171. Urban area or city accounting officer responsibilities in revenue management (1) The accounting officer of an urban area or city is responsible for the management of the revenue received by that urban area or city in accordance with

section 172. (2) The accounting officer shall— (a) for the purposes of collection systems consistent with this Act and the Urban Areas and Cities Act, manage, the urban area or city’s credit control and debt collection policy; (b) immediately inform the County Executive Committee member for finance of any payments due to the urban area or city by a State organ in respect of city or urban area tax, or services, if such payments are regularly in arrears for periods of more than thirty days; and (c) take all reasonable steps to ensure that any funds collected by the urban area or city on behalf of another organ of state is transferred to that organ of state within three days and that such funds are not used for purposes of the city or urban area.

172. Financing of urban areas or cities Subject to the Constitution and any other Act of Parliament, and with the approval of the County Assembly, an urban area or city may be funded through any of the following sources— (a) revenue arising from rates, fees, levies, charges and other revenue raising measures which is retained by the urban area or city for the purpose of defraying its costs for providing services; (b) revenue allocated by the county government to the urban area or city; (c) investment income; (d) grants and donations; or (e) borrowing as provided for under section 140 of this Act.

173. Criteria for allocating funds to urban areas or cities by county governments (1) In allocating funds to the urban areas or cities under section 172(b), the county government shall use objective criteria reflecting the service demand and responsibilities of the urban area or city.

(2) The objective criteria to be prescribed in county legislation, may include, among others, adjustments for— (a) the proportional population, calculated as the population of the urban area or city divided by the total population of the county; (b) the relative area, calculated as the area of the urban area or city divided by the total county area; (c) the relative poverty levels based on objective measures of relative poverty; (d) the relative per capita revenue collection estimated as urban area or city per capita revenue collection divided by the County per capita revenue collection; 105 No. 18 of 2012 Public Finance Management [Rev. 2020] (e) an objective measure to account for price differentials in providing similar services in the urban area and city relative to the rural areas of the county; (f) a minimum amount to ensure effective delivery of essential services and responsibilities assigned to the urban area or city; and (g) incentives to encourage urban areas and cities to exercise prudent financial management as well as transparency and accountability in public financial management.

(3) In approving the criteria in subsection (2), the County Assembly will seek the recommendations of the Commission on Revenue Allocation.

174. Principles to be observed by urban areas or cities in managing public finances The accounting officer of an urban area or city shall observe the following principles in managing public finances of that entity— (a) the actual expenditure on the personnel shall not exceed a percentage of their allocation to be prescribed by the County Assembly; (b) on an annual basis the urban area’s or city’s recurrent expenditure shall not exceed its revenue; (c) in the medium term, the recurrent expenditure may not exceed a percentage of total revenue, which will be approved by the county assembly; (d) an urban area’s or city’s debts are maintained at a sustainable level; and (e) over the medium term, the proceeds of borrowing by an urban area or city are used only for purposes of financing development expenditure and not recurrent expenditure.

175. Budget and budget process for urban areas or cities (1) An urban area or city shall develop a strategic plan based on the integrated development plan that is consistent with the County Fiscal Strategy Paper.

(2) The strategic plan along with any further guidelines from the County Treasury on the county budget process shall form a basis for development of the urban area’s or city’s budget proposals.

(3) No later than the 30th August of every year, the County Treasury shall issue budget instructions to the urban areas or cities.