The Operations of the National and County Governments on Management and Control of Public Finance

Establishment of National and County Treasuries

Establishment of the National Treasury

There is established, pursuant to Article 225 of the Constitution, an entity of the national government to be known as the National Treasury which shall comprise of the following; The Cabinet Secretary (head of National Treasury).

The Principal Secretary.

The department or departments, office or offices of the National Treasury responsible for economic and financial matters.

General responsibilities of the National Treasury

The National Treasury shall carry out the following responsibilities;

• Formulate, implement and monitor macro-economic policies involving expenditure and revenue
• Manage the level and composition of national public debt, national guarantees and other financial obligations of national government within the framework of PFM Act and develop a framework for sustainable debt
• Formulate, evaluate and promote economic and financial policies that facilitate social and economic development in conjunction with other national government
• Mobilize domestic and external resources for financing national and county government budgetary
• Design and prescribe an efficient financial management system for the national and county governments to ensure transparent financial management and standard financial reporting to ensure they respect as well as promote the distinctiveness of the national and county levels of
• In consultation with the Accounting Standards Board, ensure that uniform accounting standards are applied by the national government and its
• Develop policy for the establishment, management, operation and winding up of public funds.
• Within the framework of PFM Act and taking into consideration the recommendations of the Commission on Revenue Allocation and the Intergovernmental Budget and Economic Council, prepare the annual Division of Revenue Bill and the County Allocation of Revenue Bill.
• Strengthen financial and fiscal relations between the national government and county governments and encourage support for county
• Assist county governments to develop their capacity for efficient, effective and transparent financial management in consultation with the Cabinet Secretary responsible for matters relating to intergovernmental

Responsibility of National Treasury with Respect to Public Funds

• The National Treasury is responsible to administer the Consolidated
• The National Treasury is responsible to administer the Equalisation
• Cabinet Secretary is responsible to administer the Contingencies
• Cabinet Secretary is responsible to seek Parliamentary approval for payments made from Contingencies Fund.

Establishment of County Treasury

There is established for each county government, an entity to be known as County Treasury which shall comprise of the following;

• The County Executive Committee member for finance
• The Chief Officer
• The department or departments of the County Treasury responsible for financial and fiscal

General responsibilities of a County Treasury

The County Treasury shall monitor, evaluate and oversee the management of public finances and economic affairs of the county government including the following;

• Developing and implementing financial and economic policies in the
• Preparing the annual budget for the county and coordinating the preparation of estimates of revenue and expenditure of the county
• Coordinating the implementation of the budget of the county
• Mobilizing resources for funding the budgetary requirements of the county government and putting in place mechanisms to raise revenue and
• Managing the county government’s public debt and other obligations and developing a framework of debt control for the
• Consolidating the annual appropriation accounts and other financial statements of the county government in a format determined by the Accounting Standards
• Acting as custodian of the inventory of the county government’s assets except where provided otherwise by other legislation or the
• Ensuring compliance with accounting standards prescribed and published by the Accounting Standards Board from time to
• Ensuring proper management and control of, and accounting for the finances of the county government and its entities in order to promote efficient and effective use of the county’s budgetary
• Maintaining proper accounts and other records in respect of the County Revenue Fund, the County Emergencies Fund and other public funds administered by the county government.
• Monitoring the county government’s entities to ensure compliance with PFM Act and effective management of their funds, efficiency and transparency and, in particular, proper accountability for the expenditure of those
• Assisting county government entities in developing their capacity for efficient, effective and transparent financial management, upon
• Providing the National Treasury with information which it may require to carry out its responsibilities.
• Issuing circulars with respect to financial matters relating to county government
• Advising the county government entities, the County Executive Committee and the county assembly on financial
• Strengthening financial and fiscal relations between the national government and county governments in performing their
• Reporting regularly to the county assembly on the implementation of the annual county budget.

Responsibility of County Treasury with Respect to Public Funds

• The County Treasury for each county government shall ensure that all money raised or received by or on behalf of the county government is paid into the established County Revenue Fund.
• County Government Executive Committee may establish county government Emergency Fund.
• County Executive Committee member for finance is responsible for administering the Emergency Fund
• County Executive Committee member for finance has the responsibility to seek approval for payments from Emergency Fund from the county
• County Treasury is to submit a report to Auditor-General in respect to Emergency Fund
• County Treasury is responsible for preparing County Fiscal Strategy
• County Treasury responsible for preparing a County Budget Review and Outlook

Establishment, Purpose and Composition of Intergovernmental Budget and Economic Council (IBEC)

The PFM Act establishes a council to be known as the Intergovernmental Budget and Economic Council to enhance relations between the National and County government.

Composition of IBEC

IBEC is composed of the following;

• The Deputy President is the Chairperson
• The Cabinet Secretary
• A representative of the Parliamentary Service Commission
• A representative of the Judicial Service Commission
• The Chairperson of the Commission on Revenue Allocation or a person designated by the Chairperson
• The Chairperson of the Council of County Governors
• Every County Executive Committee member for finance
• The Cabinet Secretary responsible for intergovernmental

Purpose of IBEC

The purpose of the Council is to provide a forum for consultation and cooperation between the national government and county governments on;

• The contents of the Budget Policy Statement, the Budget Review and Outlook Paper and the Medium-Term Debt Management
• Matters relating to budgeting, the economy and financial management and integrated development at the national and county
• Matters relating to borrowing and the framework for national government loan guarantees, criteria for guarantees and eligibility for
• Agree on the schedule for the disbursement of available cash from the Consolidated Fund on the basis of cash flow
• Any proposed legislation or policy which has a financial implication for the counties, or for any specific county or
• Any proposed regulations to PFM
• Recommendations on the equitable distribution of revenue between the national and county governments and amongst the county
• Any other matter which the Deputy President in consultation with other Council members may

Process of Sharing Revenue

The process of sharing revenue raised by the national government between the national and county governments, and among the county governments, shall be in accordance with the Constitution and the PFM Act.

Each year when the Budget Policy Statement is introduced, the Cabinet Secretary shall submit to Parliament a Division of Revenue Bill and County Allocation of Revenue Bill prepared by the National Treasury as provided in PFM Act for the financial year to which that Budget relates.

The Division of Revenue Bill is a bill introduced in parliament to provide for the equitable division of revenue raised nationally between the national and county governments in the relevant financial year, and for connected purpose.

The County Allocation of Revenue Bill shall specify the following;

• Each county’s share of the
• Any other allocations to the counties, from the national government’s share of that revenue, and any conditions on which those allocations shall be

Before the submission of the Division of Revenue Bill and County Allocation of Revenue Bill, the Cabinet Secretary shall notify;

• The Intergovernmental Budget and Economic Council; and
• The Commission on Revenue

When the Division of Revenue Bill or County Allocation of Revenue Bill is submitted, it shall be accompanied by a memorandum which explains—

• How the Bill takes into account the criteria listed in the
• The extent of the deviation from the Commission on Revenue Allocation’s recommendations.
• The extent, if any, of deviation from the recommendations of the Intergovernmental Budget and Economic
• Any assumptions and formulae used in arriving at the respective

Criteria in Sharing Revenue

Article 202 of the Constitution provides that the revenue raised nationally shall be shared equitably among the national and county governments.

The following are criteria to be taken into account in sharing revenue; National interest

Provision that must be made in respect of the public debt and other national obligations The needs of the national government determined by objective criteria

The need to ensure that county governments are able to perform the functions allocated to them

The fiscal capacity and efficiency of county governments Developmental and other needs of counties

Economic disparities within and among counties and the need to remedy such disparities The need for affirmative action in respect of disadvantaged areas and groups

The need for economic optimization of each county and to provide incentives for each county to optimize its capacity to raise revenue

The desirability of stable and predictable allocations of revenue

The need for flexibility in responding to emergencies and other temporary needs based on similar objective criteria

Equitable share of the revenue allocated to county governments every fiscal year shall not be less than 15% of all revenue collected by the national government based on the most recent audited accounts.

The Role of Commission on Revenue Allocation

Article 215 of the Constitution establishes the Commission on Revenue Allocation (CRA) which comprises of the following persons;

Chairperson nominated by the President and approved by the National Assembly Two persons nominated by political parties represented in the National Assembly Five persons nominated by the political parties represented in the Senate Principal secretary responsible for finance

Functions of CRA

1. Make recommendations concerning the basis for equitable sharing of revenue raised by the national
2. Make recommendations on other matters concerning the financing and financial management by county governments as required by the
3. To seek to define and enhance the revenue sources of the national and county governments as well as encourage fiscal responsibility as it makes its
4. To determine, publish and regularly review a policy in which it sets out the criteria by which to identify the marginalized
5. Submit recommendations to the Senate, the National Assembly, the national executive, county assemblies and county