), the Cabinet Secretary may issue guidelines on benefits and allowances for public officers by way of a notice in Kenya Gazette .

LEASE FINANCING

128Lease financing transactions by accounting officers of state and county departments

(1) For the purpose of this regulation, a lease is regarded as a contract that gives the lessee (the renter) the right to the use of property, plant or equipment for a fixed period of time with a fixed schedule of payments to the lessor (the owner).

(2) The accounting officer of a state or county department may, for the purpose of conducting the government entity's business, enter into operating lease transactions.

(3) The accounting officer of a state or county department may under no circumstances enter into finance leases (non-operating lease) without the approval of the relevant National Treasury.

(4) For the purpose of paragraph (3), a lease is considered to be a finance lease if—

(a) the lease transfers ownership of the asset to the government entity by the end of the lease period;
(b) the government entity has the option to purchase the asset at a price which is expected to be sufficiently lower than the fair value at the date the option becomes exercisable, so that at the inception of the lease it is reasonably certain that the option will be exercised;
(c) the lease term is for the economic life of the asset even if the title is not transferred;
(d) at the inception of the lease, the present value of the minimum lease payments amount to at least 90% of the fair value of the leased asset;
(e) the leased asset is of a specialised nature such that only the government entity can use the asset without major modifications being made;
(f) the lessor's losses associated with cancellation of the lease by the lessee is borne by the lessee; and
(g) the leased asset cannot be easily replaced by another asset.

(5) The National Treasury shall monitor all finance lease transactions and report.

MANAGEMENT OF INTERGOVERNMENTAL TRANSFERS

129Definitions of terms

For purposes of Regulations 130, 131, 132, 133, 134 and 135—

(a) "national Accounting Officer" refers to an Accounting Officer of a national government entity; and

(b) "county Accounting Officer" refers to an Accounting Officer of a county government entity.

130Duties of National Government Accounting Officers in managing intergovernmental transfers to counties

(1) A national government accounting officer transferring a conditional or unconditional allocation to a county government in accordance with an Act of Parliament shall be responsible for—

(a) ensuring that transfers to a county government—
(i) are made in accordance with the frameworks governing the conditional and unconditional transfers to county governments; (ii) are deposited only into the County Revenue Fund of a County Government; and (iii) are made in accordance with the relevant Act of Parliament unless the allocations are withheld or stopped in terms of Article 225 of the Constitution;
(b) ensuring that the transfer of funds is done only after information required in terms of the laws and frameworks governing intergovernmental transfers has been secured and all relevant information has been provided to the National Treasury.

(2) Upon approval of the County Allocation of Revenue Bill by Parliament, the Cabinet Secretary shall communicate the frameworks under paragraph (1)(b), to county governments within fifteen days after the approval.

(3) A national government accounting officer who transfers any conditional allocation to a county government shall, in addition to any other requirement in terms of the Act or any other applicable law or framework governing the allocation, monitor and evaluate the financial and non-financial performance of programmes, fully or partially funded by the allocation and submit to the National Treasury—

(a) a quarterly report within 30 days after the end of each quarter;
(b) an annual report within three months after the end of the financial year;
(c) the attendant conditions of any conditional grant to a county accounting officers.

(4) The reports referred to in paragraph (3) shall include information that—

(a) indicate the total amount of funds transferred to each county government;
(b) indicate the amount of funds withheld or stopped from any county government, the reason for withholding or stopping and the action taken by the national government Accounting Officer and the county government Accounting Officer to deal with the matters that necessitated the withholding or the stoppage of the transfer;
(c) indicate any reductions or additions of conditional or unconditional allocations to county governments authorized by the National Treasury;
(d) indicate the funds, if any, spent by the national government Accounting Officer on the administration of the transfer to the counties; and
(e) that may be required under the relevant law or framework governing the transfer by the National Treasury.

131Duties of County government Accounting Officers in managing intergovernmental transfers

A county government Accounting Officer—

(a) shall be responsible for ensuring compliance with requirements of the relevant law and frameworks governing the management of conditional and unconditional transfers from the national government;

(b) shall ensure all transfers from the national government are included separately in the County Government's Appropriation Bill;

(c) shall monitor and evaluate the financial and non-financial performance of programmes funded by a conditional and unconditional transfer from the national government and prepare and submit to the relevant national accounting officer—
(i) a quarterly report within 15 days after the end of each quarter in a format prescribed by the Public Sector Accounting Standards Board; (ii) an annual report within two months after the end of each financial year in a format prescribed by the Public Sector Accounting Standards Board;

(d) the reports submitted in paragraph (1)(c) under this regulation shall specify—
(i) actual transfers received by the county government from the national government; (ii) actual expenditure incurred in respect of the transfer; (iii) any reallocations authorised by the relevant national accounting officer; (iv) to what extent the county government complied with the provisions of the Act, these Regulations and met the conditions provided for in the relevant framework of such a transfer;
(v) the steps taken to deal with non-compliance with any of the provisions of the Act and these Regulations or the conditions provided for in the relevant frameworks of such a transfer; (vi) the extent to which the objectives and outputs of the transfer were achieved; (vii) any other information as may be specified in the relevant framework for that transfer and any other information accounting officer may determine.

132Formats of annual reports on intergovernmental transfers

The National Treasury may provide additional guidelines on how national government Accounting Officers and County government Accounting Officers reports on conditional transfers on a quarterly and annual basis, to facilitate the audit of transfers to county governments.

133Transfer made in error or fraudulently

(1) Despite the provisions of any other law, where it is determined that the transfer of funds to a county government was done in error or fraudulently such a transfer shall be regarded as not legally due to that county government.

(2) An erroneous transfer contemplated in paragraph (1), may be recovered immediately or set-off against future transfers to that county government, which would otherwise become due to the county government.

134Equitable transfer before approval of County Allocation of Revenue Bill

(1) If the County Allocation of Revenue Bill submitted to Parliament for a financial year has not been approved by Parliament or is not likely to be approved by Parliament, by the beginning of the financial year, the Controller of Budget may authorize withdrawals of up to fifty (50%) percent from the Consolidated Fund based on the last County Allocation of Revenue Act approved by Parliament for the purposes of meeting expenditure of the county governments for the financial year.

(2) The authority under paragraph (1) shall cease upon accent of the County Allocation of Revenue Act for the financial year.

(3) The transfer to county governments made under paragraph (1) under this regulation shall form part of their equitable transfer for the financial year.

135Liability for costs incurred in violation of principles of cooperate governance and intergovernmental relations

(1) Any state organ involved in an intergovernmental dispute regarding any provision of this Act or any division of revenue matter or allocation shall, before approaching a court to resolve such dispute, make every effort to settle the dispute with the other state organ concerned, including exhausting all alternative mechanisms provided for resolving disputes in relevant legislation.

(2) If a court is satisfied that a state organ, in an attempt to resolve a dispute has not exhausted all the mechanisms for alternative dispute resolutions as contemplated in section 35 of the Intergovernmental Relations Act, 2012, (No. 2/2012) and refers the dispute back for the reason that the state organ has not complied with subsection (1), the expenditure incurred by that state organ in approaching the court shall be regarded as wasteful expenditure.

(3) The costs in respect of such wasteful expenditure referred to in paragraph (2) shall, in accordance with a prescribed procedure, be recovered without delay from the person who caused the state organ not to comply with the requirements of paragraph (1).

PFM Regulations

Part X – EXPENDITURE MANAGEMENT AND CONTROL