Public Finance Management Act (Kenya)

Public Finance Management Act (Kenya)
Name	Public Finance Management Act (Kenya)
Enacted	2012
Jurisdiction	Kenya
Status	In force

Public Finance Management Act (Kenya) The Public Finance Management Act (PFMA) is a statutory framework enacted to implement fiscal provisions of the Constitution of Kenya and to regulate financial management across national and county institutions including the Parliament of Kenya, Senate of Kenya, and Supreme Court of Kenya. It establishes rules for budgeting, accounting, reporting and oversight interfacing with entities such as the Controller of Budget, Office of the Auditor-General (Kenya), and the National Treasury (Kenya). The Act interacts with sectoral laws and institutions including the Constituency Development Fund, Kenya Revenue Authority, County Governments of Kenya, and international partners like the World Bank, International Monetary Fund, and African Development Bank Group.

Background and enactment

The Act followed the adoption of the Constitution of Kenya (2010) and legislative reforms driven by debates in the National Assembly of Kenya and the Parliamentary Select Committees. Legislative history involved comparative studies referencing the Public Finance and Accountability Acts of jurisdictions such as United Kingdom, South Africa, and New Zealand. Key actors included the Office of the President (Kenya), the Ministry of Finance (Kenya), civil society organizations like Transparency International and research centers such as the Institute of Economic Affairs (Kenya). The Act passed amid high-profile fiscal controversies involving entities like the Kenya Medical Supplies Authority and cases heard by the High Court of Kenya and the Court of Appeal of Kenya.

Objectives and scope

The Act aims to give effect to Articles of the Constitution of Kenya that address public finance, including transparency, accountability, and prudent stewardship by organs such as the National Treasury (Kenya), county treasuries, and state corporations like the Kenya Ports Authority and Kenya Power and Lighting Company. It covers planning instruments including the Medium Term Expenditure Framework, relations with the Budget Committee (Parliament of Kenya), and fiscal objectives relevant to the International Monetary Fund programs and World Bank Group conditionalities. The scope spans national and county public entities, public debt instruments handled by the Central Bank of Kenya, and fiscal measures affecting development projects funded by the African Development Bank Group and bilateral partners like United Kingdom agencies.

Key provisions

Major provisions set out processes for preparation of the national and county budgets, fiscal responsibility rules linked to debt ceilings overseen by the National Assembly of Kenya and Senate of Kenya. The Act prescribes accounting standards for public entities, cash-management rules affecting the Controller of Budget, and procurement interfaces with the Public Procurement Administrative Review Board (Kenya). It defines classification of revenues and expenditures relevant to the Kenya Revenue Authority and procedures for supplementary budgets that interact with the Cabinet of Kenya and the President of Kenya. Provisions on public investment management relate to state corporations including the Kenya Railways Corporation and the Kenya National Highways Authority.

Institutional framework and roles

The Act delineates roles for institutions: the National Treasury (Kenya), the Controller of Budget, and the Office of the Auditor-General (Kenya) have distinct mandates for budget preparation, execution oversight, and audit respectively. County-level responsibilities are assigned to county assemblies and county executives such as the offices of County Governors and County Treasuries, interfacing with agencies like the Commission on Revenue Allocation. Parastatal governance, including boards of entities like the Kenya Wildlife Service and the Kenya Roads Board, must comply with fiduciary duties under the Act. Inter-institutional coordination involves committees of the Parliament of Kenya, the Senate of Kenya, and professional bodies like the Institute of Certified Public Accountants of Kenya.

Budget process and fiscal discipline

The Act structures the budget cycle—preparation of the budget policy statement, tabling of estimates in the National Assembly of Kenya, appropriation measures, and execution oversight by the Controller of Budget. Fiscal discipline is enforced via fiscal responsibility principles echoing obligations under the Constitution of Kenya and monitored by macroeconomic institutions including the Central Bank of Kenya. Rules on public debt, contingent liabilities, and cash flow management affect borrowings overseen by the National Treasury (Kenya) and scrutinized by the Parliamentary Budget Office. The Act also mandates transparency measures for public funds similar to practices promoted by the International Monetary Fund and World Bank.

Implementation and compliance

Implementation mechanisms include the development of accounting manuals, internal audit units within ministries like the Ministry of Health (Kenya) and Ministry of Education (Kenya), and training programs supported by partners such as the United Nations Development Programme. Compliance is enforced through audits by the Office of the Auditor-General (Kenya), reporting to the Parliament of Kenya and sanction mechanisms involving administrative and judicial remedies in the High Court of Kenya. Monitoring by civil society organizations like Transparency International and think tanks such as the African Tax Administration Forum contributes to public scrutiny. Implementation has been evaluated in reports by the World Bank and the International Monetary Fund.

Amendments and legal challenges

Since enactment, amendments proposed in the National Assembly of Kenya and reviewed by the Senate of Kenya have addressed issues such as fiscal decentralization and public debt limits, invoking debates involving the Attorney-General of Kenya and litigation in the High Court of Kenya and Court of Appeal of Kenya. Several challenges have arisen in contexts like procurement disputes involving the Kenya Medical Supplies Authority and debt management controversies scrutinized by the Parliamentary Public Accounts Committee. Judicial interpretations by the Supreme Court of Kenya and precedents from the Court of Appeal of Kenya have clarified constitutional interfaces, influencing subsequent legislative reforms and oversight by institutions such as the Controller of Budget and the Office of the Auditor-General (Kenya).

Category:Law of Kenya