BUDGET PREPARATION MODULE - AICSinstitutechildstudies.org/wp-content/uploads/2016/06/Budget...History of Budgeting in Kenya ... Budget Preparation Module – Participant Book, October

BUDGET PREPARATIONMODULE

October 2014

P A R T I C I P A N T B O O K

Public Financial Management

KENYA SCHOOL OF GOVERNMENTNATIONAL TREASURY MINISTRY OF DEVOLUTION AND PLANNINGREPUBLIC OF KENYA REPUBLIC OF KENYA

Public Financial Management

BUDGET PREPARATIONMODUlE

P A R T I C I P A N T B O O K

October 2014

Table of Contents

Foreword .................................................................................................................................... i

Acknowledgements .................................................................................................................... ii

Abbreviations .............................................................................................................................. iii

Introduction ................................................................................................................................... 1

Aims and Objectives of the training ........................................................................................... 1

Public Finance Management Curriculum—Summary ................................................................. 2

Target Participant Group ............................................................................................................ 4

Glossary and Resources ................................................................................................... 4

Timings and Methodology .......................................................................................................... 4

Training Overview—Budget Preparation .................................................................................... 5

Getting Started ............................................................................................................................. 6

History of Budgeting in Kenya ........................................................................................................ 7

County Budget Cycle, Calendar and Conceptual Overview of Budgeting ...................................... 10

1. Key legislation, documents, roles and responsibilities in county budgeting ........................... 11

2. County Budget Cycle and Calendar ......................................................................................... 22

3. Legislative Approval Process ................................................................................................... 28

4. Strategic vs. Operational Phases of budget preparation ........................................................ 36

5. Introduction to Medium Term Expenditure Framework ......................................................... 39

6. Introduction to Programme Based Budgeting ........................................................................ 41

7. Introduction to the Chart of Accounts (CoA) .......................................................................... 44

8. Public Participation in Budget Preparation ............................................................................. 46

Strategic Phase of Budgeting ......................................................................................................... 48

1. County Budget Circular ........................................................................................................... 50

2. County Integrated Development Plan .................................................................................... 51

3. County Budget Review and Outlook Paper (C-BROP) ............................................................. 54

4. Sector Working Groups and Resource Allocation ................................................................... 64

5. County Fiscal Strategy Paper (C-FSP) ...................................................................................... 66

Operational Phase of Budgeting .................................................................................................... 68

1. County Budget Circular/Budget call circular (budget estimates) ............................................ 70

2. Department Budget Estimates prepared ................................................................................ 71

A. Preparing the County Recurrent Budget ............................................................................ 72

B. Preparing the County Development Budget ...................................................................... 73

C. Budgeting for Appropriations-in-Aid (A-in-A) ..................................................................... 74

D. Budget Preparation Tools – The Chart of Accounts and Programme Based Budgeting format .... 75

3. Review, consolidate and submit Budget Estimates .................................................................... 83

Conclusion ..................................................................................................................................... 86

Summary .................................................................................................................................... 86

Assessment & Evaluation ............................................................................................................ 86

Glossary ......................................................................................................................................... 87

Resources ...................................................................................................................................... 89

Assessment .................................................................................................................................... 90

Annexes ......................................................................................................................................... 91

Annex 1: Example Revenue Forecast Format, Example Sector Ceilings ...................................... 92

Annex 2: C-FSP Format ............................................................................................................... 95

Annex 3: Sector Working Group Report Format ......................................................................... 96

Annex 4a: Estimates of Recurrent Expenditure .......................................................................... 99

Annex 4b: Estimates of Development Expenditure .................................................................... 100

Annex 5: FORMAT FOR PRESENTATION OF PROGRAMME BASED BUDGETS (PBB) .................... 101

Annex 6: Departmental/Sectoral Committees ........................................................................... 104

Annex 7: County Integrated Development Plan Chapter Outlines ............................................. 106

Annex 8: Template for costing of programs and activities ......................................................... 110

Foreword

The Fourth Schedule of the Constitution of Kenya assigns the National Government the function of capacity building of counties. This mandate of the National Government

has also been recognised and elaborated in the National Government Capacity Building Framework for County Governments. With regard to county public finance management (PFM) capacity building, this responsibility has been placed on the National Treasury.

In order to effectively deliver on its mandate of building the capacity of county governments in PFM, the National Treasury developed a County PFM Training Curriculum and has in partnership with development partners embarked on the development of a number of County PFM Training Modules. The National Treasury intends to roll out training on PFM and make these modules accessible to all county governments.

In this respect, the National Treasury will partner with the Kenya School of Government (KSG) to roll out the training of county State and public officers using the County PFM Modules as the primary training toolkit. These modules, besides standardizing the County PFM Training, will also ensure that those trained will also have reference material for use in their day-to-day operations.

At the outset, training will be delivered by a pool of staff drawn from the National Treasury. In the medium and long-term, the National Treasury, in partnership with the Kenya School of Government will identify and train a pool of professionals, through scheduled training of trainers. This pool of professionals will then conduct future training of county PFM staff. For this purpose, each module includes a ‘Training of Trainers’ guide in addition, to the participants guide.

This Budget Preparation module, is among the first to be developed and is specifically designed to equip the county officials with the necessary skills and information, to help improve and strengthen their capacity in the preparation of county budgets. The module will be used to train officials drawn from the county executives as well as county legislatures and emphasizes the use of participatory and practical approaches to learning.

I have no doubt that this county PFM Training modules will help to strengthen the capacity of county governments in public finance management and contribute towards enhancing prudent, accountable and transparent management of public resources.

Henry K. Rotich,Cabinet SecretaryNational Treasury

i

Budget Preparation Module – Participant Book, October 2014

Acknowledgements

This Budget Preparation module has been developed through the concerted effort of various institutions and professionals. We wish to express our gratitude to all those

persons and institutions that contributed towards the development of this manual.

In particular, I wish to acknowledge the role of the Budgetary Supply Department and the newly created Intergovernmental Fiscal Relations Department of the National Treasury in coordinating and providing technical guidance in the development of this Module.

Much thanks to the Kenya School of Government (KSG) who provided quality control during the development of the module and for their commitment to include the Budget Preparation module as the main toolkit for county PFM training at the Kenya School of Government.

We are equally grateful to World Bank through its Kenya Accountable Devolution Programme, for its support towards the development of this module. Special thanks to the pool of experts from the World Bank who worked tireless to ensure successful delivery of this module.

Dr. Kamau Thugge, EBSPrincipal SecretaryNational Treasury

ii


Abbreviations

AOs Accounting Officers

BROP Budget Review and Outlook Paper

CA County Assembly

C-BEF County Budget and Economic Forum

CEC County Executive Committee

CEC-MF County Executive Committee Member for Finance

CEC-MP County Executive Committee Member for Planning

CoB Controller of Budget

CoK Constitution of Kenya (2010)

CFPG County Fiscal Planning Group

CRA Commission for Revenue Allocation

CT County Treasury

GDP Gross Domestic Product

IBEC Inter-governmental Budget and Economic Council

MTEF Medium Term Expenditure Framework

NT National Treasury

PBB Programme Based Budgeting

PEM Public Expenditure Management

PFM Public Finance Management

PFMA Public Finance Management Act (2012)

SWGs Sector Working Groups

iii


1

Introduction Aims and Objectives of the training This Budget Preparation training is one component of the Public Finance Management Module. It aims to enhance general understanding of public financial management, and for the technical county staff empower them, the participants, to prepare timely, accurate and effective county budgets which address some key weaknesses encountered through the 2014/15 budget preparation period. The training will achieve this by increasing participants’ understanding of the budget preparation process and its related concepts, as well as the specific ‘how to’ elements of budget preparation. Specific Objectives

By the end of this training, participants should be able to better perform their roles and: • Identify the different elements of the budget cycle and calendar, and plan work

accordingly to ensure that they can comply with deadlines. • Identify areas of challenges and what improvements may be necessary in their own

county’s budget preparation process and explore ways to achieve this. • Clearly explain the different components of the budget preparation process,

including key legislation, players and documents. • Effectively manage the county budget preparation process for a smooth process of

legislative approval. • Identify specific places in budget preparation where public participation is

needed,and explore and incorporate different mechanisms for public participation. • Carry out the tasks associated with the ‘Strategic Phase’ of budgeting, including

revenue forecasting and ceiling setting, through the preparation of C-BROP and C-FSP documents and Sector Working Group Reports.

• Carry out the tasks associated with the ‘Operational Phase’ of budgeting, including the preparation of detailed department budget estimates.

• For the officers, use the Chart of Accounts to code expenditure as part of preparing budget estimates.

• Identify how thecounty budget will incorporate the programme based budget for 2014/15.

!It is important that each county/organization/entity using this manual ensures

modifications are made in the delivery of the training to take account of local dynamics, to meet specific needs in public financial operations and applications in the target unit.


2


Specific training outcomes

As an outcome, it is anticipated that participants will feel more confident in the budget preparation process, as a result of addressing weaknesses identified in the preparation of the 2014/15 budget, and will be motivated to implement what they have learned into their preparation of their county budget for 2014/15. Public Finance Management Curriculum—Summary Component What is covered?

i) Constitutional and Legal Framework for PFM

• Overview of the Constitutional and legal framework for PFM, including the Constitution of Kenya, 2010;PFM Act, 2012; CRA Act, 2011 among others

• Roles and responsibilities of national and county government PFM institutions

• Process/Role of County Assembly in approval and oversight of County Government’s (CG) budget

ii) Budget Preparation

• History of budgeting in Kenya • Budget Cycle, Calendar and Conceptual

Overview • Strategic Phase of budget preparation • Operational Phase of budget preparation

iii) Budget Execution • Cash and Treasury Management: • Revenue Management (Tax, non-tax): sources and modalities for

optimizing capacity for raising revenue • Grants and Donations Management • Expenditure Management, including losses and write-offs • Debt Management • Procurement • County Assets and Liabilities Management • Role of the Controller of Budget

iv) Financial Accounting, Recording and Reporting

• Role of Accounting Officers • Financial Reports: types, content and timelines • Standard Chart of Accounts and relationship with COFOG and GFS • Integrated Financial Management Information System (IFMIS)

!Budget Preparation is the focus of this Participant Book.

3


v) PFM in AGAs and SAGAs / Audit and Risk Management (Autonomous and Semi-Autonomous Government Agencies)

• Internal Audit • External Audit

vi) Inter- and Intra-governmental Fiscal Relations

• Process of Revenue Sharing – Division of Revenue Bill and the County Allocation of Revenue Bill

• IGFR Institutions – IBEC and Joint Technical Committee • Stoppage of Funds • Inter-governmental Reporting • Budget Policy Statement

vii) Monitoring and Evaluation

• Public Expenditure Review (PER) • Public Expenditure Tracking Survey (PETS) • Parliamentary and County Assembly oversight • Performance measurement • PFM and performance contracting • Public participation • Tools for public participation

viii) Leadership and Integrity

• Chapter Six (Constitution of Kenya 2010) • Ethics and Anti-corruption Act provisions • Leadership and Integrity Act provisions • Public Officer and Ethics Act provisions

ix) Gender and Youth in Development

• Understanding gender, youth and persons with disabilities in development

• Government policies on gender, youth and persons with disabilities

• Preferences and Reservations for Women, Youth and Persons with Disabilities on public procurement

• Strategies for gender and youth mainstreaming

4


Target Participant Group This Budget Preparation training is designed for the following target groups:

• County Executive Committee Members for Finance • Chief Officers/Accounting Officers of County Governments • Staff of the department or departments of the County Treasury • Clerks of the County Assemblies • Members of County Assemblies • Staff of city and municipal boards involved in public finance management • Audit committee members • Staff of County Departments and county government entities involved in public

finance

! Note that Sessions I and II of the trainingare targeted at all the above participants.

Session III is largely targeted at County Assembly, County Treasury, and County Executive Committee. Session IV is largely targeted at county departments in preparing their budgets. Glossary and Resources

• There is a Glossary of relevant terms and their meanings included at the end of this Participant Book.

• You will find a list of useful Resources for further information at the end of this Participant Book.

Timings and Methodology This Budget Preparation training has been designed as three (3) day training, but can be extended to four (4) days or more depending on the target audience (i.e. for different levels the time table can be adjusted). A timetable will be provided by your trainer. This training in Budget Preparation aims to be interactive and participatory. In addition to lecture/presentations, the following will be used: • Group and plenary discussions • Group exercises • Brainstorm questions • Example-based questions • Written exercises

5


Training Overview—Budget Preparation Session What is covered?

Getting Started • Welcomes, Introductions • Aims, Objectives • Expectations, Ground Rules • Understanding the emerging challenges in the budget

process

Session I: History of Budgeting in Kenya

• Overview of Key Budgeting Reforms in Kenya • Key legislation in budgeting • Exercise: Impact of Budget Reforms • Questions for Discussion

Session II: Budget Cycle, Calendar and Conceptual Overview

• Overview of key players, documents, responsibilities • Outline of budget cycle, budget calendar, legislative

approval process • Introducing MTEF and Programme Based Budgeting • Introduction to Chart of Accounts • Role of Public Participation in budgeting

Session III: Strategic Phase of Budgeting

• The County Integrated Development Plan • Preparing the C-BROP • Resource Envelope, Ceilings, Medium Term Budget

Strategy • Sector Working Groups and Sectoral Resource Allocation • Preparing the C-FSP

Session IV: Operational Phase of Budgeting

• Preparing Detailed Budget Estimates—recurrent and development budgets

• Preparing budget estimates according to Programme Based Budgeting formats

• Using the CoA to code expenditure.

Module Conclusion • Module Summary • Assessment Exercise • Evaluation

6


Introductory Session

Getting Started Here are some topics your trainer is likely to cover in this session:

• Welcome, Introductionsand ‘Housekeeping’

• Aims and Objectives of the training

• Training Overview and Timetable

• Relevant Documents

• Expectations and Ground Rules

• Understanding the challenges in the budget process

‘Icebreaker’Questions:

Session Objectives: • To create a comfortable and encouraging learning environment. • To provide an overview of the training, including aims and objectives. • To understand participants’ expectations of the training. • To set some agreed ground rules for the training.

Briefly discuss the following with your neighbour: • What are your expectations of this training? • What do you think you can contribute to this training?

Discuss the following quote:

If we all did the things we are capable of, we would astound ourselves.

Thomas Edison,American inventor What do you think this quote is saying? How might it apply to this training?

!In this session you will get to know your trainer/s and the other participants. You will

find out what the training involves and what you are expected to do.

7


Session I History of Budgeting in Kenya

Session Objectives: By the end of this session participants will be able to: • Identify how key budget reforms in Kenya since independence have influenced the

current budgeting process at a national and local level. • Discuss areas for improvement from their own county’s budget for 2013/14 and

identify possible ways ahead for 2014/15 and beyond.

Concepts Box 1: Budgeting in Kenya • Executive Branch, through the Minister for Finance, had total authority over

budget and overall PFM for many years.

• Parliament debated budget proposals each year, but constitutionally could not increase any fiscal measures. Also, the budget could not be rejected, as this would lead to a ‘vote of no confidence’ and hence require new elections.

• Such restrictions led to ineffective legislative budget oversight, and over time the need for a robust PFM system was recognized by government.

• For example, prior to the budget reforms, two separate budgets were prepared for each fiscal year; a recurrent and a development (or capital) budget. As the economy grew and became more complex, the need arose to change how resources were mobilized and allocated.

• Since independence, the budget process has gone through many reforms in an effort to improve PEM for better delivery of services to the citizens (see Table 1).

• In some cases, the need for reform was not locally driven, but came from external sources such as development partners, who had been providing Kenya with financial support.

• In addition, on the revenue side, since 1990 Kenya has carried out a wide-ranging tax modernisation program which has enabled Kenya to sustain a ‘revenue to GDP’ ratio well above the sub-Saharan average. This has been important for reducing dependency on aid to a manageable level.

Source: PFM training curriculum document

8


Table 1: Key Budget Reforms since Independence Budget Reform Period Objective of Reform Success of reform and

impact on today’s budget process?

Programme Review and Forward Budgeting (PRFB)

1970s Achieving a linkage between the development agenda and the budget through a medium-term oriented budget process.

Budget Rationalization Programme(BRP)

1986 Introducing a mechanism of prioritization consistent with available recourses to priority programmes (address resource constraints).

Public Investment Programme (PIP)

1990s Linking the capital budget to future recurrent budgets through a mechanism of prioritizing project implementation.

Kenya Tax Modernization Programme

Since 1990

• Modernize tax policy and administration.

• Shift emphasized on revenue mobilization to consumption.

• Simplify tax administration to lower cost of compliance and enforcement.

• Reduce excessive protection of local producers that was based on import substitution to encourage efficiency, innovation and competitiveness of local goods and services.

• Introduce computer-based enforcement and compliance.

The Medium Term Expenditure Framework Process (MTEF)

2000 Provide a link between policy, planning and budgeting through a coherent multi-year budgeting process.

Programme Based Budgeting

2013 Aims to deepen the MTEF approach by moving decision-making on resource allocation from line item to expected outputs. From line item to program and sub-program and outputs and performance targets.

9


Exercise 1: Impact of Budget Reforms

Questions for Discussion

The above exercise has given us an idea of why it can be useful to ‘look backward to go forward’. In the context of your own county, think about the 2013/14 budget currently being executed. In terms of the process of preparing this budget:

• What elements of the process worked well, and what could be improved for the preparation of the 2014/15 budget?

• What areas or elements of budget preparation for 2013/14 were most troublesome, and how could these issues be addressed for 2014/15?

The aim of the exercise is for you to think about the budget reforms which have been implemented in Kenya, and identify any impacts of these reforums that apply to today’s budgeting process. 1. Work in groups of 4, as identified by your trainer. 2. Using information in Concepts Box 1, Table 1, Table 2, and any other relevant resource documents provided by your trainers, have a discussion around the budget reforms you have just learned about. You can jot down notes in the right-hand column of Table 1. 3. Some questions to guide your group discussion:

• How successful were these reforms in terms of improving the budgeting process in Kenya?

• Can you identify any examples from your experience and knowledge of today’s budgeting process, that demonstrates an impact of these budget reforms?

• Are these impacts at the national level only, or do they also apply at the county level?

4. Report back to the wider group on 1 of the reforms that you discussed.

10


Session II County Budget Cycle, Calendar and Conceptual Overview of Budgeting At the outset, it is important to understand that the county budgeting process fits within a wider Public Expenditure Management (PEM) cycle, as shown in Diagram 1 below: Diagram 1: The PEM Cycle and budget preparation

Source: Adopted from http://blog-pfm.imf.org/pfmblog/2008/08/public-expendit.html

Session Objectives: By the end of this session participants will be able to: • Identify the stages in the county budget cycle and calendar, including key

calendar targets and the legislative approval process. • Demonstrate an understanding of the concepts of MTEF, Programme Based

Budget and the Chart of Accounts. • Explain the importance of public participation in the budget preparation process

and identify key opportunities for public input in this process.

Formulate plans andbudgets

Execute budgets

Account and report

Audit and scrutinise budgets

and reports

• Prepare , present and review:• National development plan• Budget policy statement• Medium-term expenditure

framework• Annual budget

• Release funds • Procure goods, works and

services• Manage the wage bill • Manage debts

• Undertake internal audit• Conduct procurement reviews,

public expenditure reviews, service delivery surveys etc.

• Carry-out external audit• Parliament provides oversight

and scrutiny

• Account for expenditure • Reconcile of accounting records• Generate in-year and end of year

financial and other reports

In this training, we focus on this section of the PEM cycle.

11


1. Key legislation, documents, roles and responsibilities in county budgeting Table 2: Quick Reference—Key legislation for budget preparation

Legislation

Relevant Sections

Constitution of Kenya (2010)

Articles 201, 202, 203 on revenue sharing Article 207 County Revenue Fund Article 209 and Article 210 on tax allocation and taxation Article 212 (County Borrowing) Articles 215–219 (Revenue Allocation) Articles 220,224, 227 (Budgets and Spending) Article 225 (Financial Control) Article 226 Accounts and audits Article 228, Controller Budget Article 229, Auditor-General

Public Finance Management Act (2012)

Sections 25–27 (Responsibilities of the National Treasury with respect to the budget process) Sections 35–45 (NationalGovernment BudgetProcess) Sections 102-116, 117–118 (Responsibilities of county governments with respect to the county budget process, principles of PFM) Sections 147–149 (Roles, responsibilities of Accounting Officers Sections 157–162 Receivers and collectors of revenue Sections 125–137 (The County Government Budget Process) Sections 189–191 (The Process of Sharing Revenue)

County Government Act (2012)

Part VIII – Citizen Participation Section 91 (c) Budget preparation and validation fora

!You will learn more about relevant legislation in the training module:

i) Constitutional and Legal Framework for PFM

12


Tab

le 3

: Qu

ick

Ref

eren

ce—

Key

pla

yer

s in

the

cou

nty

bu

dg

etin

g p

roce

ss (

in a

lpha

beti

cal

ord

er)

Initi

als

Body

Wha

t is t

heir

role

?

Coun

ty L

evel

Inst

itutio

ns

AOs

Acco

untin

g O

ffice

rs

•Le

ad th

e va

rious

Cou

nty

Sect

or W

orki

ng G

roup

s.

•Ar

e de

signa

ted

by th

e CE

C-M

F an

d ar

e ac

coun

tabl

e to

theC

ount

y As

sem

bly

(CA)

for f

inan

cial

man

agem

ent.

•Ar

e re

spon

sible

for a

ccou

ntin

g fo

r mon

eyap

prop

riate

d by

Cou

nty

Asse

mbl

y.

•Ha

ve p

ower

s to

exec

ute

loan

doc

umen

ts, m

anag

e as

sets

and

liab

ilitie

s of C

G an

d re

allo

cate

fund

ssub

ject

to

cert

ain

cond

ition

s.

•En

sure

pub

lic re

sour

ces a

re u

sed

in a

way

that

is la

wfu

l and

aut

horis

ed a

nd in

an

effe

ctiv

e an

d ef

ficie

nt m

anne

r. •

Mus

t ens

ure

prop

er fi

nanc

ial m

anag

emen

tof t

he re

spec

tive

Coun

ty G

over

nmen

t ent

ity.

•Le

ad ro

le in

pre

parin

g an

d su

bmitt

ing

depa

rtm

enta

l bud

gets

and

in th

e bu

dget

pre

para

tion

proc

ess.

•

Appr

oval

of r

e-al

loca

tion

of fu

nds b

etw

een

prog

ram

s, su

bjec

t to

limits

set i

n th

e re

gula

tions

. •

CEC

Fina

nce

coor

dina

tes b

udge

ting

and

PFM

for c

ities

and

urb

an a

reas

.

CA

Coun

ty

Asse

mbl

y

•Ap

prov

es/a

dopt

s key

bud

get d

ocum

ents

, inc

ludi

ng In

tegr

ated

Dev

elop

men

t Pla

n, C

-FSP

, Deb

t Man

agem

ent

Stra

tegy

, and

Bud

get E

stim

ates

. •

Prov

ides

ove

rall

over

sight

ove

r pub

lic fi

nanc

es a

t the

Cou

nty

Gove

rnm

ent l

evel

. •

Ensu

re a

dher

ence

by

CEC

and

CG to

Prin

cipl

es o

f Pub

lic F

inan

ce a

nd th

e fis

cal r

espo

nsib

ility

prin

cipl

es.

•Ap

prov

es th

e es

tabl

ishm

ent o

f oth

er c

ount

y pu

blic

fund

s.

•Ap

prov

es b

udge

t and

reve

nue

allo

catio

n fo

r citi

es a

nd u

rban

are

as.

•O

vers

ight

of a

ccou

ntab

ility

and

com

plia

nce

with

lega

l req

uire

men

ts, e

.g. a

ccou

ntin

g st

anda

rds a

nd o

ther

. •

Appr

oves

and

ove

rsee

s Cou

nty

Asse

mbl

y Bu

dget

. •

Appr

oves

Cou

nty

Debt

Str

ateg

y Pa

per w

hich

sets

bor

row

ing

limits

, det

ails

borr

owin

g ne

eds.

13


Co

unty

As

sem

bly

Cler

k

•Su

bmits

the

budg

et o

f the

Cou

nty

Asse

mbl

y, to

the

Coun

ty A

ssem

bly

for c

onsid

erat

ion

and

appr

oval

by

30Ap

ril

as p

er P

FM A

ct 2

012,

129

(3).

Also

resp

onsib

le fo

r Cou

nty

Asse

mbl

y Bu

dget

. •

May

real

loca

te re

sour

ces w

ithin

Vot

es su

bjec

t to

10%

lim

it.

C-BE

F Co

unty

Bu

dget

and

Ec

onom

ic

Foru

m

A ne

w st

ruct

ure

at c

ount

y le

vel t

o se

rve

asa

cons

ulta

tive

foru

m o

n co

unty

pla

ns a

nd b

udge

ts. I

t inc

lude

s:

•Co

unty

Gov

erno

r as C

hair

•M

embe

rs o

f the

CEC

•

Repr

esen

tativ

es o

f a w

ide

rang

e of

gro

ups a

t cou

nty

leve

l inc

ludi

ng p

rofe

ssio

nals,

bus

ines

s, la

bour

issu

es,

wom

en, p

erso

ns w

ith d

isabi

litie

s,th

e el

derly

and

faith

bas

ed g

roup

s.

•Sp

ecifi

c re

spon

sibili

ties i

nclu

de c

onsu

ltatio

ns fo

r the

pre

para

tion

of: C

ount

y De

velo

pmen

t Pla

ns, C

-BRO

P, C

-FSP

. Se

e PF

MA

(201

2) S

ectio

n 13

7, E

stab

lishm

ent o

f For

um fo

rcon

sulta

tion

by c

ount

ygov

ernm

ents

CEC

Coun

ty

Exec

utiv

e Co

mm

ittee

•Re

spon

sible

for t

he so

cial

-pol

itica

l, po

licie

s, fi

nanc

e an

d ex

ecut

ion

aspe

cts i

n a

coun

ty.

•Co

ordi

nate

s pre

para

tion

of C

IDPS

that

gui

de b

udge

ting,

on

appr

oval

impl

emen

ts b

oth

plan

and

bud

get.

•Ap

prov

es C

-BRO

P an

d C-

FSP

docu

men

ts.

•Re

view

s the

Ann

ual B

udge

t Est

imat

esbe

fore

subm

issio

n to

the

CA fo

r app

rova

l. •

With

the

appr

oval

of C

ount

y As

sem

bly

appr

oves

, is i

n ch

arge

of e

stab

lishm

ent a

nd d

issol

utio

n of

a c

ount

y co

rpor

atio

n •

With

the

appr

oval

of C

ount

y As

sem

bly,

app

rove

s the

est

ablis

hmen

t of a

cou

nty

emer

genc

y fu

nd.

CE

C-M

F Co

unty

Ex

ecut

ive

Com

mitt

ee

Mem

ber f

or

Fina

nce

•Re

spon

sible

for p

ropo

sing

coun

ty P

FM p

olic

ies a

nd m

anag

ing

the

budg

et p

roce

ss o

f the

Cou

nty

Gove

rnm

ent.

See

PFM

A (2

012)

Sec

tions

128

–130

. •

Prop

oses

reve

nue

raisi

ngm

easu

res,

incl

udin

g bo

rrow

ing

subj

ect t

o na

tiona

l gov

ernm

ent g

uara

ntee

. •

Desig

nate

s rec

eive

rs o

f cou

nty

reve

nues

. •

Desig

nate

s cou

nty

acco

untin

g of

ficer

s.

•M

anag

es th

e Co

unty

Rev

enue

Fun

d.

14


•Es

tabl

ishes

the

nece

ssar

y sy

stem

s for

cas

h m

anag

emen

t as p

rovi

ded

in th

e la

w.

•Pr

epar

es a

nd su

bmits

to C

ount

y As

sem

bly

the

Med

ium

Ter

m D

ebt M

anag

emen

t Str

ateg

y.

! The

CEC

-MF

mus

t ens

ure

that

the

budg

et p

roce

ss is

con

duct

ed in

a m

anne

r and

with

in a

tim

efra

me

suffi

cien

t to

perm

it th

e ot

her p

artic

ipan

ts in

the

proc

ess t

o m

eet t

he re

quire

men

ts o

f the

CoK

(201

0) a

nd P

FMA

(201

2), i

nclu

des

ensu

ring

the

C-BR

OP,

C-F

SP a

re p

repa

red

and

subm

itted

to th

e Co

unty

Ass

embl

y on

tim

e.

CE

C-M

P CE

C M

embe

r fo

r Pla

nnin

g

•Su

bmits

the

Inte

grat

ed D

evel

opm

ent P

lan

to th

e CA

for a

ppro

val e

ach

year

.

Ci

tizen

s

•Im

port

ant r

ole

to p

artic

ipat

e in

pub

lic h

earin

gs o

n th

e CI

DP, C

-BRO

P, S

ecto

r Rep

orts

and

Bud

get E

stim

ates

. •

Impo

rtan

t rol

e in

iden

tifyi

ng c

omm

unity

nee

ds a

nd p

riorit

ies,

thro

ugh

the

coun

try

deve

lopm

ent p

lans

pla

nnin

g pr

oces

s.

•Im

port

ant r

ole

in p

rovi

ding

ove

rsig

ht a

nd fe

edba

ck o

n pr

ogra

ms a

nd p

roje

cts a

nd in

par

ticul

ar o

n th

e us

e of

pu

blic

reso

urce

s.

Co

unty

SW

Gs

Coun

ty

Sect

or

Wor

king

G

roup

s

•Co

unty

Dep

artm

ents

are

gro

uped

into

rela

ted

sect

ors,

(bas

ed o

n st

ruct

ure

of C

ount

y Go

vern

men

t), d

epen

ding

on

thei

r man

date

s and

func

tions

. •

Grou

ps m

ust a

gree

on:

o

Sect

oral

obj

ectiv

es, o

utpu

ts a

nd p

riorit

ies,

link

ed to

the

Coun

ty D

evel

opm

ent P

lan.

o

Activ

ities

, inc

ludi

ng th

e re

view

and

dev

elop

men

t of p

rogr

amm

es a

nd su

b-pr

ogra

mm

es, a

nd th

eir c

ostin

g.

oM

ediu

m-t

erm

out

puts

and

targ

ets f

or th

e se

ctor

and

est

imat

e re

sour

ce re

quire

men

ts fo

r the

sect

or.

•Gr

oups

nee

d to

link

shar

ing

of a

vaila

ble

reso

urce

s to

the

criti

cal p

riorit

ies o

f the

sect

or (r

efer

red

to a

s ‘se

ctor

re

sour

ce sh

arin

g pr

oces

s’).

•Th

e Se

ctor

Wor

king

gro

up is

cha

ired

by th

e co

unty

chi

ef o

ffice

rs w

ith a

con

veno

r fro

m th

e Co

unty

Tre

asur

y.

15


CT

Coun

ty

Trea

sury

•Ha

s ove

rall

resp

onsib

ility

for m

anag

ing

the

finan

cial

and

eco

nom

ic a

ffairs

of t

he C

ount

y Go

vern

men

t. •

Prep

ares

and

subm

its th

e C-

FSP

to th

e CE

C fo

r app

rova

l. •

Subm

its C

ount

y De

bt M

anag

emen

t Str

ateg

y to

the

CA.

•Dr

ives

the

MTE

F pr

oces

s, (t

he th

ree-

year

rolli

ng p

lan)

wor

king

clo

sely

with

rele

vant

dep

artm

ents

and

in

stitu

tions

in th

e co

unty

and

the

depa

rtm

ent i

n ch

arge

of e

cono

mic

pla

nnin

g.

•Pr

epar

es A

nnua

l Bud

get E

stim

ates

for t

he C

ount

y Go

vern

men

t (CG

)and

coo

rdin

ates

the

prep

arat

ion

and

impl

emen

tatio

n of

the

CG b

udge

t. •

Enfo

rces

Fisc

al R

espo

nsib

ility

Prin

cipl

es a

t the

CG

leve

l. •

Prep

ares

bud

get,

finan

cial

and

fisc

al re

port

s and

subm

its th

em to

the

CA a

nd a

lso p

ublis

hes a

nd p

ublic

izes

them

. •

Prep

ares

bud

get,

finan

cial

and

fisc

al re

port

s and

subm

its th

em to

the

CA a

nd a

lso p

ublis

hes a

nd p

ublic

izes

them

. •

Coor

dina

tes t

he p

roce

ss o

f fin

alizi

ng th

e bu

dget

, inc

ludi

ng c

onsu

ltatio

n w

ith o

ther

stak

ehol

ders

at t

he c

ount

y.

CFPG

C

ount

y Fi

sal

Plan

ning

G

roup

•In

cha

rge

of e

stim

atio

n of

the

coun

ty re

sour

ce e

nvel

ope.

•

Resp

onsib

le fo

r dev

elop

ing

draf

t C-B

ROP

and

C-FS

P.

•M

embe

rshi

p in

clud

es C

ount

y Tr

easu

ry, t

he d

epar

tmen

t res

pons

ible

for e

cono

mic

pla

nnin

g, a

nd o

ther

rele

vant

th

ink

tank

s on

reve

nue

fore

cast

ing

and

econ

omic

issu

es.

Nat

iona

l Lev

el In

stitu

tions

Co

B Co

ntro

ller o

f Bud

get

•Ro

le is

to o

vers

ee th

e im

plem

enta

tion

of b

udge

ts o

f nat

iona

l and

cou

nty

gove

rnm

ents

by

auth

orisi

ng

with

draw

als f

rom

:The

Con

solid

ated

Fun

d; T

he E

qual

isatio

n Fu

nd; T

he C

ount

y Re

venu

e Fu

nds.

CRA

Com

mis

sion

for

Reve

nue

Allo

catio

n,

(CRA

)

•Re

com

men

ds th

e ba

sis fo

r the

equ

itabl

e sh

arin

g of

reve

nue

betw

een

natio

nal a

nd c

ount

y go

vern

men

ts

and

allo

catio

n am

ong

coun

ty g

over

nmen

ts (A

rtic

le 2

16).

16


•Re

com

men

ds re

venu

e en

hanc

emen

t mea

sure

s for

bot

h le

vels.

•

Prop

oses

revi

sion

of re

venu

e sh

arin

g/al

loca

tion

form

ula.

IBEC

In

ter-

gove

rnm

enta

l Bu

dget

and

Ec

onom

ic C

ounc

il

•IB

EC p

rovi

des a

mea

ns fo

r con

sulta

tionb

etw

een

the

two

tiers

of g

over

nmen

t and

am

ong

CGs o

n a

broa

d ra

nge

of e

cono

mic

and

fina

ncia

l iss

ues,

incl

udin

g:bo

rrow

ing

and

guar

ante

es; b

udge

ts; d

evel

opm

ent

plan

s; c

ash

disb

urse

men

ts; r

egul

atio

ns to

PFM

Act

, 201

2; d

ivisi

on o

f rev

enue

.

NT

N

atio

nal T

reas

ury

•

Has o

vera

ll re

spon

sibili

ty fo

r mac

roec

onom

ic m

anag

emen

t, na

tiona

l eco

nom

ic p

olic

y.

•Re

spon

sible

for o

vera

ll re

venu

e m

obili

zatio

n an

d de

bt g

uara

ntee

s to

coun

ty g

over

nmen

ts.

•Pr

epar

es a

nnua

l bud

get e

stim

ates

of r

even

ues a

nd e

xpen

ditu

res o

f the

NG

and

coor

dina

tes t

he

prep

arat

ion

and

impl

emen

tatio

n of

the

NG

budg

et.

•Pr

epar

es th

e Bu

dget

Pol

icy

Stat

emen

tand

the

Budg

et R

evie

w a

nd O

utlo

ok p

aper

for t

he N

atio

nal

Gove

rnm

ent.

•En

forc

esfis

cal r

espo

nsib

ility

prin

cipl

es a

t nat

iona

l lev

el.

•Pr

epar

es th

e pr

e-an

d-po

st b

udge

t rep

orts

.

N-B

AC

Nat

iona

l Ass

embl

y Bu

dget

and

Ap

prop

riatio

n Co

mm

ittee

•Re

view

s and

app

rove

s the

BPS

that

sets

pol

icie

s and

gui

des b

udge

ting,

ver

tical

shar

ing

of th

e na

tiona

lly

Raise

d Re

venu

es, c

ount

ies n

ot to

pre

judi

ce se

t eco

nom

ic p

olic

ies.

•

Prov

ides

gen

eral

dire

ctio

n on

bud

geta

ry m

atte

rs.

•M

onito

rs a

dher

ence

to P

FM p

rinci

ples

and

acc

ount

abili

ty b

y pa

rliam

ent,

the

Judi

ciar

y an

d N

atio

nal

Gove

rnm

ent a

nd o

ther

pub

lic e

ntiti

es.

•Re

view

s mon

ey b

ills i

nclu

ding

the

Annu

al D

ivisi

on o

f Rev

enue

, ens

ures

adh

eren

ce to

PFM

Fin

anci

al

prin

cipa

ls in

the

Cons

titut

ion

and

adhe

renc

e to

app

rove

d Fi

scal

fram

ewor

k.

•Re

view

s Ann

ual B

udge

t est

imat

es o

f exp

endi

ture

and

reve

nue

and

intr

oduc

es th

e an

nual

an

dSup

plem

enta

ry A

ppro

pria

tions

.

17


PBO

Pa

rliam

enta

ry

Budg

et O

ffic

e •

Prov

ides

pro

fess

iona

l adv

ice

on b

udge

ting

and

over

all P

FM, f

inan

ce a

nd e

cono

mic

info

rmat

ion

to

parli

amen

t (its

adv

ice

on re

venu

es a

ffect

s ove

rall

reso

urce

env

elop

e).

•Pr

ovid

es a

naly

sis o

n al

l bill

s tha

t hav

e an

eco

nom

ic a

nd fi

nanc

ial i

mpa

ct.

•Re

view

s and

adv

ices

rele

vant

com

mitt

ees o

f par

liam

ent o

nleg

islat

ivep

ropo

sals

for D

ivisi

on o

f Rev

enue

an

d Co

unty

Allo

catio

n of

Rev

enue

. •

Prov

ides

a te

chni

cal b

ridge

bet

wee

n th

e le

gisla

ture

, the

exe

cutiv

e an

d ot

her n

atio

nal a

nd in

tern

atio

nal

orga

nisa

tions

with

inte

rest

in b

udge

tary

and

soci

al e

cono

mic

mat

ters

.

PDM

O

Publ

ic D

ebt

Man

agem

ent O

ffic

e •

Advi

ses o

n m

anag

emen

t of n

atio

nal g

over

nmen

t deb

t (in

ord

er to

min

imize

risk

s).

•Ad

vise

s on

debt

sust

aina

bilit

y w

hich

impa

cts o

n gu

aran

tees

to c

ount

ies a

nd p

ublic

ent

ities

. •

Prep

ares

and

upd

ates

the

annu

al M

ediu

m T

erm

deb

t man

agem

ent s

trat

egy.

•

Carr

ies o

ut o

n a

regu

lar b

asis

a de

bt su

stai

nabi

lity

anal

ysis.

•

Proc

esse

s the

issu

ance

of l

oan

guar

ante

es in

clud

ing

asse

ssm

ent a

nd m

anag

emen

t of r

isks i

n th

e N

atio

nal G

over

nmen

t gua

rant

ee.

•M

aint

ains

and

upd

ates

nat

iona

l deb

t inc

ludi

ng g

uara

ntee

s and

any

der

ivat

ive

finan

cial

inst

rum

ent t

hat

gove

rnm

ent m

ay e

nter

into

. S-

F&BC

Se

nate

Fin

ance

and

Bu

dget

Com

mitt

ee

•Pr

opos

es to

the

sena

te th

e cr

iteria

for a

lloca

tion

of re

venu

es a

mon

g co

untie

s.

•Re

view

s the

Ann

ual D

ivisi

on o

f Rev

enue

Bill

whe

n su

bmitt

ed to

Sen

ate

by th

e N

atio

nal A

ssem

bly.

•

Revi

ews a

nd re

com

men

ds to

the

sena

te th

e An

nual

Cou

nty

Allo

catio

n of

Rev

enue

Bill

. •

Exam

ines

fina

ncia

l sta

tem

ent s

ubm

itted

to th

e se

nate

. •

Mon

itors

the

adhe

renc

e by

the

Coun

ty e

ntiti

es to

prin

cipl

es o

f pub

lic fi

nanc

e as

set o

ut in

the

cons

titut

ion.

Sour

ce: S

ome

cont

ent i

n th

is ta

ble

adap

ted

from

Pow

erPo

int p

rese

ntat

ions

dev

elop

ed b

y N

atio

nal T

reas

ury—

‘Con

stitu

tiona

l and

lega

l fra

mew

ork

for P

FM

and

impl

icat

ion

on C

ount

y PF

M’,

‘Ken

ya’s

new

bud

get p

roce

ss’ a

nd ‘I

mpl

emen

tatio

n of

the

Publ

ic F

inan

ce M

anag

emen

t Act

, 201

2’.

18


Tab

le 4

: Qu

ick

Ref

eren

ce—

Key

doc

um

ents

in

the

cou

nty

bu

dg

et p

repa

rati

on p

roce

ss

Docu

men

t

Wha

t is i

t?

Why

is it

pro

duce

d?

Who

pro

duce

s it a

nd b

y w

hen?

Ho

w d

oes t

his d

ocum

ent

prog

ress

the

budg

et

prep

arat

ion

cycl

e?

Coun

ty

Budg

et

Circ

ular

Issu

ed e

ach

year

, it

prov

ides

initi

al in

stru

ctio

ns

to g

uide

the

budg

et p

roce

ss

for t

he c

omin

g ye

ar.

The

Budg

et C

ircul

ar is

an

impo

rtan

t co

mm

unic

atio

n to

ol fo

r gui

ding

co

untie

s in

the

budg

et p

repa

ratio

n pr

oces

s for

the

com

ing

year

. N

ote:

ther

e is

furt

her g

uida

nce

issue

d by

the

Coun

ty T

reas

uryo

n de

taile

d bu

dget

ing

once

bud

get

ceili

ngs a

re fi

rmed

up

(i.e.

afte

r the

C-

FSP)

. See

Ses

sion

IV.

It is

prod

uced

by

each

Co

unty

Tre

asur

y by

30

Augu

st e

ach

year

. N

ote

that

the

coun

ty

budg

et c

ircul

ars w

ill v

ary

both

in c

onte

nt a

nd ti

min

g,

as lo

ng a

s the

y:

•M

eet m

anda

tory

co

nstit

utio

nal a

nd le

gal

dead

lines

, and

•

Com

ply

with

gaz

ette

ac

coun

ting

stan

dard

s.

•Gi

ves g

uida

nce

on k

ey

timel

ines

, pro

cedu

res,

po

licy

area

s and

fo

rmat

s.

•O

nce

this

is iss

ued,

pr

epar

atio

n of

the

C-BR

OP

can

com

men

ce.

Coun

ty

Inte

grat

ed

Deve

lopm

ent

Plan

s An

nual

Re

visio

ns

ispar

t of

Annu

al

Thes

e ar

e pr

epar

ed e

ach

year

and

incl

ude:

•

Stra

tegi

c pr

iorit

ies f

or

the

med

ium

term

•

Prog

ram

mes

to b

e de

liver

ed

•Si

gnifi

cant

cap

ital

expe

nditu

re

The

Coun

ty In

tegr

ated

Dev

elop

men

t Pl

an is

an

impo

rtan

t doc

umen

t for

id

entif

ying

: •

the

mai

n pr

iorit

ies o

f the

cou

nty

and

thei

r obj

ectiv

es

•th

e pe

rfor

man

ce in

dica

tors

, pr

ogra

mm

es a

nd a

ctiv

ities

that

ar

e ne

eded

to m

eet t

he

•Pr

epar

ed b

y CE

C M

embe

r for

Pla

nnin

g,

with

inpu

t fro

m th

e Co

unty

Bud

get a

nd

Econ

omic

For

um(C

-BEF

) an

d de

part

men

ts.

•Su

bmitt

ed to

the

CA b

y 1

Sept

embe

r eac

h ye

ar.

Info

rmat

ion

from

the

CIDP

in

form

s the

Cou

nty

Sect

or

Wor

king

Gro

up R

epor

t an

d th

e Pr

ogra

mm

e Ba

sed

Budg

etin

g pr

oces

s. S

ee

Sess

ion

II, P

art 6

and

Se

ssio

n III

, Par

t 2.

19


Budg

et

•Gr

ants

, tra

nsfe

rs a

nd

subs

idie

s to

be m

ade

on

beha

lf of

CGs

.

obje

ctiv

es

•th

e co

stin

gs o

f the

prio

ritize

d ac

tiviti

es.

Coun

ty

Budg

et

Revi

ew a

nd

Out

look

Pa

per (

C-BR

OP)

The

C-BR

OP

com

pare

s pr

evio

us y

ear’s

reve

nue

and

spen

ding

aga

inst

wha

t was

pl

anne

d in

the

budg

et.

The

C-BR

OP

outli

nes:

•

Actu

al fi

scal

per

form

ance

in th

e pr

evio

us y

ear

•U

pdat

ed e

cono

mic

and

fina

ncia

l fo

reca

sts (

show

ing

any

chan

ges

from

the

fore

cast

s in

the

C-FS

P fr

om th

e pr

evio

us y

ear)

•

Iden

tific

atio

n of

bro

ad p

olic

y pr

iorit

ies

•In

dica

tive

avai

labl

e re

sour

ces t

o fu

nd C

G pr

iorit

ies.

•Pr

epar

ed b

y th

e Co

unty

Tr

easu

ry (

Coun

ty F

iscal

Pl

anni

ng G

roup

). •

Subm

itted

to C

A by

30

Sept

embe

r eac

h ye

ar.

•C-

BRO

P al

low

s for

the

CEC

to e

ngag

e on

ex

pend

iture

stra

tegi

es,

as w

ell a

s brie

f the

CA

on th

e bu

dget

pro

cess

an

d ec

onom

y of

the

coun

ty.

•O

nce

indi

cativ

e av

aila

ble

reso

urce

s are

id

entif

ied

in th

e C-

BRO

P, S

ecto

r Wor

king

Gr

oups

can

mee

t to

iden

tify

prio

ritie

s for

th

e co

min

g ye

ar.

Se

ctor

W

orki

ng

Gro

up R

epor

t

A re

port

whi

ch g

ives

sect

or

Visio

n an

d M

issio

n,

Stra

tegi

c Go

als o

f the

se

ctor

. A re

view

of t

he p

ast

perf

orm

ance

of t

he se

ctor

, in

clud

ing

a m

ediu

m te

rm

prio

ritie

s and

fina

ncia

l pla

n

The

purp

ose

of th

e Se

ctor

Rep

ort i

s to

out

linin

g th

e pr

iorit

izatio

n of

(c

oste

d) p

rogr

amm

es a

nd su

b-pr

ogra

mm

es, e

xpec

ted

outc

omes

, ou

tput

s and

key

per

form

ance

in

dica

tors

. The

Cou

nty

Inte

grat

ed

Deve

lopm

ent P

lan

is an

impo

rtan

t

•De

part

men

ts c

lust

ered

in

to se

ctor

s, le

d by

Ac

coun

ting

Offi

cers

. •

Grou

ps c

onve

ned

in

Oct

ober

, fol

low

ing

prep

arat

ion

of C

-BRO

P.

The

Sect

or R

epor

ts

prov

ide

a ba

sis fo

r the

de

part

men

ts to

go

thro

ugh

a pr

oces

s of

shar

ing

or a

lloca

ting

reso

urce

s am

ong

them

selv

es, o

n th

e ba

sis

20


for t

he M

TEF

perio

d.

The

repo

rt g

ives

det

ails

of

cont

inui

ng p

roje

cts a

nd

prog

ram

s tha

t nee

d fu

ndin

g in

com

ing

fisca

l yea

r, w

hich

sh

ould

be

allo

cate

d fu

nds

befo

re n

ew o

nes.

docu

men

t to

info

rm th

e de

velo

pmen

t of t

his r

epor

t. A

form

at fo

r the

Sec

tor W

orki

ng

Grou

p re

port

is p

rovi

ded

in A

nnex

3.

of th

e se

ctor

al re

view

. Th

is w

ill th

en fe

ed in

to th

e pr

oces

s of p

repa

ring

depa

rtm

enta

l bud

get

estim

ates

, in

the

Ope

ratio

nal P

hase

of

budg

et p

repa

ratio

n.

Co

unty

Fis

cal

Stra

tegy

Pa

per (

C-FS

P)

The

C-FS

P co

ntai

ns:

•Su

mm

ary

of re

venu

e an

d ex

pend

iture

pe

rfor

man

ce fo

r the

FY

to d

ate.

•

Asse

ssm

ent f

or th

e re

mai

nder

of t

he

curr

ent F

Y.

•Br

oad

stra

tegi

c pr

iorit

ies a

nd p

olic

y go

als (

med

ium

and

lo

ng-t

erm

). •

Fina

ncia

l out

look

on

expe

nditu

res,

reve

nues

an

d bo

rrow

ing

for t

he

med

ium

term

.

The

CFSP

gui

des t

he fo

rmat

ion

of

the

budg

et fo

r the

com

ing

finan

cial

ye

ar. I

t loo

ks a

t pro

ject

ed re

venu

e an

d ex

pend

iture

and

impo

rtan

tly,

wha

t pro

port

ion

of th

e co

unty

’s

budg

et w

ill b

e al

loca

ted

to e

ach

sect

or. T

he S

ecto

r Wor

king

Gro

up

Repo

rts w

ill in

form

this

proc

ess.

•Pr

epar

ed b

y Co

untr

y Tr

easu

ry (

Coun

ty F

iscal

Pl

anni

ng G

roup

) •

Prep

ared

in ti

me

for

revi

ew a

nd a

ppro

val b

y th

e CE

C be

fore

su

bmiss

ion

to th

e CA

by

28 F

ebru

ary.

The

subm

issio

n of

the

C-FS

P sig

nals

the

end

of th

e ‘S

trat

egic

Pha

se’ o

f bud

get

prep

arat

ion

and

the

star

t of

the

‘Ope

ratio

nal P

hase

’. Fu

rthe

r ins

truc

tions

are

pr

ovid

ed to

cou

ntie

s on

how

to p

repa

re th

e de

taile

d bu

dget

est

imat

es.

!Not

e: T

he C

-FSP

mus

t be

alig

ned

with

the

natio

nal o

bjec

tives

in th

e Bu

dget

Pol

icy

Stat

emen

t (BP

S). T

he B

PS is

subm

itted

for a

ppro

val b

y on

15 F

ebru

ary,

whi

ch g

ives

co

untie

s tw

o w

eeks

to c

onsid

er th

e na

tiona

l obj

ectiv

es in

the

BPS

and

alig

n th

eir o

wn

C-FS

P ac

cord

ingl

y, b

efor

e su

bmitt

ing

by th

e en

d of

Feb

ruar

y.

21


Coun

ty D

ebt

Man

agem

ent

Stra

tegy

This

med

ium

-ter

m st

rate

gy

stat

es a

ctua

l and

like

ly

liabi

lity

for t

he c

ount

y an

d ho

w to

dea

l with

it.

The

debt

man

agem

ent s

trat

egy

outli

nes:

•

The

tota

l sto

ck o

f deb

t as a

t the

da

te o

f the

stat

emen

t. •

The

sour

ces o

f loa

ns m

ade

to th

e co

unty

gov

ernm

ent a

nd ri

sks

asso

ciat

ed w

ith th

ose

loan

s.

•Th

e as

sum

ptio

ns u

nder

lyin

g th

e de

bt m

anag

emen

t str

ateg

y; a

nd

an a

naly

sis o

f the

sust

aina

bilit

y of

the

amou

nt o

f deb

t, bo

th

actu

al a

nd p

oten

tial.

The

Coun

ty D

ebt

Man

agem

ent S

trat

egy

is co

mpl

eted

and

su

bmitt

ed a

t the

sam

e tim

e as

the

C-FS

P, b

y 28

Fe

brua

ry.

The

Coun

ty D

ebt

Man

agem

ent S

trat

egy

com

plem

ents

the

C-FS

P in

th

at it

out

lines

how

co

untie

s pla

n to

dea

l with

an

y in

herit

ed d

ebt.

Sour

ce: S

ome

cont

ent i

n th

is ta

ble

adap

ted

from

pre

sent

atio

ns ‘C

onst

itutio

nal a

nd le

gal f

ram

ewor

k fo

r PFM

and

impl

icat

ion

on C

ount

y PF

M’,

by A

. Mw

enda

, N

atio

nal T

reas

ury

and

‘Ken

ya’s

new

bud

get p

roce

ss’.

22


2. County Budget Cycle and Calendar Table 5: County Budget Calendar

Target Date (annually)

Activity Relevant Legislation

30 August

• Issued by CEC-MF from each county. • Budget Circular must also outline procedures for

inviting the public to participate in the process.

PFMA (2012) Section 128 (2)

1 September

• The CEC-MP submits the Development Plan to the County Assembly (CA) for approval.

• Copy of the plan to CRA and National Treasury (NT).

!Within 7 days of submission to the CA, the CEC-MP

must publish and publicize the plan.


County Budget Circular Issued

County Integrated Development Plan Submitted

Concepts Box: County Budget Cycle and Calendar • The imperative for a county budgeting process is set down in key legislation –

including the Constitution of Kenya (2010) and the Public Finance Management Act (2012) (see Table 2).

• The budgeting process can be seen as a cycle (See Diagram 2), whereby the results of each year feed into the process for the following year.

• Linked to this budgeting cycle is a calendar (see Table 5; Diagram 3), which identifies target dates for the submission and approval of key budget documents. Many of these target dates for counties are aligned with key dates for the national budget.

• It is important to understand that the annual budgeting process ideally takes place using a Medium Term Expenditure Framework (MTEF)approach, which will be introduced later in this session.

• The Budget Calendar also identifies timeframes within which relevant documents must be published and publicized, in the interests of public participation. More details about public participation in the budgeting process will be provided later in this session.

23


30 September

• The County Treasury (CT) prepares and submits the

C-BROP to the CEC. • CEC must review and approve within 14 days of

submission.

!Within 7 days of approval by the CEC, the CT will

arrange for the paper to be laid before the CA and subsequently publish and publicize the paper.

PFMA (2012) Section 118 (1), (2) (a) (b) (c) (d), (3), (4)

31 December

• CRA makes recommendations on revenue sharing (vertical and horizontal).

PFMA (2012) Section 190

28 February

• The CT prepares and submits the C-FSP to the CEC,

allowing enough time for review and approval before submission to the CA by 28 February.

• The C-FSP is submitted to the CA for approval by 28 February and must be aligned to the BPS

• CA must review and adopt within 14 days of submission.

!Within 7 days of submission to the CA, the County

Treasury publishes and publicizes the C-FSP.

PFMA (2012) Section 117 (1), (6), (8)

28 February

• CT submits Debt Management Strategy of the county to the CA.

!As soon as practicable after the statement has been

submitted to the CA, the CEC-MF publishes and publicizes the statement and submits copies to the CRA and IBEC.

PFMA (2012) Section 123 (1), (3)

30 April

• CEC-MF submits the Budget Estimates to the CEC for

approval, prior to submitting to the CA by 30 April. • Budget Estimates must be submitted with all

supporting documents and draft bills. • The CEC-MF prepares and presents his/her

PFMA (2012) Section 129, (1), (2), (3), (4)

C-BROP Submitted

C-FSP Submitted

Budget Estimates Submitted

24


comments on the budgetestimates (by 15 May).

!As soon as practicable after the budget estimates and

other document have been submitted to the CA, the CEC-MF publishes and publicizes the documents.

15 June

• CG to prepare and submit annual cash flow projections for the county to the CoB with copies to IBEC and NT.


30 June

• CA considers budget estimates and approves with or without amendments, in time for relevant appropriation law or laws required to implement the budget – to be passed by 30 June.


30 June

• CA approves budget estimates and passes the Appropriation Bill.

• After approval of the budget, the CEC-MF is expected to consolidate, publish and publicize the budget within 21 days.

PFM 2012, 131(5)

Within 90 days of

approval of Appropr’n

Bill

• The CEC-MF with approval from the CEC, submits the County Finance Bill to the CA, which sets out the revenue raising measures for the county government, together with a policy statement expounding on those measures.


On an ‘as needed’

basis

• Submission of supplementary estimates by relevant County Executives to the Cabinet Secretary for Finance.

• Submission of the consolidated supplementary estimates to CA.

• Approval of supplementary estimates.


!Details about the budget documents mentioned in the above budget calendar can be

found in Table 4.

Budget Estimates Approval

25


New

cyc

le c

omm

ence

s

Diag

ram

2: B

udge

t Cyc

le –

Cou

nty

Budg

et P

repa

ratio

n

Esta

blis

hing

cou

nty

reso

urce

en

velo

pe,re

venu

e an

d de

bt li

mits

Se

ctor

Wor

king

G

roup

s and

Res

ourc

e Al

loca

tion

Annu

al A

udits

•Re

port

s•

Ove

rsig

ht

Prep

arat

ion

of

Depa

rtm

enta

l Bud

get

•Re

view

by

Coun

ty

Trea

sury

and

co

nsol

idat

ion

•Su

bmiss

ion

to

Coun

ty A

ssem

bly

Legi

slat

ive

Appr

oval

Pr

oces

s•

Scru

tiny

and

appr

oval

by

Asse

mbl

y•

Coun

ty F

inan

ce

Bill

•Su

pple

men

tary

Es

timat

es

Budg

et E

xecu

tion

•Ca

sh fl

ow

repo

rtin

g•

In-y

ear r

epor

ts

•Ex

ecut

ion

and

repo

rtin

g•

Acco

untin

g

Coun

ty B

udge

t Ci

rcul

ar is

sued

Deve

lopm

ent P

lans

su

bmitt

ed

C-BR

OP C-FS

P

Budg

et E

stim

ates

Su

bmitt

ed

Budg

et A

ppro

val

Stra

tegi

c Ph

ase

Ope

ratio

nal P

hase

26


Diag

ram

3: B

udge

t Cal

enda

r– C

ount

y Bu

dget

Pre

para

tion

Coun

ty B

udge

t Ci

rcul

ar

Inte

grat

ed

Deve

lopm

ent

Plan

C-BR

OP

C-FS

P

Deve

lopm

ent P

lan

subm

itted

by

1 S

epte

mbe

r

Budg

et C

ircul

ar

issu

ed b

y 30

Aug

ust

C-BR

OP

subm

itted

by

30

Sept

embe

r

Budg

et

Appr

oval

Budg

et E

stim

ates

su

bmitt

ed b

y 30

Apr

il

Budg

et

Estim

ates

Appr

opria

tion

Bill

mus

t be

pass

ed b

y

30 Ju

neCR

A re

com

men

datio

ns

on re

venu

e sh

arin

g

C-FS

P su

bmitt

ed b

y 28

Feb

ruar

y (a

lso

Debt

Man

agem

ent S

trat

egy)

Stra

tegi

c Ph

ase

O

pera

tiona

l Ph

ase

27


Dia

gra

m 4

: Leg

isla

tive

App

rova

l P

roce

ss—

Fro

m B

ud

get

Est

imat

es t

o A

ppro

val

1. S

ubm

it

estim

ates

to C

A by

30

April

Bu

dget

Es

timat

es

2. D

epar

tmen

t Co

mm

ittee

s re

view

and

ex

amin

e es

timat

es

Budg

et

Appr

oval

11. C

ount

y

Fina

nce

Bill

12.

Supp

lem

enta

ry

Estim

ates

3. D

epar

tmen

t Com

mitt

ees

cons

ult w

ith C

EC, A

Os a

nd

othe

r sta

keho

lder

s

6. B

AC p

repa

res a

re

port

and

re

com

men

datio

ns

and

subm

its to

CA

by

firs

t wee

k of

June

5. B

AC

hold

s pu

blic

bu

dget

he

arin

gs

4. C

omm

ittee

s sub

mit

repo

rt a

nd

reco

mm

enda

tions

to th

e Bu

dget

and

App

ropr

iatio

ns

Com

mitt

ee (B

AC).

CEC-

MF

prep

ares

and

subm

its a

mem

oran

dum

to

CA

on th

e bu

dget

of t

he C

Aand

re

com

men

datio

ns b

y 15

May

.

7. C

A ad

opts

ther

epor

t an

drec

omm

enda

tions

and

appr

oves

est

imat

es (w

ith

or w

ithou

t am

endm

ents

)

9. B

AC in

trod

uces

Ap

prop

riatio

n Bi

ll 8.

CEC

-MF

prep

ares

Ap

prop

riatio

n Bi

lland

su

bmits

to C

A

10. A

ppro

pria

tion

Bill

m

ust b

e pa

ssed

by

30

June

28


3. Legislative Approval Process 1. Submission of Estimates See PFMA (2012) Section 129, (1)–(7); 130 (1)

• At least two months before the end of the financial year (i.e. before 30 April), the County Executive Committee Member for Finance (CEC-MF) submitsbudget estimates of the county government (and supporting documents) to the County Executive Committee (CEC).

• The CEC approves and then the CEC-MF submits estimates, supporting documents and Bills to the County Assembly (CA), by 30 April.

• At the same time, the County Assembly Clerk for the County Assembly prepares and submits the estimates of expenditure for the CA, with a copy submitted to CEC-MF.

• The budget estimates submitted should include all estimated revenue, as well as estimated expenditure, by Vote and by programme, clearly identifying both recurrent and development expenditures (See ‘Quick Reference Box—Budget Estimates’ in Session IV).

• The submission should be accompanied by supporting memorandum to justify or explain key decisions and demonstrate compliance with principles of fiscal responsibility (i.e. PFMA (2012) Section 107 (2)).

2. Departmental Committees

• Estimates stand committed to departmental committees for scrutiny and interrogation, in accordance with their respective mandates.

• See Annex 6 which gives the types of departmental committees found at the counties, based on their standing orders and their mandates.

• County Assemblies also establish PAC and PIC, which have the mandates for auditing. • Depending on special needs, a county may establish special purpose committees. • Committees are required to review and examine the estimates, prepare a report and

submit to Budget and Appropriations Committee (BAC). 3. Departmental Committees consult with stakeholders

• During the process, the departmental committees may consult with CEC members, AOs and other stakeholders, as appropriate.

4. Committees report to BAC

• Departmental committees are required to consider, discuss and review the estimates, prepare a report and recommendations and submit to Budget and Appropriations Committee (BAC) within 21 days of being submitted to the CA.

29


• The BAC is established under the standing orders for the County Assembly. The committee consists of not more than eight members.

• The functions of the committee include: coordination and control of the county budget, review of the budget of both the County Assembly and the county executive budget, review and approval of the County Fiscal Strategy Paper, examination of any budget related legislative proposal, introduction to the assembly of appropriations bill and evaluation of tax estimates, economic and budgetary policies and programs with direct outlays.

5. BAC holds public budget hearings

• The County BAC should take a lead role and hold county public budget hearings immediately after the estimates are laid before the CA.

• The public hearings are held in an accessible venue within the county. Depending on the area covered by the county they can be held in various urban centres, or just in one centre as the BAC shall determine.

• The hearings are structured in a manner to allow the public make their recommendations and views on the budget without much of an interruption.

• The date and venue should be adequately advertised within the county. • Most hearings are one day and can be held in various centres simultaneously so long

as in each venue there is a member of BAC taking a lead role. 6. BAC prepares report and recommendations

• BAC should collate views from the public hearings, including presentations by departmental committees, and prepare a report, recommendations and table them before CA.

• The BAC review, as well as the departmental committees, should seek answers to such questions as:

i) Do the estimates comply with the PFM provisions in Constitution and the PFM Act?

ii) Is it consistent with approved CIDP on needs and priorities iii) Are the recurrent estimates fully funded? iv) If there is a deficit, if there is, is the planned borrowing factored in approved

Strategic Debt Management Strategy Paper already approved? v) Have the estimates taken into consideration the County Assembly resolutions

in C-FSP? vi) Will the estimates lead to the accomplishment of the targets set out in the C-

FSP? vii) Are critical spending areas (mandatory expenditures) taken care of? viii) Has the budget taken into consideration the previous audit

recommendations?

30


• Based on the analysis of such questions and results of consultations with key stakeholders, and other departmental committees, The BAC prepares its report and a recommendation on budget estimates, which it tablesbefore the County Assembly.

• The report by the BAC should be laid in the County Assembly latest by the first week of June.

• This is for the purposes of ensuring the report is debated and any amendments to the budget are agreed to, in order to facilitate the preparation and approval of the County Appropriation Bill, which constitutes legal authority to spend public money.

Altering the Estimates See PFMA Section 131 (3)

• There are limitations on the power of the County Assembly to alter the estimates. The budget balance must remain the same, and any increases must be balanced by a corresponding reduction.

• According to the PFMA (2012), and also should be provided for in County Standing Orders, for the CA to make amendments and increase expenditure, this must be matched by a reduction elsewhere, as below:

• This is necessary for the BAC to safeguard the overall resource envelope, consistent with the C-FSP and to ensure that (as provided in the Constitution) there is prudence in the allocation and use of public resources.

7. County Assembly approves budget estimates See PFMA Section 131 (1), (5), (6)

• CA adopts the report and recommendations of the BAC, with or without amendments, and approves the budget estimates, in enough time for the relevant Appropriation Bill to be passed by 30 June.

• Not later than 21 days after CA has approved the budget estimates, the County Treasury shall consolidate the estimates and publish and publicize them.

• The CEC-MF shall take all reasonably practicable steps to ensure that theapproved budget estimates are prepared and published in aform that is clear and easily understood by, and readilyaccessible to, members of the public.

PFMA Section131(3) an amendment to the budget estimates may be made by the county assembly only if it is in accordance with the resolutions adopted regarding the County Fiscal Strategy Paper and if—

(a) any increase in expenditure in a proposed appropriation, is balanced by areduction in expenditure in another proposed appropriation; and (b) any proposed reduction in expenditure is used to reduce the deficit.

31


8. CEC-MF prepares the Appropriation Bill See PFMA Section 129 (7); Section 130 (2)

• Upon approval of the budget estimates by the CA, the CEC-MF shall prepare and submit a County Appropriation Bill to the CA, of the approved estimates.

• In preparing the annual Appropriation Bill to put before the CA, the CEC-MF shall ensure that the expenditure appropriations in the Bill are in a form that— (a) is accurate, precise, informative and pertinent tobudget issues; and (b) clearly identifies the appropriations by Vote andprogramme.

9. BAC introduces the Appropriation Bill

• The PFMA and County Standing Orders provide that upon approval of the budget estimates by the CA, the BAC shall introduce the Appropriation Bill.

• That Bill should be in line with the House resolutions on the Budget and the BAC report.

• The Schedules attached to this Bill cannot be amended during debate in Assembly, unless:

1. The amendments have been referred back to the BAC. 2. Or are in conflict with the resolutions of the CA on the budget and those in

the BAC report. Vote on AccountSee PFMA Section 134, (1), (2) / CoK Articles 221, 222

• A ‘Vote on Account’ is a precautionary measure intended to avert situations of county operations grinding to a halt due to delayed budget approval. It is provided for in PFMA Section 134 subsection (1) and states:

• It is important to note that the COK 222 contemplates existence of an appropriation bill, which if not assented to or unlikely to be assented justifies a Vote on Account. The appropriation bill must therefore be before the County Assembly.

• A Vote on Account can only be done under certain circumstances, as outlined in PFMA Section 134, subsection (2) (a) and (b):

If the County Appropriation Bill for a financial year has not been assented to, or is not likely to be assented to, by the beginning of that financial year [i.e. 1 July] acounty assembly may authorise the withdrawal of money from the County Revenue Fund.

32


• The above is also upheld in the Constitution of Kenya (2010), Articles 221, 222. While these two articles refer to the process at National level, the same principles apply at county level.

10. The CA passes the Appropriation Bill

• As noted previously, this Bill must be passed by 30 June. 11. County Finance Bill See PFMA Section 132 (2), 133

• The CEC-MF with approval from the CEC, submits the County Finance Bill to the CA, which sets out the revenue raising measures for the county government, together with a policy statement expounding on proposed measures.

• As part of preparing the Finance Bill CEC-MF to provide analysis of previous fiscal year performance, expected receipts and projections (see below).

• Proposed changes by the CA must ensure that total revenues remain the same as in the C-FSP, to avoid financing gaps.

• Recommendations of the CEC-MF on changes proposed by the CA are to be tabled in the CA.

• Within 90 days after the CA passes the Appropriation Bill, the CA must consider and approve the County Finance Bill (with or without amendments), otherwise it will contravene the law.

• Failure to approve Finance constitutes a serious breach since it may lead to unplanned deficit (not included in approved Debt Management Strategy).

(2) Money withdrawn under subsection (1)—(a) may be used only for the purpose of meeting expenditure necessary to carry on the services of the county government during the financial year concerned, until such time as the relevant appropriation law is passed: and(b) may not exceed, in total, one-half of the amount included in the estimates of expenditure submitted to the county assembly for that year.

33


12. Supplementary Estimates See PFMA Section 135 (1)–(7)

• The Constitution and PFMA provide leeway for the county government to prepare and submit Supplementary Estimates to the County Assembly in certain circumstances.

• The purpose of Supplementary Estimates is to: a) Regularise unforeseen and unexpected circumstances resulting in

expenditures being incurred in the course of delivery of services, for example an outbreak of disease that needs an increase in allocation of drugs to hospitals, changes in the weather that may lead to intervention by county governments. Ideally, any expenditure that cannot wait until the next financial year.

b) Finance cost escalations in ongoing services, for example an ongoing contract where the costs increase due to inflation and the project needs to be completed and all the bills paid within the financial year.

Information for preparation of Finance Bill1. A Finance Bill is based on existing revenue laws which it seeks to

change. Comprehensive and up to date information on each of the existing revenue bases identifies:

• areas of weaknesses which need legal changes to firm up• areas of potential increase of tax rate• areas where tax needs change e.g. lowering the rate• seek information from sector regulators (if necessary)• consider cost implications to both enforcement and compliance

2. Consider compliance with constitution and law3. Possible areas for taxing or levying fees/charges4. Estimate possible receipts based on proposed rate and coverage5. Review capacity to enforce/administer the changes, consider:

• possible changes in law• human resources/skills needed

Based assessed ability to enforce and collect, County Treasury seeks:• approval from CEC• on approval, the CEC-MF prepares the Bill• submits Bill to County Assembly with supporting information

34


• According to PFMA Section 135 (1), the county government may spend money that has not been appropriated if:

o The amount appropriated is insufficient, or a need has arisen for expenditure for a purpose not appropriated by the County Appropriation Act.

o Money has been withdrawn from the county government Emergency Fund. o Money set aside in approved budget could not be spent due to unavoidable

circumstances and needs to be reallocated, e.g. delays due to procurement appeals.

• Approval for additional expenditure must be sought within two months after the first withdrawal of the money.

• The county government would submit a supplementary budget in support of additional expenditure to the CA. This must describe how the additional expenditure relates to fiscal responsibility principles and financial objectives.

• If the CA approves this additional expenditure, a Supplementary Appropriation Bill is introduced for appropriation of the money.

• Importantly, in any financial year, the county government may notspend more than ten percent (10%)of the amount appropriated by the CA for that year as additional expenditure (unless that CA has, in special circumstances, approved ahigher percentage).

!For some examples of FY 2013/14 County Appropriation Bills and County

Finance Bills go to: http://kenyalaw.org/kl/index.php?id=3408

35


Exercise 2: Meeting budget calendar targets

Your role in the county budget preparation process requires you to carry out specific tasks by specific deadlines, as we have seen in budget calendar. This exercise aims to help you to think about how you and your county can be in a good position to meet the calendar budget targets. 1. Work in groups of 4 or 5 for this activity. Ideally you will work in a group with other people from your own county. 2. In your groups, look at the different stages provided in the budget calendar in Table 5 and answer the following questions:

• For our county’s budget preparation for 2013/14, how well did we meet these calendar targets?

• If we did not meet these targets, what were some of the reasons why? 3. Now, in your groups, think about the budget preparation process for 2014/15 that you have recently commenced, and ask the following questions:

• How well have we met the calendar targets so far (for example, for our county’s Budget Circular and C-BROP), and what could be improved?

4. Your task will be to create a brief work plan for the remainder of the 2014/15 budget cycle for your county, marking in key dates. Use the information provided in Tables 3, 4 and 5 and in Diagrams 2 and 3 to help you. Also refer to the key legislation if you have it available. Some guiding questions include:

• Who are the key people needed for each of the budget activities described in the budget calendar?

• Are we clear about our own roles in this budget preparation process? • If something is due by X date, when do we need to start preparing? For

example, the C-FSP must be submitted to the CA by 28 February. When should this start to be prepared? What are the possible constraints? What other activities are going on at the same time?

• What things might we need to help us meet our budget calendar targets? (For example, specific information or support).

• Is enabling law in place to enable county change tax rates/fees?

36


4. Strategic vs. Operational Phases of budget preparation

Concepts Box: Strategic vs Operational Phases • We can think of the budget preparation process as being in two phases—

‘Strategic’ and ‘Operational’ (see Diagrams 2 and 3).

• The Strategic Phase starts with the issue of the Budget Circular and concludes with the finalisation of the C-FSP (August-February). Activities include:

o County Integrated Development Plan prepared and informs: the main priorities of the county and their objectives; the performance indicators, programmes and activities that are needed to meet the objectives; and costing of the prioritised activities.

o Preliminary resource envelope and budget strategy (C-BROP) submitted to CEC and CA.

o Approval by CEC and recommendations from CRA Sector Working Groups consult and prepare Sector Reports

o Sectoral Resource Allocation process

o C-FSP prepared, submitted and approved

o Upon the CFSP is approved then the ceilings for departments are firmed up and issued to the departments.

• The Operational Phase involves the preparation of Budget Estimates (March-April) and include:

o Budget estimates prepared by departments, for recurrent and development budgets and according to programme based budgeting formats, as per requirements of PFM Act 2012 second schedule section 12.

o Budget estimates prepared by departments, which use the Chart of Accounts.

o Submission of budget estimates to the CEC and then to the CA for approval.

!Diagrams 5a and 5b below outline of who is involved in these two phases. Step

by step guidance on these two phases will be given in Sessions IIIand IV.

37


Diag

ram

5a:

Bud

get C

ycle

– S

trat

egic

Pha

se O

verv

iew

Co

unty

Fis

cal P

lann

ing

Gro

up•

Estim

ates

the

‘reso

urce

env

elop

e’.

•De

velo

ps d

raft

C-B

ROP

and

C-FS

P.•

Mem

bers

hip

from

the

Coun

ty T

reas

ury,

Dep

artm

ent o

f Ec

onom

ic P

lann

ing

and

othe

rs.

Co

unty

Sec

tor W

orki

ng G

roup

s•

Agre

e on

sect

or o

bjec

tives

and

prio

ritie

s, re

sulti

ng fr

om

the

Coun

ty D

evel

opm

ent P

lan.

•De

part

men

ts a

re g

roup

ed in

to se

ctor

s acc

ordi

ng to

m

anda

tes a

nd fu

nctio

ns.

•Al

loca

te se

ctor

reso

urce

s to

depa

rtm

ents

.

Citiz

ens

•In

volv

ed in

pub

lic h

earin

gs o

n th

e bu

dget

and

its r

elat

ed

docu

men

ts, s

uch

as C

-BRO

P an

d Co

unty

Sec

tor R

epor

ts.

•En

gage

with

the

budg

et p

repa

ratio

n pr

oces

s thr

ough

the

Coun

ty E

xecu

tive

Com

mitt

ee (C

EC).

Co

unty

Exe

cutiv

e Co

mm

ittee

•

Resp

onsib

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r soc

io-p

oliti

cal a

nd fi

nanc

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pect

s in

a co

unty

.•

Appr

oves

the

C-BR

OP

and

C-FS

P do

cum

ents

. •

Enga

ges w

ith th

e pu

blic

on

the

budg

et p

roce

ss.

C-BR

OP

•Es

tabl

ishi

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ty

reso

urce

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velo

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nue

and

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ngs.

•

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urce

Al

loca

tion

C-FS

P

Stra

tegi

c Ph

ase

Co

unty

Dev

elop

men

t Pl

an

38


Diag

ram

5b:

Bud

get C

ycle

–O

pera

tiona

l Pha

se O

verv

iew

Co

unty

Dep

artm

ents

•

Prep

are

deta

iled

budg

et e

stim

ates

and

subm

it to

Cou

nty

Trea

sury

for r

evie

w a

nd c

onso

lidat

ion.

Coun

ty T

reas

ury

•Re

view

s and

con

solid

ates

dep

artm

enta

l bud

get

estim

ates

. •

Prov

ides

gui

danc

e to

cou

nty

depa

rtm

ents

on

prep

arat

ion

of e

stim

ates

, thr

ough

mea

ns o

f a B

udge

t Ci

rcul

ar sp

ecifi

cally

on

prep

arin

g bu

dget

est

imat

es.

CE

C-M

F •

Subm

its b

udge

t est

imat

es to

CEC

and

then

to C

A fo

r th

eir a

ppro

val.

Acco

untin

g O

ffic

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•Le

ad th

e va

rious

Cou

nty

Sect

or W

orki

ng G

roup

s.

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ad ro

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pre

parin

g an

d su

bmitt

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depa

rtm

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l bu

dget

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plem

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ecom

men

datio

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f the

Cou

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Asse

mbl

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the

Audi

t Rep

orts

and

any

oth

er.

Prep

arat

ion

of

Depa

rtm

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gets

•Re

view

by

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Coun

ty T

reas

ury

and

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olid

atio

n•

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issio

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embl

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hase

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val

Budg

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stim

ates

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bmitt

ed

39


5. Introduction to Medium Term Expenditure Framework

Concepts Box: What is an MTEF? • MTEF stands for ‘Medium Term Expenditure Framework’. It is an approach

to budgeting that seeks to link policy, planning and budgeting.

• MTEF provides a framework for evaluating and allocating available resources, based on agreed policy priorities that are consistent with the national development objectives.

• A key element of a budget developed using an MTEF approach, is that expenditure estimates are set down for a three-year period—that is, the coming budget year and the two years following. This is why it is referred to as a Medium Term Expenditure Framework.

• The MTEF approach supports a two-tier process of ‘top down’ and ‘bottom up’, as shown below:

! It is important to understand that the MTEF is not a separate process from

that outlined in the budget calendar and cycle above. Rather, the MTEF gives a framework in which to develop the county budget, in accordance with the budget calendar and cycle. Many of the activities associated with budget preparation within an MTEF are located in the ‘Strategic Phase’ of budgeting. We will identify where elements of an MTEF link into the budget preparation process as we go through the step by step processes in Session III.

MTEF

Decide on parameters and set policy goals and targets e.g. County Fiscal Planning Group

Needs identification and prioritisation e.g. citizens

!The aim is to integrate the ‘top down’ and ‘bottom up’ processes.

40


Concepts Box: Principles of MTEF The three key principles MTEF aims to achieve are the following, with the overarching goal of transparent and accountable government:

Fiscal Discipline

Allocative Efficiency

Predictability Fiscal Discipline—is about ensuring that the availability of resources drive expenditure decisions and that resource mobilisation is conducted efficiently, effectively and equitably.

In other words, ‘spend within limits’.

Allocative Efficiency—is about allocating available resources to agreed strategic priorities, both between and within sectors.

In other words, ‘spend where it is most needed’, which requires sequencing.

Predictability—is about developing consistent and realistic systems and processes for resource estimation, projection, collection and disbursement.

In other words, ‘know what is available to spend’.

Questions for Discussion • What experience have you had of developing a budget using an MTEF

approach? Share your thoughts with the group. • Based on your understanding and knowledge of MTEF, can you identify

some reasons why it might be useful to adopt an MTEF approach to budgeting—in other words, why do it?

Transparency and Accountability

41


6. Introduction to Programme Based Budgeting

Concepts Box: What is Programme Based Budgeting? • Programme Based Budgeting (PBB) is an approach to budgeting where the

expenditures are planned, authorised and executed in the form of ‘outcomes-based’ programmes. This means that the focus of the budget shifts from ‘inputs’, to the intended ‘outputs and outcomes’ of the budget.

• PBB is a new process for Kenya. FY 2013/14 was the first year of budgets prepared and presented as programme based budgets at national level. FY 2014/15 will be the first year of doing so at the county level. See PFMA (2012) Second Schedule, Section 12.

• According to PFMA (2012) Section 38, the budget formats shall include: o All expenditures by vote and by programme, clearly identifying both

recurrent and development expenditures (see (1) (b) (v)). o The appropriations by vote and by programme (see 3 (b)).

• A PBB is different from traditional ‘line item’ budgets in a few ways: o The PBB still has recurrent and development expenditures, but

these are presented under specific ‘programmes’, which aim to achieve certain outcomes. This way, we have more of an idea what the expenditure is actually trying to achieve.

o Each county department submits their budget estimates within a PBB format. A PBB must also include narrative information, which explains what a department is trying to achieve through its budget.

See Annex 5 for an example of the PBB format from Treasury Circular No. 11/13. The County Treasury should also, in its Budget Circular, outline guidelines and formats for PBB for the coming budget year. There is also an example and practical exercise on converting a line item budget to a Programme Based Budget, see Session IV, Exercise 5: Karibu County Programme Based Budget.

!The National Treasury has prepared a Programme Based Budgeting Manual

which can be downloaded from the Treasury website at www.treasury.go.keor a hard copy from the National Treasury. Participants are advised to obtain copies of the PBB Guide or Manual.

42


Concepts Box: What is Programme Based Budgeting? (continued) • Because the PBB needs to outline programme objectives, targets and

performance indicators—and link expenditure to these things—there is a need for very strong links between the planning and budgeting processes.

• In addition, the planning process helps to prioritise what is included in the budget. This is important because ‘public need’will always exceed available resources, thus a ‘trade-off’, or prioritisation process is required, which should involve public participation. Once prioritisation is done, the budget becomes a tool to implement plans that can deliver desired results.

• The Parliament will appropriate at Vote level both recurrent and Development as set out in the Constitution thus it is important for the programs to be broken down into recurrent and into development

• A sample appropriation bill is included in the annexes.

• As such, the County Integrated Development Plan (CIDP) is very important for the development of the PBB, as the plan should identify:

o the main priorities of the county and their objectives o the performance indicators, programmes and activities that are

needed to meet the objectives o costing of the prioritised activities.

See Session III, Part 2 for more information and Diagram 6 below, which illustrates the ‘Programme Based Budget Hierarchy’, showing how activities link to outputs and strategic objectives.

! Also refer to PFMA (2012) Section 126, for what the plan should include: (a) strategic priorities for the medium term that reflect the county government’s priorities and plans; (b) a description of how the county government is responding to changes in the financial and economic environment; (c) programmes to be delivered with details for each programme of—

(i) the strategic priorities to which the programme will contribute;(ii) the services or goods to be provided;(iii) measurable indicators of performance where feasible; and(iv) the budget allocated to the programme;

(d) payments to be made on behalf of the county government, including details of any grants,benefits and subsidies that are to be paid; (e) a description of significant capital developments;(f) a detailed description of proposals with respect to the development of physical,

43


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44


7. Introduction to the Chart of Accounts (CoA)

Concepts Box: What is the Chart of Accounts?

• The Kenyan Government has been over the years restructuring its budget to suit international standards for financial management, by adopting some of the principles contained in the Government Financial Statistics Manual (GFS 2001).

• The migration to GFS 2001 was done in the 2005/06 budget. This resulted into the adoption of new classification of economic activities within the budget process.

• Further, the government has now adopted a new Chart of Accounts (COA). The COA consists of the cost centre, program, project and economic classification.

• The COA is important because it allows for consistency in all aspects of budgeting, including execution control and monitoring, accounting, comparability and reporting.

• A COA illustrates the various headings under which an organisation’s transactions are classified, analysed and recorded. Not only does it create a simple and straightforward recording of process, but a well-constructed chart of accounts also provides standard account heads for budgeting and budgetary control purposes.

• The chart of accounts is being introduced to enhance government accounting and financial reporting. It is a new system for recording of financial transactions.

• Institutions connected to IFMIS are already linked to the COAs and the codes are already uploaded in the system. Reports to be generated are customised in the system. Efforts are being made to ensure the entities not yet on IFMIS prepare and produce their financial reports using COA codes.

• The current COA has seven segments: namely: (i) Class: recurrent, development etc. (ii) Vote: appropriation entity e.g. Ministry/Department (iii) Administrative: also known as the cost centre (iv) Source of Finance (v) Program (vi) Economic: The HOW /input (vii) Geographical

45


Concepts Box: What is the Chart of Accounts? • Based on these segments, the coding structure has been shaped such that

data on government spending is captured and recorded based on each of the seven segments. The new coding structure shapes the way government expenditure is to be classified and used to generate required budget and financial reports.

• This is a sure departure from the previous fragmented and shallow coding structures which did not disclose critical information on government revenues and spending for analytical purposes .New COAs will enable government inform itself, report on a timely basis to Parliament and let citizens who are taxpayers know how their money has been used.

• The new COAs fits in the new devolved system of government, and so by extension in the Constitution and the PFM Act, 2012. Though system introduces some fundamental changes, it is not doing away with some of the current functionalities, which will be retained and used across the seven segments.

• It is sufficient to say the COAs will make the budget more credible, transparent and comprehensive which is in line with best practices of planning, budgeting, control, monitoring and evaluation. It will also provide consistency in the treatment of financial transactions and reporting across county governments and their entities.

! Importantly, there are some specific examples and exercises on using the Chart

of Accounts provided in Session IV, Part 2.

46


8. Public Participation in Budget Preparation

Concepts Box: Public Participation in Budget Preparation

Public participation is emphasised in legislation as an important element of budget preparation. For example, see the following excerpt from the (Draft) Public Finance (Administration and Management) Regulations (2013), Section 9—Openness and Accountability.

Public participation is also critical for:

• achieving public or citizen ownership and support of government programs and projects

• ensuring needs-based policy formulation and planning • efficient resource allocation and utilization • achievement of target outputs and outcomes • promoting accountable public financial management.

In budget preparation there are two key points at which public participation should be sought: 1. In the ‘Strategic Phase’, public hearings on the C-BROP and Sectoral Reports 2. In the ‘Operational Phase’, public hearings on the budget estimates.

There are several avenues for communicating engaging with the public, these includes; invite written submissions, Media (modern i.e. print, television radio and traditional), Public Meetings and Websites (county departments websites)

! Importantly, this stakeholder involvement in the budget preparation process must be

documented, (see Treasury Circular 11/2013, 29 Public Participation / Stakeholder Involvement).


• What are some of the mechanisms you know of for effective public participation, in county government processes generally, and budget preparation specifically?

• Look at Diagram 7 below, which presents some options for public participation. Can you identify any specific examples from your county where public participation takes place according to the diagram? And what documents can be availed?

(3) Subject to sections 126 (1), 128 and 131 (2) of the Act [PFMA], Treasuries shall arrange for effective public participation during the development of their annual budget estimates, including the publication of citizens’ budgets, which explain and summarize the budget proposals.

47


Dia

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48


Session III Strategic Phase of Budgeting • The Strategic Phase of budget preparation starts with the issue of the Budget Circular

and concludes with the finalization of the C-FSP (August-February). Main activities of this phase include:

o County Integrated Development Plan prepared and submitted.

o Preliminary resource envelope and budget strategy (C-BROP) submitted to CEC and CA.

o Approval by CEC and recommendations from CRA (which ultimately informs revenue sharing ceilings).

o Sector Working groups consult and prepare Sector Reports.

o Sectoral Resource Allocation process.

o C-FSP prepared, submitted and approved.

o One of the critical activities of this phase is the Programme Performance Reviews/Public Expenditure Review. This should take place July – September. The reviews provide a basis for formulating the ensuing MTEF budget. Note that Programme Performance Reviews and Public Expenditure Reviews should be reflected in the Sector Working Group Reports under Chapter 2: Performance Expenditure Review. See Annex 3 for a format for the Sector Working Group Reports.

See Diagram 8below for an overview of the Strategic Phase of budget preparation, including key target dates.

Session Objectives: By the end of this session participants will be able to: • Outline the budget preparation process, from CIDP to C-FSP. • Conduct specific tasks within the Strategic Phase of budget preparation, including

preparing the C-BROP, budget strategy and C-FSP.

49


Diag

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50


1. County Budget Circular When: Issued by 30 August each year

Who: Prepared by County Treasury

Purpose: Gives guidance on key timelines, procedures, policy areas and formats.

Note that the county budget circulars will vary both in content and timing, as long as they: • Meet mandatory constitutional and legal deadlines, and • Comply with gazette accounting standards. Below is an example of the headings for the National Budget Circular for 2014/15-2016/17 (Treasury Circular No. 11/2013) Guidelines for the preparation of the Medium Term Expenditure Framework (MTEF) Budget for the Period 2014/15-2016/17 I. PURPOSE II. BACKGROUND III. OVERVIEW OF RECENT ECONOMIC DEVELOPMENTS IV. SPECIFIC GUIDELINES (a) Medium Term Development Strategy (b) Timeframe and Reorganisation of Sector Working Groups (SWGs) (c) Programme Performance Review (PPR) (d) ProgrammeBased Budgeting (PBB) (e) Prioritization and Allocation of Resources (f) Capital Projects (g) Public Participation/Stakeholder Involvement V. SUBMISSION OF BUDGET PROPOSALS VI. CONCLUSION

51


2. County Integrated Development Plan When: Submitted to CA by 1 September each year

Who: Prepared by CEC Member for Planning, with input from C-BEF and departments

Purpose: Identifies and prioritizes citizen needs: • the main priorities of the county and their objectives. • the performance indicators, programmes and activities that are needed to

meet the objectives. • costing of the prioritized activities.

• Below are the chapter outlines for a County Integrated Development Plan, taken from

the Guidelines for preparation of County Integrated Plans, prepared by the Ministry of Devolution and Planning (May 2013).

• Annex 7 contains more detail on what is required in each of the chapters, with a particular focus on ‘Chapter 7: County Development Priority Programmes and Projects’ and ‘Chapter 8: Implementation, Monitoring and Evaluation’.

CIDP CHAPTER OUTLINES

Chapter 1: County General Information

Chapter 2: County Socio-Economic Development, Challenges and Strategies

Chapter 3: County Spatial Framework

Chapter 4: Linkage with other Plans

Chapter 5: Institutional Framework

Chapter 6: Resource Mobilization Framework

Chapter 7: County Development Priority Programmes and Projects

Chapter 8: Implementation, Monitoring and Evaluation

There are four main steps that are followed in developing the strategic plan, namely: i) Identification of the vision and mission: The county must have a medium term and long-term vision that should be closely linked to the National Vision currently documented as Vision 2030. A vision is defined as the long-term dream to attain excellence, whereas the Mission is the more or less the plan on how to accomplish the Vision.

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ii) Situation Analysis: Here the key issue is to take stock of current status to identify the weaknesses and the strengths of county. In planning the first questions to ask include: what are the currently issues? what advantages do we have?, what do we need to do? This is the historical perspective which each county is expected to scan and identify its issues, problems or weaknesses, together with what is already in place. iii) Identification of priorities and strategies necessary to achieve the vision Focusing on what needs to be done to achieve the target goals in medium term and how to get there and achieve the set goals. iv) Identification of key performance indicators together with programs and activities necessary to deliver on the policy goals and objectives. If there are no performance targets, it is difficult to achieve the desired results, which leads to failure of the strategic plans. It is therefore necessary to identify outputs together with the necessary inputs and set the milestones and benchmarks to be achieved at each stage. v) Costing of the Plan. Whatever the county plans to do, programs, projects, must be costed using the current costing framework that is used in the budget process.

• The figure below demonstrates the relation between long-term policy strategy, the medium-term plan and the budget.

• More information on the links between planning and budgeting can also be found in Session II, Part 6.

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Links between Policy, Planning and Budgeting

Budget Cycle

Assessment of outputs, results

& outcomesBudgeting,

allocation & approval

Annual Reporting, Accounting,

Auditing

Budget execution &Reports

Annual plan, activities, resource needs,

deliverables

Medium-term Plan – sets out

strategic outputs

Long-term Policyobjectives

54


3. County Budget Review and Outlook Paper (C-BROP) When: Submitted to CA by 30 September each year.

Who: Prepared by Country Treasury (County Fiscal Planning Group).

Purpose: Outlines: • Actual fiscal performance in the previous year, compared to what was

planned in the budget. • Updated economic and financial forecasts (showing any changes from the

forecasts in the C-FSP from the previousyear). • Identification of broad policy priorities. • Indicative available resources to fund CG priorities (indicative ceilings).

Estimating the Resource Envelope: National vs County processes

National

County

• The establishment of a comprehensive process to determine available resources is critical to decisions on setting expenditure ceilings.

• At the Macro level there are issues related to the wide economy such as the movement or the changes in prices of goods (inflation), the cost of money (interest rates) and the overall economic growth.

• The main variables that influence the budget at the national level often include: the projected/envisaged economic growth for the period under consideration; target inflation rate; exchange rate, and balance of payments; and other macro variables thatthat may affect government’s ability to mobilize resources and the impact of expenditures.

• At the county level, on the other side, the bulk of revenue resources to fund the budget are from transfers from the nationally collected revenues, with a smaller portion coming from own revenue sources which not as difficult to estimate.

• Counties can use previous years’ revenue forecasts as a starting point, but also should factor in changes to their own source revenues. For example, a widening of the tax base in the county, or more efficient revenue collection systems will have an impact on levels of own source revenue.

• These indicative levels are ‘firmed up’ as part of developing the County Fiscal Strategy Paper, which is finalized after the CRA has given recommendations forrevenue allocation for the coming year.

55


Links between Macro Framework at County and National levels and the budget

County Development

Plan

Estimation of Resource Envelope and County Expenditure Priorities

National policies and strategies (Articles 209 (5), 220)

National economicpolicy goals and objectives

CBROP Developed

Presentation of CBROP to County Assembly

Finalization of County Sector

Reports and holding of Public Hearing

The County Fiscal Strategy paper finalized and

submitted to CA

Medium-term Plan • sets priorities • sequences programs & projects • costs activities

!While the national government is estimating the resources and expenditure

limits, the counties are expected to carry out a similar exercise but at a lower scale, with fewer areas of revenue estimates and expenditure. The diagram below demonstrates the development of the macro framework at the county level.

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• The C-BROP is an evaluation document that seeks to assess past performance, both financial and non-financial to inform the next budget. It covers also covers consistency between what was approved and what was done. In new dispensation, it covers with fiscal responsibility principles.

• The C-BROP covers sector ceilings as part of review, for coming fiscal year this is covered by CFSP. Counties are expected to issue guidelines on preparation of their C-BROPs but there should be a common approach.

• The format of the County BROP is prepared along same parameters as the National BROP, but must necessarily reflect county diversity and priorities and allocated functions.

Example Contents: (National) Budget Review and Outlook Paper, September 2013 I. INTRODUCTION Objective of the BROP

II. REVIEW OF FISCAL PERFORMANCE IN 2012/13 A.Overview B. 2012/13 Fiscal Performance C. Implication of 2012/13 fiscal performance

III. RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK A.Recent Economic Developments B. Macroeconomic outlook and policies C. Medium Term Fiscal Framework D.Risks to the outlook

IV. RESOURCE ALLOCATION FRAMEWORK A.Adjustment to 2014/15 Budget B. Medium-Term Expenditure Framework

V. CONCLUSION AND NEXT STEPS Annex Table 1:Main Macroeconomic Indicators, 2014/15-2016/17 Annex Table 2:Central Government Operations, 2014/15-2016/17 (in billion of KSh) Annex Table 3:Central Government Operations, 2014/15-2016/17 (in percent of GDP) Annex Table 4: Total Sector Ceilings for MTEF 2014/15-2016/17 Annex Table 5: Recurrent Sector Ceilings for the MTEF Period 2014/15-2016/17 (KSh.Mn) Annex Table 6: Development Sector Ceilings for the MTEF Period 2014/15-2016/17 Annex Table 7: Summary of Strategic Interventions Annex Table 8: Budget Calendar for 2014/15 MTEF budget The full National BROP for 2013 can be found at http://www.treasury.go.ke/index.php/resource-center/cat_view/78-budget-outlook-paper

57


Resource Envelope and Budget Ceilings

Concepts Box: Resource Envelope and Expenditure Ceilings • The resource envelope is the total amount of money available to a county

government for spending in any one year. It is composed of: i) revenues raised in a county which will depend on each county’s ability to mobilize taxes, fees and charges ii) funds transferred from National Treasury, both unconditional and conditional iii) affordable borrowing for the year iv) any other receipts, from donors etc.

• The County Fiscal Planning Group is responsible for establishing the ‘resource envelope’ and expenditure targets (ceilings). This activity is done as part of developing the C-BROP document.

• Estimates of available financial resources (the resource envelope) are determined by forecasting the following:

Source: Information adapted from presentation ‘Constitutional and legal framework for PFM and implication on County PFM’, by A. Mwenda, National Treasury, slide 12. See Annex 1 for example expenditure ceilings.

County share of revenue from the

National Government.

County Own Source Revenue: revenues generated within the county, from taxes and non-tax

sources, e.g. fees/charges

Domestic Borrowing Potential external support

(grants and loans)

Conditional and non-conditional grants from the

national government

Grants from the Equalization Fund

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Revenue forecasting

!Accurate revenue forecasting is essential for a county to gain a realistic picture of what

resources it will have available in the coming budget year, and ideally the following two years. An example format for a revenue forecast is provided below.

Example: Revenue Forecast Format Details Previous Actual to

date Forecast Forecast Forecast

Year (12/13)

Year (13/14)

Year (14/15)

Year (15/16)

Year (16/17)

1 Own Source revenue: Taxes – Property Rates Taxes – Other Trade Licences Other fees and charges

2 Shareable Revenue proposed in the BPS

3 Grants from Development Partners

4 Conditional Grants

Total Revenue

Much of a county’s revenue comes from transfers from the national government. It is important to use the correct figures given in the County Allocation of Revenue Bill. Note

that at the time of preparing the C-BROP (September), the CRA will not have made its

recommendations about allocation of revenue (December). However, an indication can be given from the previous year’s figures, which can be adjusted once the new figures

are released.

Counties can use previous years’ revenue forecasts as a starting point, but also should factor in changes to their own source revenues. For example, a widening of

the tax base in the county, or more efficient revenue collection systems will have an impact on levels of own source revenue. Ideally, counties will estimate their own

source revenue for the coming budget year and the following two.

Proposed funding from any external sources, such as donors, should also be

reflected in the revenue forecast.

The different types of own source revenue should be outlined.

59


Commission on Revenue Allocation (CRA) The CRA uses a formula to develop proposal on revenue sharing among the counties and the basis of this formula is given below:

Basis of Revenue Sharing among the Counties By a resolution passed on 22nd November 2012, the National Assembly resolved in pursuant of Article 217 of the Constitution, the basis of revenue sharing shall be as follows:

Parameters Percentage Weights 1 Population 45% 2 Poverty Index 20% 3 Land Area 8% 4 Basic Equal Share 25% 5 Fiscal Responsibility 2%

!For more information, go to the CRA website:

www.crakenya.org/vertical-formula-for-the-financial-year-2014-15

www.crakenya.org/wp-content/uploads/2013/07/CRA-Revenue-Divison-Among-

County-Governments.pdf

www.crakenya.org/functions-of-county-government

A copy of the 2014 County Allocation of Revenue Bill is also available on the

Treasury website at: www.treasury.go.ke/index.php/resource-

center/doc_download/689-the-county-allocation-of-revenue-bill-2014

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Developing an accurate revenue forecast

Questions to ask Things to consider

Have we incorporated the correct figures on

national transfers from the County Allocation of

Resources Bill (Act)?

Can we use last year’s actual collection of local revenues with a realistic

% growth projection?

Is there scope to increase the collection of own

source revenues in any areas over the coming 3 years and if so, how is that likely to impact on

the amount of local revenue in our forecast?

The information from the Act should provide an accurate indication of revenue from national government and external funding for the coming year.

This will depend on how accurate the figures for revenue collection are and how steady the rate of growth in these revenues is likely to be.

In some counties where the local revenue collection process is not systematic, it may be difficult to make an accurate prediction in this way.

This will require an assessment of the current methods of revenue collection and their efficiency.

Such an analysis may point to opportunities for improved revenue collection, which could be reflected in the revenue forecast.

What factors might affect the support our county receives from

external donors in the next 3 years?

This could include the presence of new donors, or changes to the way in which donors fund development work in the county.

It will be important to have a good understanding of the external donors in the county and their proposed plans, in order to predict likely levels of support.

What factors in the coming years might

affect the amount our county receives from the

national government?

This will depend to an extent on how well the national government is able to predict its own revenues and communicate this information to the counties.

61


Concepts Box: Principles of Fiscal Responsibility Indicative ceilings set in the C-BROP (and later confirmed in the C-FSP) should follow the principles of fiscal discipline set out in the PFMA (2012) as below:

FROM PFMA (2012), 107 (2)

(2) In managing the county government’s public finances, the County Treasury shall enforce the following fiscal responsibility principles-

(a) the county government’s recurrent expenditure shall not exceed the county government’s totalrevenue;

(b) over the medium term a minimum of thirty percent of the county government’s budget shall be allocated to the development expenditure;

(c) the county government’s expenditure on wages and benefits for its public officers shall not exceed a percentage of the county government’s total revenue as prescribed by the County Executive member for finance in regulations and approved bythe County Assembly;

(d) over the medium term, the government’s borrowings shall be used only for the purpose of financing development expenditure and not for recurrent expenditure;

(e) the county debt shall be maintained at a sustainable level as approved by county assembly;

(f) the fiscal risks shall be managed prudently; and

(g) a reasonable degree of predictability with respect to the level of tax rates and tax bases shall bemaintained, taking into account any tax reforms thatmay be made in the future.

Questions for Discussion 1. Referring to (b) above, and according to Example: Karibu County Budget excerpt below, were they in accordance with the Act? What is the case in your own county for FY 2013/14?

2. Referring to (c)above, do you know what percentage is set in your own county for expenditure on wages and benefits for its public officers?

3. Regarding (d)above, what might be some problems associated with financing recurrent expenditure for the counties?

4. Regarding (e)above, what is the ‘sustainable level of county debt’ approved by your County Assembly?

62


Example: Karibu County Budget 2013/14 The excerpt below from Karibu County’s Budget for 2013/14 shows the expenditure for both the recurrent and development budgets (a), as well as revenue sources (b).

a) 2013/14 Expenditure: Recurrent and Development Budgets

Ksh TOTAL RECURRENT 5,868,328,000 Development - County Assembly 212,000,000 Development - Sub County Units 2,264,672,000 TOTAL DEVELOPMENT 2,476,672,000 TOTAL EXPENDITURE 8,345,000,000

b) 2013/14 Example of Revenue Summary

TOTAL FROM LOCAL SOURCES 3,417,121,255 TRANSFERS Grants from share of National Revenue - Equitable Share 4,155,298,066 - Conditional grants 711,380,679 Unspent Balances returned to CRF Account 61,200,000 Total Transfers from National Government 4,927,878,745 GRAND TOTAL 8,345,000,000

Questions for Discussion 1. What proportion of Karibu County’s revenue is from local sources? How does

this figure compare with your own county? 2. How well established is your county’s tax base, in terms of its ‘predictability’

for forecasting local revenues into the medium term—that is, beyond the next fiscal year?

3. What improvements could be made in your own county regarding widening the tax base, as well as improving revenue collection? What are some of the challenges of doing this? What are the benefits?

63


Example: Karibu County Budget 2013/14 (cont) c) Some examples of Karibu County’s own source revenue collection for 2013/14 budget.

HEALTH SERVICES Ksh

HEALTH SERVICE MNGT UNIT 1450105 Health centre service fees 15,000,000

Cost sharing 345,000,000 EPIDEMIC CONTROL INSPECTION UNIT

1450105 Food handlers fees 3,300,000 1450105 Public health inspection/building plans 3,165,000 1450105 Food hygiene, licence fees 5,420,000 1140501 Liquor licences 550,000

CEMETARY UNIT - 1450105 Burial Fees 282,000

TOWN HALL &MOBILE CLINIC - 1450105 Vaccine certificates 2,231,000 1450105 Health centres Fees 277,600

COMMUNICABLE DISEASE CONTROL 1450105 Malaria prevention service fees 20,0000

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4. Sector Working Groups and Resource Allocation When: Groups convened in October, following preparation of C-BROP.

Who: Departments clustered into sectors, led by Accounting Officers.

Purpose: • Agree on sector objectives, outputs and activities, including review and development of programmes, sub-programmes and their costing.

• Prepare and submit a Sector Report, outlining prioritization of (costed) programmes and sub-programmes, expected outcomes, outputs and key performance indicators.

County Sector Working Groups, Public Hearings and Resource Allocation County Sector Working Groups • The County Integrated Development Plan is used to guide this process.

Counties should spend time on this stage to: o Identify key expected outputs and targets based on the plan. o Sequencing of the programs that are to be implemented in the

medium term (consistent with the resource envelope). o Prepare County Sector Reports to illustrate i and ii.

Public Hearings • This process also involves public hearings, which use the C-BROP and

County Sector Reports and aim to ensure the needs of citizens are considered and included in the budget.

• This stage would usually take place in October, with public hearings possibly held in November.

• Up to now, the ceilings are not disaggregated into departments—rather they are set at sectoral level.

Sectoral Resource Allocation• The county departments within their sectors need to go through a process

of sharing or allocating resources among themselves, on the basis of the sectoral review.

• This process is consensus based and driven by strategic needs and priorities.

! See Annex 3 for a format for the Sector Working Group Reports and an example mechanism for resource allocation.

65


Exercise 3: Public Hearings on C-BROP and Sector Reports As we saw earlier, public hearings on the C-BROP and Sector Reports are an important part of the MTEF approach to budgeting. In your county, do these hearings take place? Or if not, what plans will you put in place for these hearings, for the next cycle of budget preparation?

Work in groups of 4 or 5 and discuss the following questions about public hearings in your county. For example:

• What form is the public hearing—for example, is a public meeting held? If so, when and where does it take place?

• Do people have access to the necessary information in advance of the public hearing? If not, how could this be done?

• Who presents information on behalf of the County? • What kind of questions are the public able to ask? Importantly, what revisions

or changes could be made, as a result of the public hearing? • Are the public hearings in your county representative of a large cross-section

of the community? If not, what could be done to ensure more groups are represented?

• What kind of information do you think is important for the public to know? For example, what kind of information in the C-BROP and Sector Working Group Reports might be of relevance to the wider public and why? See Annex 1 and Annex 3for some examples of the type of information that these reports contain.

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5. County Fiscal Strategy Paper (C-FSP) When: Prepared in time for review and approval by the CEC before submission to

the CA by 28 February.

Who: Prepared by Country Treasury (County Fiscal Planning Group) with input through the County Budget and Economic Forum (C-BEF) as part of the consultative process.

Purpose: • Broad strategic priorities and policy goals (medium and long-term). • Financial outlook on expenditures, revenues and borrowing for the

medium term.

• The C-FSP is developed after the public hearings have been conducted and must be

approved by the end of February.Once the C-FSP is approved, financial programming of the county budget (i.e. budget estimates) can now commence.

• County Treasury issues further instructions on preparing the detailed estimates of expenditure.This activity signals the conclusion of the Strategic Phase of Budget Preparation.

• See Annex 2 for example contents for a County Fiscal Strategy Paper.


Your trainer will ask you to bring in a copy of your county’s most recent C-FSP to analyse according to the following questions.

Does our county’s C-FSP look to the ‘past, present and future’? In other words, does it have: • A summary of the implementation of the current year’s budget to date,

including both revenue collection and expenditure? (past) • An explanation of how our budget is being adjusted to meet our targets for

the year, if required? (present) • An overview of the total revenue and expenditure for the next budget year,

and ideally the following two? (future) • An explanation of the budget allocations to each sector, which reflect the

broad priorities of the county? (future)

Ideas for these questions adapted from ‘A county’s fiscal strategy paper is the soul of budgeting past, present, future’ 22 March 2014. Available at: www.theeastafrican.co.ke/OpEd/comment/A-county-s-fiscal-strategy-paper-is-the-soul-of-budgeting/-/434750/2253582/-/item/0/-/1vlevkz/-/index.html

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Checklist: Strategic Phase of Budget Preparation This checklist can adapted and used as a tool when preparing the budget, to ensure all important steps are carried out for each phase. The detailed process would be listed in the ‘Activity column’, for reference and then checking off when completed. There is also room for any comments about the process, for example, information that was difficult to find, reasons for any deadlines missed etc.

Activity and date completed

Comments

County Budget Circular prepared and distributed by 30 August.

County Integrated Development Plan submitted by 1 September.

County Budget Review and Outlook Paper prepared and submitted by 30 September.

County Sector Working Group Reports prepared and submitted.

County Fiscal Strategy Paper prepared and submitted by 28 February.

!Note that the main activities of the Strategic Phase have been included here.

This checklist can be copy-pasted and expanded to include other activities that are also part of the Strategic Phase of Budget Preparation.

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Session IV Operational Phase of Budgeting • The Operational Phase of budget preparation starts with the issue of a County Budget

Circular giving guidance on preparing budget estimates and concludes with the submission of budget estimates to the County Executive Committee and subsequently to the County Assembly (March-April). Main activities of this phase include:

o Detailed Budget Estimates prepared by departments.

o Review and consolidation of the estimates by Treasury.

o Submission of budget estimates to the CEC and then to the CA for approval.

See Diagram 9 below for an overview of the Operational Phase of budget preparation, including key target dates.

Session Objectives: By the end of this session participants will be able to: • Outline the budget preparation process, detailing the preparation of budget

estimates. • Conduct specific tasks within the Operational Phase of budget preparation,

including preparation of the 2014/15 budget estimates according to relevant guidelines.

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Diag

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1. County Budget Circular/Budget call circular (budget estimates) When: Issued in March each year, following approval of C-FSP.

Who: Prepared by County Treasury.

Purpose: Gives guidance on preparation of detailed budget estimates.

• After the approval of the C-FSP by the CA (submitted 28 February), County Treasury

issues another circular, to guide the preparation of the detailed estimates of expenditure.

• Note that by this point, at a national level, the following will have been approved:

o Division of Revenue Bill (vertical division) o County Allocation of Revenue Bill (horizontal division) o Budget Policy Statement

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2. Department Budget Estimates prepared When: Commences in March, following issue of County Budget Circular.

Who: Prepared by departments, submitted to County Treasury for review and consolidation.

Purpose: Outlines the detailed expenditure for departments for the coming year and projections for the following two years.

This section is presented in four parts: A. Preparing the County Recurrent Budget B. Preparing the County Development Budget C. Budgeting for Appropriations-in-Aid D. Budget Preparation Tools – the Chart of Accounts and Programme Based Budget format

• County Treasury will issue budget formats and codes to be used in all county budgets, gazetted by the National Accounting Board. It is the department heads who are responsible for preparing their department’s budget estimates, based on their departmental allocation, which was derived through the sector resource allocation process in the strategic phase (see Session III, Part 4.).

!Counties are required to use gazetted templates and codes when preparing their

budgets. However, where these are not available, as an interim measure counties should use the Programme Based Budgeting templates in Annex 5 and the current IFMIS CoA.

County Budget Preparation

Recurrent Budget Includes ongoing or annual operational expenditures such as: • Salaries • Operations and Maintenance • Supplies – stationery, fuel etc See Annex 4a for a relevant format

Development Budget Includes capital costs or development expenditures such as: • Construction of assets at county

level e.g. roads, health facilities, public works

See Annex 4b for a relevant format

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A. Preparing the County Recurrent Budget • Recurrent expenditure refers to expenditure that does not result in the acquisition of

long-term assets. Rather, the recurrent budget covers all the expenditures that allow the county to operate, such as staffing costs and operating expenses.

• Each department should refer to the targets set out in the following documents: •

• The process of allocating resources should take place in this manner:

Sectoral Reports

C-BROP

C-FSP County

Development Plan Any other

instructions issued by

county governments

County Recurrent

Budget

i) Compensation for employees (i.e. salaries) and other allowances to be paid to the county staff in specific departments, with projections for the outer years informed by either a recruitment policy, or any wage adjustments. Otherwise, the normal wage drift should be accommodated within provisions for the outer years (forward estimates).

ii) Operating expenses,which includes use of goods and services, transport expenses and recurrent operating expenses incurred in the provision of public goods and services. These should be driven by ongoing projects and programmes, based on work plans that have activities to be accomplished in the given period.

iii) County public corporations that are county specific, which receive resources from the county budgets and whose recurrent costs should be included in the recurrent budget estimates.

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B. Preparing the County Development Budget • Development expenditure refers to ‘capital expenditure’, which means funds spent for

the acquisition of a long-term asset. For example, expenditure on things such as equipment, land and buildings.

• The preparation of the development budget involves establishing the capital costs of projects that the county iscurrently implementing, together with those the county intends to implement in the financial year, with first priority given to the ongoing ones, as shown below:

• However, projections should be driven on one side by the ceilings set for the development budget for each department and the ongoing commitments—and on the other, the targets set out in the C-BROP and C-FSP.

Capital costs of county projects currently being implemented

1st Priority

Capital costs of projects to be implemented in the coming financial year.

Projections of capital costs are to include: • Estimates of construction,

minor works, outright purchases of buildings and specialized equipment.

• County public corporations that require capital grants to carry out their mandates.

County Development

Budget Capital costs

related to county-specific external

funding for development

projects should also be included.

!As outlined in the PFMA (2012) Section 107 (2):

(b) over the medium term a minimum of thirty percent of the county government’s budget shall be allocated to the development expenditure.

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C. Budgeting for Appropriations-in-Aid (A-in-A) This includes: i) Revenues raised by county departments that are spent or applied at source, based on

prior approval by County Assembly. For example, receipts from administrative fees and charges, as well as receipts from the sale of inventories, stock and commodities.

ii) Value of support in kind, by way of materials, equipment, or services, given to county departments, say by development partners or donors, local or foreign, which is disbursed directly to the county department instead of through County Treasury.

iii) Direct disbursements to be reported to CEC-MFwith full details (Section 138, PFMA). iv) Where donor A-in-A requires county contribution, receiving department to ensure

money is in approved budget, get approval by CEC-MF who reports to CA (PFMA Section 138 (6).

!Where a commitment is made for such support, the cost should be included in the cost projections, particularly due to need for operating costs associated with such support, and also for transparency and accountability.

• As county departments finalize their recurrent and development estimates they should identify any possible receipts of user fees, and budget for their collection and accounting accordingly.

• The rule in estimation of Appropriations-in-Aid is that if there is an overestimation, services are likely to experience a shortage of funding, and if there is an

From PFMA Section 130 (1) (b), Budget estimates to include:

(i) a list of all county government entities that are to receive funds appropriated from the budget of the county government;

(ii) estimates of revenue projected from the Equalisation Fund over the medium term;

(iii) all revenue allocations from the national government over the medium term, including conditional and unconditional grants;

(iv) all other estimated revenue, e.g. from own sources by broad economic classification;

(v) all estimated expenditure, by Vote, and by programme, clearly identifying bothrecurrent and development expenditures;

(vi) information regarding borrowing by the county government, including an estimateof principal, interest and other charges tobe paid by that county government in thefinancial year in respect of those loans;

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underestimation, any amount of excess must be reflected and transferred to County Treasury. ‘Under-collection’ means less revenue collected, which has a negative effect on budget implementation. It is therefore necessary for departments to ensure accurate estimation of Appropriations-in-Aid.

D. Budget Preparation Tools – The Chart of Accounts and Programme Based Budgeting format

Example: Excerpt from the Chart of Accounts (current at

29 Nov 13)

3100000 ACQUISITION OF NON- FINANCIAL ASSETS3110000 Acquisition of Fixed Capital Assets3110100 Purchase of Buildings3110101 Purchases of Residential Buildings3110102 Purchase of Non-Residential Buildings3110103 Purchase of Military Buildings with Potential Dual Use3110199 Purchase of Buildings - Other (Budget)3110200 Construction of Buildings3110201 Residential Buildings ( Including Hostels)3110202 Non-Residential Buildings (Offices Schools, Hospitals, etc..)3110299 Construction of Buildings - Other (Budget)3110300 Refurbishment of Buildings3110301 Refurbishment of Residential Buildings3110302 Refurbishment of Non-Residential Buildings3110303 Refurbishment of Military Buildings with Potential Dual Use3110399 Refurbishment of Buildings - Other (Budget)3110400 Construction of Roads3110401 Major Roads3110402 Access Roads3110499 Construction of Roads - Other (Budget)3110500 Construction and Civil Works3110501 Bridges3110502 Water Supplies and Sewerage3110503 Aerodromes and Airstrips3110504 Other Infrastructure and Civil Works3110505 Sea Walls and Jetties3110506 Railways3110599 Other Infrastructure and Civil Works3110600 Overhaul & Refurbishment of Construction and Civil Works3110601 Overhaul of Roads and Bridges3110602 Overhaul of Water Supplies and Sewerage

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Exercise 4: Using the Chart of Accounts—Karibu County Your trainer will guide you in this practical exercise designed to increase familiarisation with Chart of Accounts coding. DEVELOPMENT EXPENDITURE – SUB-COUNTY UNITS

2. KARIBU CENTRAL

3110202 CONSTRUCTION OF COMMUNITY HALL 4,469,000

3110202 COMMUNITY HALL 827,000

3110302 RENOVATION OF INTITUTIONAL HOUSE ‘D’ 4,380,000

3111117 STREET LIGHTING 38,000,000

3110701 LORRY FOR INSPECTORATE 7,000,000

3110302 REN. OF MEO'S (PAINTING,ROOFING,FIXTURES & FURNITURE) 3,500,000

3111403 DEVELOPING TOUR GUIDE POLICY DOCUMENT - TOURISM DEPARTMENT 500,000

3110302 RENOVATION OF MUNICIPAL WORKS YARD OFFICES 2,300,000

3110301 RENOVATION OF INSTITUTIONAL HOUSES 2,000,000

3110302 COMPLETION AND RENOVATION PRIMARY SCHOOL 1,435,000

3110706 MCK-2 BROOMERS 3,000,000

3110705 MCK-2-4TONNE REFUSE TRUCK 10,000,000

3110706 MCK-TRUCTOR MOWER 1,500,000

3110705 2 - 18 TONNES TIPPERS 12,000,000

3110501 CONSTRUCTION OF CULVERTS AND STONE PITCHING AND DRAINAGE OF USAID 22,665,000

3110301 RENOVATION AND MAINTENANCE OF INSTITUTIONAL HOUSE ‘C’ 297,250

3110302 COMPLETION OF TOWNCLERKS OFFICE TOILETS 250,000

3110202 CONSTRUCTION OF 22 NO HAWKERS STALLS AT BLOCK A 1,080,356

3110301 RENOVATION AND MAINTENANCE OF INSTIT. HOUSE ‘A’ 1,000,000

3110301 RENOVATION AND MAINTENANCE OF INSTITUTIONAL HOUSE ‘B’ 682,718

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Example: From line item to ‘Programme Based’ Budgets Construction of Primary School ‘A’ 2,500,000 Construction of 2 classrooms at Primary School ‘B’ 1,600,000 Construction of Primary School ‘C’ 2,500,00 Renovation of Primary School ‘D’ 800,000 Estimates Projected Estimates Programme 1: The Access to Education Programme Sub-Programme 1: The Primary School Access Programme

7,400,000

Construction of Primary School ‘A’ 2,500,000 Construction of 2 classrooms at Primary School ‘B’ 1,600,000 Construction of Primary School ‘C’ 2,500,000 Renovation of Primary School ‘D’ 800,000

1. An expenditure item in a line item budget might appear as one of a long list in the development budget, like so:

2. However, this list of expenditures does not tell us much about the reason behind all this construction and renovation and what it is trying to achieve.

3. In a PBB, these items would be grouped as ‘activities’ under a specific ‘programme’, or ‘sub-programme’.

4. And as we have seen, the projected estimates would need to show the costs of the sub-programme for the coming two years (Projected Estimates; N+2, N+3).

5. The programme or sub-programme would also need to have a specific objective, for example, ‘to increase primary school access in the county from 60–70% by 2017’.

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Exercise 5: Karibu County Programme Based Budget Below we have an excerpt from Karibu County’s 2013/14 budget. We will now try to translate some of that information into a PBB format (for 2014/15). d) 2013/14 Example of Karibu County Development Expenditure Items: Health

Ksh

3111001 Equipment/Furniture at ‘Number 1’ Health Centre 2,728,000

3110202 Construction of Doctor’s House at ‘South Town’ Dispensary 2,300,000

3110202 Construction of ‘ABC’ Dispensary 7,000,000

3110201 Construction of Doctor’s House at ‘North Town’ Dispensary 2,000,000

3111117 Electrical Installation at ‘Number 1’ Health Centre 2,000,000

3110201 Construction of Doctor’s Residence at ‘XYZ’ Dispensary 2,400,000

3110202 Construction of Maternity Wing at ‘Main Town’ Hospital 3,500,000 1. Let’s say all the above expenditure items (activities) are grouped into a ‘sub-programme’. What might be a suitable name for this sub-programme? Summary of Expenditure by Programmes Programme Baseline

Estimates 2013/14

Estimates 2014/15

Projected Estimates

2015/16 2016/17 Programme 1: Primary Health Care Programme Sub-Programme 1.1: ……………………………………… ……………………………………… ………………………………………

….……………

2. What would the estimates be for this sub-programme? (To keep it simple, we are only including the total of the above development expenditures.) 3. What might be some of the things to consider for the projected estimates for N+2 and N+3 of the sub-programme? (For example, length of construction time > 1 year?)

N+1 N+2 N+3

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Example MTEF 1: 2014/15–2016/17

N

2014/15

N+1

2015/16

N+2

2017/18

N+3

2019/2020

Example: MTEF—A three-year outlook • For example, if the financial year we are currently in is called ‘N’, then we are

now preparing our budget for the financial year ‘N+1’. However, our MTEF approach requires that expenditure estimates also include the years ‘N+2’ and ‘N+3’, as shown in the diagram (Example 1) below.

• The diagram (Examples 2 and 3) also outlines the ‘rolling’ nature of the MTEF. It means that next year, our current ‘N+1’ will now be our ‘N’. We need to add a new year of indicative figures each year, as the diagram illustrates.

! More information is included in the (Draft) Public Finance (Administration and

Management) Regulations (2013), Section 40–Budget Preparation Process.

The years N+2 and N+3 are known as the ‘outer years’. These will contain indicative

figures (known as ‘forward estimates’), based on estimated revenue.

We are currently preparing our budget for the year ‘N+1’. The expenditure

figures in this budget will be based on known revenue allocations.

This is the financial year we are currently in. This

budget is currently being executed.

An MTEF is prepared

for 2014/15

through to 2016/17.

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Example MTEF 2: 2015/16–2017/18

N-0

2014/15

N

2015/16

N+1

2016/17

N+2

2017/18

N+3

2018/19

Exercise 6: MTEF three-year outlook Can you fill in the blank spaces on the following example?

Example MTEF 3: 2016/17–2018/19

……

2014/15

N

…………

N+1

2016/17

………..

…………

N+3

2018/19

The budget will be prepared for 2015/16. What were previously

‘forward estimates’ will now be revised and become hard figures.

Next financial year, 2013/14 will be known as ‘N-0’.

An MTEF is prepared for

2015/16 through to 2017/18.

2014/15 will now be our current year ‘N’.

We will need to add a new year of indicative figures,

which are estimates for the year 2017/18.

The budget will be prepared for N+1. What were previously ‘forward

estimates’ will now be revised and become hard figures.

This previous year will be known as

………….

An MTEF is prepared

for 2016/17 through to 2018/19.

The current year ‘N’ will be

……………

What will the figures be for this year? Will they be hard figures, or forward

estimates?

…………………………………………

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Example: Predicting the forward estimates • We have seen that in an MTEF approach to budgeting, revenue and

expenditure figures are forecast for the coming year (N+1), plus the following two (N+2, N+3 – the ‘forward estimates’).

• It can be difficult to predict these forward estimates with certainty. However, by identifying indicative figures for N+2 and N+3, it gives some basis for planning ahead for the years beyond the coming budget year.

• This process enhances the ‘predictability’ principle of the MTEF, as sectors will have an initial idea of their available revenues for the next three years.

• The process of predicting forward estimates also ensures that the cost of maintaining and operating existing programmes and projects are accounted for, before any additional funding commitments are taken on. This enhances the ‘fiscal discipline’ and ‘allocative efficiency’ principles of the MTEF. Therefore, the starting point for allocating resources should always be the cost of ongoing programmes and projects.

• Have a look at the example below, which illustrates how the ongoing cost of a programme is factored into the forward estimates.

Programme Baseline Estimates 2013/14(N)

Estimates 2014/15 (N+1)

Projected Estimates

2015/16 (N+2)

2016/17 (N+3)

Road ‘A’ Construction

- 1,000,000 100,000 110,000

The construction of the new highway will

take place in the next financial year (N+1) at a cost of Ksh 1,000,000.

The cost of maintaining this road on an annual basis is included as part of the

forward estimates. Note that (N+3) is a higher amount, to allow for inflation (10%).

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3. Review, consolidate and submit Budget Estimates When: Must take place before end April, in enough time for submitting budget

estimates to the CEC for approval, and then submitting to the CA by 30 April.

Who: • County Treasury reviews and consolidates department budgets. • CEC-MF submits the Budget Estimates to the CEC for approval, prior to

submitting to the CA by 30 April. • CEC-MF also prepares and presents his/her own comments on the budget

estimates (by 15 May).

Purpose: • Department budget estimates are consolidated by Treasury. • Budget Estimates must be submitted with all supporting documents and

draft bills.

Exercise 7: Analysis of Budget Estimates

This exercise is designed to encourage you to think about the preparation of your county’s forthcoming 2014/15 budget estimates, in the same way that the Budget and Appropriations Committee will be required to. The basis for the exercise will be to consider your county budget estimates from 2014/15 according to the questions outlined below (and as outlined above in Session II, Legislative Approval Process,6. BAC prepares report and recommendations).

!For this exercise you will need to refer to:

• A copy of your county’s approved budget estimates from 2014/15. • Your county’s C-FSP for 2014/15. • The relevant sections in the PFMA and Constitution. • Draft Management Strategy Paper (if applicable).

1. Your trainer will ask you to work in your county groups. You will analyse your 2014/15 budget estimates, according to a question and answer format. 2. You will review your county’s estimates according to the below questions (as far as possible), as though you are the Budget Appropriation Committee for your county:

i) Do the estimates comply with the PFM provisions in Constitution and the PFM Act?

ii) Are the recurrent estimates fully funded?

iii) If there is a deficit, is the planned borrowing in an approved Strategic Debt Management Strategy Paper?

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iv) Have the estimates taken into consideration the County Assembly resolutions in the C-FSP?

v) Will the estimates lead to the accomplishment of the targets set out in the C-FSP?

vi) Are critical spending areas (mandatory expenditures) taken care of?

vii) Has the budget taken into consideration the previous audit recommendations?

3. Groups will report back in a plenary discussion to give an overview of what they found out about their own 2014/15. It is a useful forum for information and experience sharing with other counties, provided it is done in a non-judgemental environment

85


Checklist: Operational Phase of Budget Preparation This checklist can adapted and used as a tool when preparing the budget, to ensure all important steps are carried out for each phase. The detailed process would be listed in the ‘Activity column’, for reference and then checking off when completed. There is also room for any comments about the process, for example, information that was difficult to find, reasons for any deadlines missed etc.

Activity and date completed

Comments

County Budget Circular on Budget Estimates prepared and issued in March.

Department budgets prepared (using Programme Based Budget format).

Department budgets reviewed and consolidated by County Treasury.

Budget estimates submitted to the CEC for approval.

Budget estimates submitted to the County for approval by 30 April.

CEC-MF prepares and presents his/her own comments on the budget estimates by 15 May.

County Assembly considers budget estimates and approves with or without amendments, in time for relevant appropriation law or laws required to implement the budget – to be passed by 30 June.

!Note that the main activities of the Operational Phase have been included here.

This checklist can be copy-pasted and expanded to include other activities that are also part of the Operational Phase of Budget Preparation.

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Conclusion Summary In this module you have learned about the following:

• The history of budget reforms in Kenya and their significance for today’s budget process.

• They key legislation in the budget preparation process, as well as key players and budget components.

• The budget cycle and calendar, including the key calendar target dates and the legislative approval process.

• The Medium Term Expenditure Framework—what it is and why it is important.

• Programme based budgeting—how it is different from traditional ‘line item’ budgeting and what kinds of formats to use.

• Public participation in the budgeting process and why it is important.

• The Strategic Phase of budget preparation—revenue forecasting and setting ceilings, preparing the C-BROP and C-FSP documents and Sector Working Group Reports.

• The Operational Phase of budget preparation—preparing budget estimates, including using the CoA, preparing recurrent and development budgets and Appropriations-in-Aid.

Assessment&Evaluation • Your trainer will now lead you through a short assessment activity, to gauge your

understanding of the content presented in this module. • Your trainer will then lead you in an evaluation activity, to gauge your thoughts and

impressions of the training you have just completed.

Knowing is not enough, we must apply.

Goethe, German writer

! It will be important in the coming weeks and months to reinforce what you have

learned in this training back in your workplace, through follow up on the job training and coaching and by referring to your Participant Book and other resources, to help you to carry out your role in county budget preparation in the best possible way.

87


Glossary Allocation Refers to money earmarked for a particular purpose in the Budget.For

example, the allocation for ‘welfare’ in the national budget must be spent on welfare and not some other area of expenditure.

Appropriation Refers to an authorisation made by law or other legislativeapproval, directing the payment of goods and services out of governmentfunds under specified conditions, or for specified purposes.

Appropriations-in-Aid

These are revenues that are raised by a ministry, department or agency (MDA) itself. They include receipts from administrative fees and charges, as well as receipts from the sale of inventories, stock and commodities. They can also include donor funds that are disbursed directly to an MDA instead of to the Treasury.

Budget Refers to the estimates of revenues and receipts, and expenditures fora given entity (agency, department, ministry or government).

Budget Ceiling

Means the maximum amount that the government allocates in a given year to target sector or expenditure categories.

Budget Circular

A statement from the National Treasury (or County Treasury)togovernment ministries, departments and agencies outlining policy andtechnical guidelines on how to prepare a budget for a given fiscal period.

Budget Deficit Budget Deficit is the difference between budget expenditureand budgeted revenues.

Budget Execution

The act of carrying out the planned budget for the financial year. Good budget execution means that money is spent in the way it is intended and is in keeping with the outcomes of the planning process.

Budget Format These are formats or styles for compiling and presenting abudget. It is usually specified by Treasury or a designated authority.

Budgeting Budgeting is a process of defining, in monetary terms, the futureplans of the ministry, department or agency. It determines, for a future period of time, what is to bedone, what is to be accomplished, the manner in which it is to be done, and the cost of doing it.

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Estimate An approximation or prediction of the cost of activities, programmes,

and projects prepared for budgeting and planning purposes only. It represents the budget maker’s understanding of the scope and expense of what needs to be done. The executive’s proposal and enacted budget are made up of estimates.

Inter-governmental transfers

Transfers of funds from one level of government (usually the central government) to lower levels. In many countries they are a significant source of revenue for sub-national governments. The design of these transfers is critical for the efficiency and equity of local service provision and the fiscal health of sub-national government.

Personal Emoluments

Compensation (wages and salaries) for civil servants.

Public Corporation

Refers to a corporation, or entity of commercial nature, which is mainly owned or mainly controlled by the Government, whether at county or at the national government level.

Public Hearing A formal hearing at which the public can voice their views and concerns on a government policy, budget proposal, or government actions. These hearings can be organised by any of the institutions involved in the budget process, for example, the executive, legislature, and supreme audit institution.

Supplementary Budget Estimates

Means additional request of funds made by an Accounting Officer after original appropriation voted for by Parliament or a County Assembly.

Unauthorised Expenditure

Means— (a) overspending of a vote or programme within a vote. (b) expenditure not in accordance with the purpose of a vote, or, in the case of a programme, not in accordance with thepurpose of the programme, or not in approved budget.

Vote Money authorised by an Appropriation Act for withdrawal from the Consolidated Fund or a CountyRevenue Fund.

Source: Some terms and definitions have been included and adapted from the ‘Manual for budget demystification: A step by step guide’, from PFMA (2012) and Draft Regulations (2013) and from‘Kenya County Budget Training Workshop, Participants’ Workbook’, International Budget Partnership.

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Resources

Websites

1. The National Treasury of Kenya www.treasury.go.ke

2. The Office of the Controller of Budget www.cob.go.ke

3. Commission on Revenue Allocation www.crakenya.org

4. County Assembly Bills 2014http://kenyalaw.org/kl/index.php?id=3408

Documents

A list of useful resource documents is provided below. URLs for sourcing these documents have been provided where available:

1. County Budget Implementation Review Report: Fourth Quarter FY 2012/13. Office of the Controller of Budget, July 2013. Available from www.cob.go.ke

2. Budget Review and Outlook Paper. National Treasury, September 2013. Available from www.treasury.go.ke

3. Treasury Circular No. 11/2013: Guidelines for the preparation of the Medium Term Expenditure Framework (MTEF) Budget for the Period 2014/15–2016/17.

4. Constitutional and legal framework for PFM and implication on County PFM. PowerPoint presentation, presented at the Induction Training for the County Transition Teams, February 2013, by Albert Mwenda, National Treasury.

5. Kenya’s new budget process. PowerPoint presentation, by National Treasury.

6. Implementation of the Public Finance Management Act, 2012. PowerPoint presentation, presented at a Forum for Induction of Members of the Transition Authority, August 2012, Permanent Secretary/National Treasury.

7. Learning By Doing: Toward Better County Budgets in 2014/15. A Joint Brief by Institute of Economic Affairs, TISA, International Budget Partnership, WALINET, World Vision Kenya, Article 19, and I Choose Life – Africa, December 2013. Available from: http://internationalbudget.org/wp-content/uploads/Joint-Synthesis-Paper-on-County-Budgets.pdf

8. The Governance Brief. Linking Planning and Budgeting: The Medium Term Expenditure Framework (MTEF), Asian Development Bank, www.adb.org

9. Kenya County Budget Training Workshop, Participants’ Workbook. International Budget Partnership, June 2013. Available from: http://internationalbudget.org/publications/kenya-county-budget-workshop-training-materials/

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Assessment

Discuss and answer the following—each question is worth 2 points: 1. Write the budget code for the following:

1. Construction of Roads……………………………………………………………………….

2. Purchase of Residential Buildings……………………………………………………………………………… 2. Put the following activities in correct order of occurrence by numbering them 1-6:

__Submit C-FSP

_1_Treasury Budget Circular issued

__Submit Budget Estimates

__Submit C-BROP

__Submit County Development Plan

__Budget Approval

3. True or False? Public participation is only needed in the development of the County

Development Plan and not during budget preparation. TRUE / FALSE 4. Circle the correct answer. Which of the following is nota consideration when preparing

the development budget? a) The capital costs of projects that the county iscurrently implementing. b) The capital costs of projects the countyintends to implement in the financial year,

with first priority given to the ongoing ones. c) Any county specific external funding. d) Compensation for employees and other allowances to be paid to the county staff in

specific departments. 5. By which date must the Appropriation Bill be passed?

-------------------------------------------------------------------------------------------------------------

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Annexes

Annex 1: Example Revenue Forecast Format, Example Sector Ceilings

Annex 2: C-FSP Format

Annex 3: Sector Working Groups Report Format

Annex 4 a&b: Recurrent and Development Estimates Formats

Annex 5: Format for Presentation of Programme Based Budgets (PBB)

Annex 6: County Departmental/Sectoral Committees

Annex 7: County Integrated Development Plan Chapter Outlines

Annex 8: Template for Costing of Programs and Activities

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Annex 1: Example Revenue Forecast Format, ExampleSector Ceilings

Example: Revenue Forecast Format Details Actual/audit

ed Actual to date Forecast

Latest Year Year (13/14)

Year (14/15)

Year (15/16)

1 Own Source revenue: Taxes – Property Rates Taxes – Other Trade Licences Other fees and charges

2 Shareable Revenue proposed in BPS

3 Grants from Development Partners

4 Conditional Grants

5 Total Revenue

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Example: Ceilings by sector in BROP 2013 The following table, from the National BROP (prepared in September 2013), shows the projected baseline ceilings for the 2014/15 MTEF, classified by sector (Ksh Millions).

SECTOR ESTIMATESFY 2013/14

CEILINGFY2014/15

PROJECTIONS2015/16 2016/17

AGRICULTURE, RURAL & URBANDEVELOPMENT

SUB-TOTAL 53,343.4 55,674.9 64,974.5 66,966.1Rec. Gross 15,022.2 16,080.7 17,514.1 18,417.3Dev. Gross 38,321.2 39,594.2 47,460.4 48,548.8

ENERGY, INFRASTRUCTURE AND ICT


GENERAL ECONOMIC AND COMMERCIAL AFFAIRS


HEALTH SUB-TOTAL 36,218.1 37,900.6 40,522.6 43,430.0Rec. Gross 20,324.7 23,432.0 25,946.1 28,743.4Dev. Gross 15,893.4 14,468.6 14,576.5 14,686.6

EDUCATION SUB-TOTAL 276,242.5 303,150.7 316,799.0 327,787.4Rec. Gross 245,827.7 268,538.6 281,447.7 291,990.6Dev. Gross 30,414.7 34,612.2 35,351.3 35,796.7

GOVERNANCE, JUSTICE, LAWANDORDER


PUBLIC ADMINISTRATION AND INTERNATIONAL RELATIONS


NATIONAL SECURITY SUB-TOTAL 84,723.2 80,301.0 81,104.1 81,915.9Rec. Gross 84,723.2 80,300.0 81,102.1 81,912.9Dev. Gross - 1.0 2.0 3.0

SOCIAL PROTECTION, CULTURE AND RECREATION


ENVIRONMENTPROTECTION, WATERAND NATURAL REOURCES


TOTAL TOTAL 1,057,271.9 1,117,168.5 1,206,406.9 1,227,824.3Rec. Gross 610,585.3 666,918.0 694,742.8 723,571.5Dev. Gross 446,686.7 450,250.5 511,664.0 504,252.9

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Example: Ceilings by sector – A County BROP 2013 Medium Term Sector Ceiling 2013/14 - 2016/17, Ksh million

Total Expenditure, Ksh Million

NAMEOFSECTOR 2013/14

2014/15

2015/16

2016/17

Printed Ceiling

S01 FINANCEANDECONOMICPLANNING 408 448 493 543 S02 AGRICULTURE ANDANIMALRESOURCES 214 472 569 726

S03 EDUCATIONANDVOCATIONALTRAINING 333 366 403 443

S04 COMMUNITYDEVELOPMENT, GENDER,SPORTSA N D CULTURE

122 160 176 193

S05 PUBLICWORKS ANDTRANSPORT 353 438 482 530

S06 LABOUR,PUBLICSERVICE,ICT,PUBLICITY ANDINTERGOVERNMENTAL RELATIONS

423 302 332 365

S07 LANDS,HOUSINGANDURBAN 197 217 239 262

S08 WATER,ENVIRONMENTANDNATURAL 90 248 273 300

S09 HEALTHANDSANITATION 758 834 917 1099

S10 TRADE,COOPERATIVES ANDTOURISM 158 199 219 265

TOTAL 3,056 3,684 4,103 4,726

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Annex 2: C-FSP Format Example Contents: County Fiscal Strategy Paper Foreword Acknowledgement Introduction Outline of the Fiscal Strategy Paper Legal Basis for Preparation of the Fiscal Strategy Paper Fiscal Responsibility Principles in the Public Finance Management Law Performance of FY 2013/14 Budget Performance of Revenue Expenditure Performance Fiscal outlook to end June 2014 Expenditures Revenues Strategic priorities over the Medium Term Medium Term Fiscal Framework Revenue Projections Expenditures Development expenditures Criteria for Resource Allocation Conclusion

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Annex 3: Sector Working Group Report Format (Adapted from Treasury Circular No 11/2013)

Note: This format is based on guidance from National level. It is expected that at county level the format would be revised as needed for the County context. TABLE OF CONTENTS (Please ensure that Headings and Subheadings are identical to those in the report) Chapters 1 - 5 should form the main body of the report and should be divided into logicalsections and subsections, using appropriate headings and numbering. Its purpose is toexplain the conclusions and to justify the recommendations EXECUTIVE SUMMARY (Restate conclusions for each section and summarize findings and recommendations under this section) CHAPTER ONE

1. INTRODUCTION 1.1. Background 1.2. Sector Vision and Mission 1.3. Strategic goals/Objectives of the Sector 1.4. Sub-Sectors and their Mandates 1.5. Autonomous and Semi-Autonomous Government Agencies 1.6. Role of Sector Stakeholders (The introduction should briefly describe context; identify general subject; describe the problem or issue to be reported on; define the specific objective for the report; outline thescope of the report; and comment on any limitations of the report) CHAPTERTWO

2. PERFORMANCE EXPENDITURE REVIEW 2010/11- 2012/13 2.1. Performance of sector Programmes - delivery of outputs 2.2. Review of Key indicators of Sector Performance 2.3. Expenditure Analysis 2.3.1 Analysis of programme expenditure 2.3.2. Analysis of programme expenditure by economic classification 2.3.3. Analysis of capital projects by Programmes 2.4 Review of Pending Bills 2.4.1. Recurrent Pending Bills 2.4.2. Development Pending Bills

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CHAPTER THREE

3. MEDIUMTERM PRIORITIES AND FINANCIAL PLAN FOR THE MTEF PERIOD 2014/15 - 2016/17 3 1 Prioritization of Programmes and Sub-Programmes 3.1 1. Programmes and their Objectives 3.1 2. Programmes, Sub-Programmes, Expected Outcomes, Outputs, and KeyPerformance Indicators for the Sector 3.1.3. Programmes and their Objectives 3.2. Analysis of Resource Requirement versus allocation by: 3.2.1. Sector (recurrent and development) 3.2.2. Sub-Sectors (recurrent and development) 3.2.3. Programmes and Sub-programmes 3.2.4. Semi-Autonomous Government Agencies 3.2.5 Economic classification 3.2 6. Resource Allocation criteria CHAPTER FOUR

4. CROSS-SECTOR LINKAGES AND EMERGING ISSUES / CHALLENGES CHAPTER FIVE

5. CONCLUSION This section should summarize the key findings of the report, as outlined in the discussionunder the chapters 1-5of the report. The conclusions should relate specifically to the report'sobjectives (as set out in the introduction); identify the major issues; be arranged in order ofimportance; be specific, and to the point; and be a list of numbered points. CHAPTER SIX

6. RECOMMENDATIONS This section should outline future actions. The Recommendations should beactionorientated, and feasible; Relate logically to the Conclusions; be arranged in order ofimportance; and be to the point. REFERENCES This section should list the sources referred to in the report APPENDICES Appendices should contain information that is too complex to include in the report. Youneedto direct readers to this information, as in "Appendix A provides an overview of the Budget ofMinistry X”

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Example: Sectoral Resource Allocation

Adapted from: The Governance Brief, ADB. Linking Planning and Budgeting: The MTEF. www.adb.org/publications/search/254%2C1120?ref=themes%2Fgovernance%2Fpublications

The Sector Resource Allocation discussions need to boil down from aggregation at sector level, to be allocated among different departments within sectors. How is this done? One good starting point is to conduct a ‘hypothetical’ allocation exercise among the different ministries. The budget agency can ask each department head to allocate a fixed amount, say KsH 100,000,000 among all the other departments, excluding his or her own. Then the resulting allocations are collected and add up the individual ministerial allocations for each ministry.

Say in ‘Sector 1’ there are 3 Departments – A, B, C. The head of each is asked to allocate KsH 100M between the two other departments that are not his/her own.

Dept A Dept B Dept C Sub-Total

Head of Dept A - 30 70 100

Head of Dept B 80 - 20 100

Head of Dept C 20 80 - 100

Sub-Total 100 110 90 300

Ratio 0.33 0.37 0.30

From this an allocation ratio is established, which is the starting point for discussions on allocation. If the total aggregate ceiling was KsH 100,000,000, then Department A would be allocated KsH 33,000,000, Department B would receive KsH 37,000,000 and Department C 30,000,000.

The agreed upon allocation of the aggregate ceiling to a specific department for a given budget year becomes the ‘hard budget constraint’ for that year. The same ratio can be used to determine the ‘forward estimates’ for the following two years.

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Annex 5: FORMATFORPRESENTATIONOF PROGRAMME BASEDBUDGETS(PBB) (Adapted from Treasury Circular No 11/2013)

Vote No.: Vote Title: Part A: Mission Part B: Vision Part C: Strategic Objectives (List all the programmes and their strategic objectives. Please note that each programme must have only one strategic objective/outcome which must be linked with Strategic Plan andVision 2030) Part D: Context for Budget Intervention This section is supposed to be a review of MTEF period 2010/11- 2012/13and should brieflydiscuss the following:

• Expenditure trends; • Major achievements for the period; • Constraints and challenges in budget implementation and how they are being addressed; and • Major services/outputs to be provided in MTEF period 2014115- 2016117(the context within which the budget is required).

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Part E:Summary of Expenditure by Programmes, 2013/14–2016/17 (KSh Millions) Programme Baseline

Estimates 2013/14

Estimates 2014/15

Projected Estimates

2015/16 2016/17

Programme 1: (State the name of the programme here)* Sub-Programme (SP) SP 1.1 SP 1.2 …N Total Expenditure of Programme 1

Programme 2: (State the name of the programme here) Sub-Programme (SP) SP 2.1 SP 2.2 …N Total Expenditure of Programme 2

* Repeat as shown above for all programmes. Provide total expenditure for each programme and their summation must equal the total expenditure of the vote. Part F: Summary of Expenditure by Vote and Economic Classification** (KSh Million) Expenditure Classification Baseline

Estimates 2013/14

Estimates 2014/15

Projected Estimates 2015/16 2016/17

Current Expenditure Compensation to Employees Use of goods and services Current Transfers Govt Agencies

Other Recurrent Capital Expenditure Acquisition of Non-Financial Assets

Capital Transfers to Government Agencies

Other Development Total Expenditure of Vote ** The total current expenditure and capital expenditure must be equal the total expenditure vote given in tables E, F & G.

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Part G: Summary of Expenditure by Programmes, Sub-Programmes and Economic Classification (KSh Million)

Expenditure Classification Baseline

Estimates 2013/14

Estimates 2014/15

Projected Estimates

2015/16 2016/17

Programme 1: (State the name of the programme here)* Current Expenditure Compensation to Employees Use of goods and services Current Transfers Govt Agencies Other Recurrent Capital Expenditure Acquisition of Non-Financial Assets Capital Transfers to Government Agencies

Other Development Total Expenditure Sub-Programme 1: (State the name of the sub-programme here)* Current Expenditure Compensation to Employees Use of goods and services Current Transfers Govt Agencies Other Recurrent Capital Expenditure Acquisition of Non-Financial Assets Capital Transfers to Government Agencies

Other Development Total Expenditure - Repeat as above in cases where a Department has more than one programme and/or sub-programmes. Part H: Summary of the Programme Outputs, Performance Indicators and Targets for FY 2013/14–2016/17 Programme Delivery

Unit Key

Outputs Key

performance Indicators

Target Baseline 2013/14

Target 2014/15

Target 2015/16

Target 2016/17

Name of Programme: Outcome: SP 1.1: SP 1.2 Etc

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Annex 6: Departmental/Sectoral Committees

Second Schedule Departmental/ Sectoral Committees

(Standing Order….) Sectoral

Committees Subject Area

Agriculture, Environment and Natural Resources

All matters related to agriculture, including crop and animal husbandry, livestock sale yards, county abattoirs, plant and animal disease control and fisheries; implementation of specific national government policies on natural resources and environmental conservation, including soil and water conservation and forestry and control of air pollution, noise pollution, other public nuisances and outdoor advertising.

Health Services

All matters related to county health services, including, in particular county health facilities and pharmacies, ambulance services, promotion of primary health care, licensing and control of undertakings that sell food to the public, veterinary services (excluding regulation of the profession), cemeteries, funeral parlours and crematoria and refuse removal, refuse dumps and solid waste disposal.

Children, Culture and Community Services

All matters related to cultural activities, public entertainment and public amenities, including betting, casinos and other forms of gambling, racing, liquor licensing, cinemas, video shows and hiring, libraries, museums, sports and cultural activities and facilities and county parks, beaches and recreation facilities; fire -fighting services and disaster management, control of drugs and pornography; ensuring and coordinating the participation of communities and locations in governance at the local level and assisting communities and locations to develop the administrative capacity for the effective exercise of the functions and powers and participation in governance at the local level; and animal control and welfare, including licensing of dogs and facilities for the accommodation, care and burial of animals.

Transport and Public Works

All matters related to county transport, including county roads, street lighting, traffic and parking, public road transport and ferries and harbours, excluding the regulation of international and national shipping and matters related thereto; county public works and services including storm water management systems in built-up areas and water and sanitation services.

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Planning, Trade, Tourism and Cooperatives

All matters related to county planning and development, including statistics, land survey and mapping, boundaries and fencing, housing and electricity and gas reticulation and energy regulation; trade development and regulation, including markets, trade licences (excluding regulation of professions), fair trading practices, local tourism and cooperative societies.

Early Childhood Education andVocational Training

All matters related to pre-primary education, villagepolytechnics, home craft centres and childcare facilities.

Labour and Social Welfare

All matters relating to labour, trade union relations,manpower or human resource planning, gender, cultureand social welfare, youth, National Youth Service children’s welfare; national heritage, betting, lotteries and sports.

Justice and Legal Affairs

Constitutional affairs, the administration of law and justice, including the elections, ethics, integrity and anti-corruption and human rights.

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Annex 7: County Integrated Development Plan Chapter Outlines Source: Guidelines for preparation of County Integrated Development Plans, Prepared by the Ministry of Devolution and Planning, May 2013. Note that outlines are given below for each Chapter, except for Chapters 7 and 8, which give more detail about the purpose and structure of these Chapters in the CIDP. Chapter 1: County General Information

This chapter should provide a detailed background of the county, population, history, resource endowments, major development constraints, previous development achievements, health, education, etc. Most of this information is available in the County Development Profiles already provided to the counties.

Chapter 2: County Socio-Economic Development, Challengesand Strategies

The chapter should describe developmental strategies the county will adopt. In view of locally-defined priorities, it proposes specific policies that the county government plans will put in place to address the current challenges and previous development shortfalls. These strategies should be based on the developmental needs of the county as identified by the stakeholders and prioritized over the implementation period, taking into account the available resources and any other challenges.

Chapter 3: County Spatial Framework

The chapter should describe the spatial framework within which development projects and programmes will be implemented.

Chapter 4: Linkage with other Plans

The chapter should describe the linkages of the County Integrated Development Plan with the county sector plans, county spatial plans, sub-county plans, national plans and international commitments madeby the governmentsuch as the MDGS, andhow they apply to the county. This chapter will also include:

I. Linkage with the Constitution of Kenya 2010. II. Linkage with the Vision 2030 and Medium Term Plans: National programmes and

projects in the County, Flagship projects of Vision 2030 in the County. III. Cross-cutting projects and programmes involving the County and neighbouring

counties. IV. Mainstreaming of MDGs at the county level: indicate status of the MDGs and explain

what will be done to reach the MDGs not yet attained. V. Linkage with Sectoral Plans, Urban and City Plans within the County.

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Chapter 5: Institutional Framework

This chapter should identify the institutional framework and provide an organisational flow chart required for implementing the County Integrated Development Plan.

Chapter 6: Resource Mobilization Framework

This chapter should explain the resource mobilization framework thatshould include strategies for the following: revenue raising, asset management, financial management, capital financing, and accountability.

Chapter 7: County Development Priority Programmes and Projects

The Chapter should provide details of programmes and projects that will be implemented in the County.This will include details of strategic priorities addressed, measurable indicators of performance, and budgets.

Give a brief introduction of the chapter giving a summary of what is being discussed in the chapter seven. The programmes and projects are outlined based on the new Medium Tern Expenditure Framework (MTEF) Sector Working Groups developed by the National Treasury. Ensure the following sub-sections are well covered:

• The Sector title • Sector Vision and Mission (as per national MTEF SWGs) • County Response to Sector Vision and Mission

• Role of Stakeholders

Stakeholder Role

• Sub-sector Priorities, Constraints and Strategies

Sub-sector Priorities Constraints Strategies

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• Projects and Programmes (on-going projects/programmes, priority activities

identified during MTP2 consultations, flagship projects in the county)

i) On-going projects/programmes Project Name Location/Ward/Constituency

Objectives Targets Description of Activities

ii) New Project Proposals Project Name Location/Ward/Constituency

Priority Ranking

Objectives Targets Description of Activities

iii) Flagship Projects Project Name

Location Objectives Targets Description of Activities

iv) Stalled Projects Project Name

Location Description of Activities

Reasons for stalling

• Strategies for mainstreaming cross-cutting issues in the sector

The idea behind mainstreaming cross-cutting issues is to ensure that they are inbuilt within various development programmes. It is necessary, therefore, that the County Development Plan clearly highlights the approaches to be applied in mainstreaming cross-cutting issues in all stages of the proposed development projects/programmes.

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Chapter 8: Implementation, Monitoring and Evaluation

Thischapterspecifiesprograms/projects tobeimplementedduringtheplan period.It also specifies objectively verifiable indicators that willbeusedto monitor project/program implementation,and setsmediumtermmilestones for impact assessment.Theoutlineofthechapterisasfollows: a) Introduction(abriefdescriptionoftheissuescoveredinthechapter) b) InstitutionalFrameworkforMonitoringandEvaluationintheCounty c) Implementation,MonitoringandEvaluationMatrix:Shouldincludeallongoingand proposedprojects.Thefollowingformatshouldbeused:

Project Name

Cost Estimate (KsH)

Time Frame

Monitoring Indicators

Monitoring Tools

Implementing Agency

Source of Funds

Implementation Status

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Annex 8: Template for costing of programs and activities This is a simple template aiming at introducing the participants to the process of estimates. Name of Program Name of activity

Frequency Quantum Total

1. Inputs required 1.1. input I (e.g. stationery 1.2. input 2 (e.g. personnel) 1.3. input 3 (e.g. drugs) 1.4. input 4 (transport)

Total for Activity I. Total for Activity II Total for Activity III Total for Program