(2) Provisions of this sections shall not apply with respect— 66 [Rev. 2020] Public Finance Management No. 18 of 2012 (a) disputed obligations which are subject to litigation in a court of law, provided such litigation is not instituted to avoid an intervention; or (b) obligations explicitly waived by creditors.

95. Stoppage of funds process in national government entity Where the Cabinet Secretary finds a State organ which is a national government entity to be in serious or persistent material breach of its obligations or financial commitments, the Cabinet Secretary shall— (a) determine the reasons for the breach; and (b) assess the national government entity’s financial state.

96. Stoppage of funds process in county government (1) Where the. Cabinet Secretary finds a State organ which is a county government entity to be in serious or persistent material breach of its obligations or financial commitments, the Cabinet Secretary shall, in accordance with Article 225 of the Constitution, immediately stop the transfer of funds.

(2) Within seven days of stopping the transfer of funds under subsection (1), the Cabinet Secretary shall inform— (a) the accounting officer, of the State organ or public entity; or (b) the Cabinet Secretary responsible for matters relating to intergovernmental relations; (c) County Executive Committee member responsible for finance; (d) the Controller of Budget; (e) the Commission on Revenue Allocation; and (f) Intergovernmental Budget and Economic Council.

(3) The Cabinet Secretary shall in the alternative promptly— (a) inform the County Executive Committee member responsible for finance; and (b) request the Auditor-General to— (i) determine the reasons for the breach; (ii) assess the county government financial state; and (iii) submit to the Cabinet Secretary and County Executive member for finance a report within thirty days from the date of the request.

(4) The Cabinet Secretary may prescribe regulations in relation to the process of stoppage of transfer of funds.

97. Procedure for stoppage of funds (1) Where the Cabinet Secretary makes a decision to stop the transfer of funds to a State organ or public entity in accordance with Article 225(3) of the Constitution and provisions of this Act, the Cabinet Secretary shall stop the payment and inform the Controller of Budget in respect of— (a) the date from when the stoppage of transfer of funds takes effect; and (b) the nature of serious material breaches, or persistent material breaches, committed by the State organ or public entity.

(2) Not later than seven days after the date of the decision to stop the transfer of funds, the Cabinet Secretary shall seek approval from Parliament. 67 No. 18 of 2012 Public Finance Management [Rev. 2020]

(3) Within fourteen days after the decision to stop the transfer of funds under subsection (1), the Controller of Budget shall investigate the matter and submit a report to Parliament in accordance with Article 225(7) of the Constitution.

(4) Parliament shall, within thirty days of the decision by the Cabinet Secretary to stop the transfer of funds, approve or renew the decision of the Cabinet Secretary to stop the transfer of funds and the Cabinet Secretary shall abide by the decision of Parliament.