The Public Finance Management Act, 2012 15 THE PUBLIC FINANCE MANAGEMENT ACT, 2012 ARRANGEMENT OF SECTIONS Sections! PART I—PRELIMINARY 1―Short title and commencement. 2―Interpretation. 3―Object of this Act. 4―Declaration of entities as national government entities. 5―Declaration of entities as county government entities. 6―Act to prevail in certain matters. PART II—PARLIAMENTARY OVERSIGHT OF NATIONAL FINANCES Responsibilities of Committees of Parliament 7―Responsibilities of the National Assembly budget committee in public finance matters. 8―Responsibilities of the Senate budget committee in public finance matters. Parliamentary Budget Office 9―Parliamentary Budget Office continued. 10―Responsibilities of the Parliamentary Budget Office.

PART III—NATIONAL GOVERNMENT RESPONSIBILITIES WITH RESPECT TO THE MANAGEMENT AND CONTROL OF PUBLIC FINANCE Establishment of the National Treasury 11―Establishment of the National Treasury. 12―General responsibilities of the National Treasury. 13―Powers of the National Treasury. The Public Finance Management Act, 2012 16 14―Secondment of public officers by National Treasury to a County Treasury. 15―The National Treasury to enforce fiscal responsibility principles. 16―National government deviation from financial objectives. Responsibilities of the National Treasury with respect to National Public Funds 17―The National Treasury to administer the Consolidated Fund. 18―The National Treasury to administer the Equalisation Fund. 19―Source of the Contingencies Fund. 20―Cabinet Secretary to administer the Contingencies Fund. 21―Advances from the Contingencies Fund. 22―Cabinet Secretary to seek parliamentary approval for payments made from the Contingencies Fund. 23―Financial statements in respect of the Contingencies Fund. 24―Establishment of Parliamentary Fund and other national government public funds. Responsibilities of the National Treasury with respect to the budget Process 25―National Treasury to prepare annual Budget Policy Statement. 26―National Treasury to prepare Budget Review and Outlook Paper. 27― Publication of pre- and post-election economic and fiscal reports by National Treasury. Other Responsibilities of the National Treasury 28―Banking arrangements for national government entities. 29―Management of cash at the national government level. The Public Finance Management Act, 2012 17 30― Procurement of goods and services. 31―Cabinet Secretary to report on all loans. 32―The Cabinet Secretary to report on National government guarantees. 33―Cabinet Secretary to submit National government debt management strategy to Parliament annually. 34―The National Treasury to provide Parliament with additional reports when required. National Government Budget Process 35―Stages in the budget process. 36―Cabinet Secretary to manage budget process at national level. 37―Submission of budget estimates and related documents for approval. 38―Submission of other budget documents to the National Assembly. 39―National Assembly to consider budget estimates. 40― Submission and consideration of budget policy highlights and the Finance Bill in the National Assembly. 41―Passing of the Finance Bill. 42―Consideration by Parliament of Division of Revenue and County Allocation of Revenue Bills. 43―Limited powers of accounting officer of national government entity to reallocate appropriated funds. 44―National government to submit supplementary budget to Parliament. 45―Appropriations to lapse if unspent at the end of the financial year. Responsibilities of the Cabinet Secretary and functions of the national government with respect to grants and loans 46―Overall responsibility of Cabinet Secretary. 47―Conditions for receiving grants and donations by national government or its entities or third parties. The Public Finance Management Act, 2012 18 48―Regulations on grant administration. 49―Authority for borrowing by national government. 50―Obligations and restrictions on national government guaranteeing and borrowing. 51―Borrowing by National government entities. 52―Persons authorised to execute loan documents at national government level. 53―Issuance of securities by national government. 54―Exemption from stamp duty. 55―Establishment of the office of Registrar of national government

securities. 56―Power of national government to enter into derivative transactions. 57―Power of national government to lend money. 58―Power of Cabinet Secretary to guarantee loans. 59―Cabinet Secretary to submit a statement on loan guarantee to Parliament. 60―Money payable in respect of a guarantee to be a charge on the Consolidated Fund. 61―Recovery of amounts paid on a guarantee. The Public Debt Management Office 62―Establishment and objectives of the Public Debt Management Office. 63―Functions of the Public Debt Management Office. 64―Role of Cabinet Secretary in Public Debt Management Office. 65―Relationship with county treasuries in debt management. The Public Finance Management Act, 2012 19 The Judiciary, Parliament, Constitutional Commissions and Independent Offices 66―Accounting officers of judiciary, Parliament, Constitutional Commissions and Independent Offices. Responsibilities of the accounting officers, the national government and the national government entities 67―Designation of accounting officers for national government. 68―Responsibilities of accounting officers for national government entities, Parliament and the Judiciary. 69―Accounting officer of a national government entity may write- off loss. 70―Spending authority of accounting officer. 71―Accounting officer for national government entity may make cash advances. 72―Accounting Officer to manage assets and liabilities of national government entities. 73―National government entity to maintain internal auditing arrangements. 74―Disciplinary measures against public and accounting officers. Receivers and collectors of National government revenue 75―Designation of receivers of national government revenue. 76―Receiver may authorise a public officer to be collector of national government revenue. 77―Powers of the Cabinet Secretary to waive or vary tax, fees or charges. 78― Kenya Revenue Authority to be a collector of national government revenue. Obligations of public officers The Public Finance Management Act, 2012 20 79―Public officers to comply with laws relating to government resources. Financial reporting by the National Treasury and national government entities 80―The National Treasury to prepare consolidated annual financial statement. 81―Annual reporting by accounting officers. 82―Annual reporting by receivers of revenue. 83―Accounting officer to prepare quarterly reports for National government entity. 84―Administrators of national public funds to prepare annual financial statements. 85―Quarterly reporting by administrators of national public funds. Establishment and dissolution of State Corporations and additional requirements for state corporations and Government-linked corporations 86―Establishment and dissolution of a State Corporation. 87―Restrictions on National government investing in government-linked corporations. 88―Cabinet Secretary in charge of state corporation to monitor its performance. 89―Annual reporting by the Cabinet Secretary responsible for matters relating to public investments. 90― Parliament may extend time limit. 91―Definitions for purposes of sections 86, 87, 88 and 89. Resolution of operational and financial problems of national government entities and county governments 92―Responsibility for avoiding, identifying and resolving financial problems. The Public Finance Management Act, 2012 21 93―Assessment of the need for intervention in accordance with Article 225 of the Constitution. 94―Additional indicators of serious material breach. 95―Stoppage of funds process in National government Entity. 96―Stoppage of funds process in county government.

97―Procedure for stoppage of funds. 98―Renewal of decision to stop funds and termination of stoppage. 99―Provision for a recovery plan. 100―Establishment of the Joint Intergovernmental Technical Committee. 101 ―Termination of intervention. PART IV— COUNTY GOVERNMENT RESPONSIBILITIES WITH RESPECT TO THE MANAGEMENT AND CONTROL OF PUBLIC FINANCE 102― County government responsibilities in public finance. 103―Establishment of county treasuries. Responsibilities and powers of a County Treasury 104―General responsibilities of a County Treasury. 105―Powers of a County Treasury. 106―Secondment of public officers by County Treasury to National Treasury. 107―County Treasury to enforce fiscal responsibility principles. 108―County government deviation from financial objectives. Responsibilities of County Treasury with respect to County Public Funds The Public Finance Management Act, 2012 22 109―Establishment of a County Revenue Fund for each county government. 110― County government Executive Committee may establish county government Emergency Fund. 111―County Executive Committee member for finance to administer the Emergency Fund. 112― Power of County Executive Committee member to make payments from Emergency Fund. 113― Limitations on power of County Executive Committee member for finance to make payments from Emergency Fund. 114―County Executive Committee member for finance to seek approval for payments from Emergency Fund. 115―County Treasury to submit a report to Auditor-General in respect to Emergency Fund. 116―Power to establish other County public funds. Responsibilities of county governments with respect to the County Budget process 117―County Treasury to prepare County Fiscal Strategy Paper. 118―County Treasury to prepare a County Budget Review and Outlook Paper. Other responsibilities of County Treasury 119―Banking arrangements for county government and its entities. 120―Management of cash at the county government level. 121―Procurement for county government entities. 122―County Treasury to maintain record of county government loans. 123―County Treasury to submit county government Debt Management The Public Finance Management Act, 2012 23 Strategy to County Assembly. 124―County Treasury to provide County Assembly with additional reports when required. The County Government Budget Process 125―Stages in county government budget process. 126―County government to prepare development plan. 127―County government to prepare cash flow projections. 128―County Executive Committee member for finance to manage budget process at county government level. 129―County Executive Committee member to submit budget estimates and other documents to County Executive Committee for approval. 130―County Executive Committee member for finance to submit budget documents to County Assembly. 131―County Assembly to consider budget estimates. 132―Submission and consideration of the revenue raising measures in the county assembly. 133―Approval of the Finance Bill. 134―Action to be taken in case of delay in enacting County Appropriation Bill. 135―County government to submit to county assembly supplementary budgets in certain circumstances. 136― Appropriation of money for county government purposes to lapse if unspent. Establishment of Forum for consultation by county governments 137― Establishment of county budget and economic forum for county budget consultation process. Responsibilities of County Executive Committee Member for finance and

functions of the county government in respect to public finances The Public Finance Management Act, 2012 24 138―Conditions for receiving grants and donations by county government or its entities or third parties. 139― Regulations on grant administration. 140―Authority for borrowing by county governments. 141―Obligations and restrictions with respect to county government borrowing. 142―Borrowing by county government entities. 143―Persons who are authorised to execute loan documents at county government level. 144― County government may issue securities only if authorised by this Act. 145― County government authorised to lend money. 146― County government joint infrastructure investment. Responsibilities of an accounting officer of a county assembly in management of public finances 147― Role of Accounting officers in management of public finances. Responsibilities of the accounting officers of county government and county government entities 148―Designation of accounting officers to county government entities by the County Executive Committee member for finance. 149― Responsibilities of accounting officers designated to county government entities. 150― Accounting officer of a county government entity may write off any loss. 151― Spending authority of accounting officer. 152―Power of accounting officers for county entities to make cash advances. 153―Accounting officer to be responsible for managing assets and liabilities of county government entity. The Public Finance Management Act, 2012 25 154―Limited power of an accounting officer to reallocate appropriated funds. 155―County government entity to maintain internal auditing arrangements. 156―Disciplinary measures against public and accounting officers. Receivers and collectors of county government revenue 157―Designation of receivers of county government revenue. 158― Receiver may authorise public officer to be collector of revenue. 159―Powers of the County Executive Committee member for finance to waive or vary tax, fees or charges. 160― Kenya Revenue Authority may be appointed collector. 161― County government revenue raising measures to conform to Article 209 (5) of the Constitution. Obligations of county government officers 162―Obligations of public officers with respect to county government resources. Financial reporting by county governments entities 163―County government to prepare annual financial statement. 164―Annual reporting by accounting officers. 165―Annual reporting by receivers of revenue. 166―Accounting officer to prepare quarterly reports for county government entity. 167―Annual reporting by Administrators of county public funds. 168―Quarterly reporting by administrators of county public funds. Financial management in urban areas and cities 169―Application of this part to urban areas and cities. The Public Finance Management Act, 2012 26 170―Accounting Officer of urban area or city. 171―Urban area or city accounting officer responsibilities in revenue management. 172―Financing of urban areas or cities. 173―Criteria for allocating funds to urban areas or cities by county governments. 174―Principles to be observed by urban areas or cities in managing public finances. 175―Budget and budget process for urban areas or cities. 176―Response to delays in approval of annual budgets by urban areas or cities. 177―Borrowing by urban areas or cities. 178―Conditions in which urban areas or cities may receive grants.

179―Urban areas or cities bank accounts. 180 ―Reporting by urban areas or cities. 181―Transitional arrangements. Establishment and dissolution of County Corporations and additional requirements for county corporations and county government-linked corporations 182―Establishment and dissolution of county corporations. 183―Restrictions on county government investing in county government- linked corporations. 184―Responsibility for monitoring financial performance of county corporations. 185―Annual reporting by the County Treasury on county corporations. 186―Definitions for purposes of sections 182, 183 and 184. PART V—RELATIONSHIP BETWEEN NATIONAL AND COUNTY GOVERNMENTS ON BUDGET AND ECONOMIC MATTERS The Public Finance Management Act, 2012 27 Establishment of the Intergovernmental Budget and Economic Council 187―Establishment, purpose and composition of the Intergovernmental Budget and Economic Council. 188―Vacation of office by a member. The process of sharing revenue 189―The process of sharing revenue. 190―Recommendations of the Commission on Revenue Allocation. 191―Division of Revenue Bill and County Allocation of Revenue Bill.

PART VI―THE PUBLIC SECTOR ACCCOUNTING STANDARDS BOARD 192―Establishment of the Board. 193―Composition of the Board. 194―Functions of the Board. 195―Vacation of office and remuneration of Board members. PART VII-ENFORCEMENT PROVISIONS 196―Offence by public officers. 197―Offence of financial misconduct. 198―Other offences by public officers. 199―Penalties for offences. 200―Duty of Principal Secretary to report suspected offences to relevant law enforcement authority for investigation. 201―Duty of the county Chief Officer to report suspected offences. 202―Liability of public officer for certain losses sustained by national government. 203―Liability of public officer for certain losses sustained by county government. 204―Cabinet Secretary may impose institutional sanctions on national government entities.

PART VIII—MISCELLANEOUS PROVISIONS The Public Finance Management Act, 2012 28 205―Powers of Cabinet Secretary to make regulations. 206―Protection of public officers from liability. 207―Public participation. 208―Repeal of certain Acts. 209―Consequential amendments to other Acts. 210―Savings and transitional provisions. FIRST SCHEDULE — CONSEQUENTIAL AMENDMENTS TO OTHER ACTS SECOND SCHEDULE— SAVINGS AND TRANSITIONAL PROVISIONS The Public Finance Management Act, 2012 29 A Bill for AN ACT of Parliament to provide for the effective management of public finances by the national and county governments; the oversight responsibility of Parliament and county assemblies; the different responsibilities of government entities and other bodies, and for connected purposes ENACTED by the Parliament of Kenya, as follows—

PART I – PRELIMINARY Short title and commencement. 1. (1) This Act shall be cited as the Public Finance Management Act, 2012. (2) Subject to Article 116 (3) of the Constitution, all provisions relating to county governments under this Act shall come into operation upon the final announcement of the results of the first elections under the Constitution. Interpretation. 2.(1) In this Act, unless the context otherwise requires— “accounting officer” means— (a) an accounting officer of a national government entity referred to in section 67; (b) an accounting officer of a county government entity referred to in section 148; (c) in the case of the Judiciary, the Chief Registrar of the Judiciary; or (d) in the case of the Parliamentary Service Commission, the Clerk of the Senate; “Accounting Standards Board” means the Public Sector Accounting Standards Board established under section 192; “appropriation” means— (a) authority granted by Parliament to pay money out of the Consolidated Fund or out of any other public fund; or The Public Finance Management Act, 2012 30 (b) authority granted by a county assembly to pay money out of the relevant County Revenue Fund or out of any other county public fund; “appropriation Act” means an Act of Parliament or of a county assembly that provides for the provision of money to pay for the supply of services; “authorised officer”— (a) in relation to the National Treasury, means any of its members or officers authorised by the National Treasury in accordance with section 13; or (b) in relation to a County Treasury, means any of its officers authorised by the County Treasury in accordance with section 105; “borrower” means a person to whom a loan has been or is to be made; “Budget Policy Statement”, in relation to a financial year, means the Budget Policy Statement referred to in

section 25; “Cabinet Secretary” means the Cabinet Secretary responsible for matters relating to finance; “chart of account” means a structured list of accounts used to classify and record budget revenue and expenditure transactions as well as government assets and liabilities on a standard budget classifications system; “Chief Officer” means the person appointed by the County Governor to administer the County department responsible for financial affairs; “commitment” means entering into a contract or other binding arrangement under which expenses or liabilities may be incurred; “collector of revenue”— (a) in relation to the national government, means a person authorised under section 76 to be a collector of revenue for the national government; (b) in relation to a county government, means a person authorised under section 158 to be a collector of revenue for that county government; “Contingencies Fund” means the Contingencies Fund established by Article 208(1) of the Constitution; “county corporation” means a public corporation within The Public Finance Management Act, 2012 31 a county established by an Act of Parliament or county legislation; “County Emergency Fund” means a Fund established under section 110; “County Exchequer Account” means a County Exchequer Account referred to in section 109; “County Executive Committee member for finance” means the member of a County Executive Committee responsible for the financial affairs of the County and for the County Treasury; “County Fiscal Strategy Paper” , in relation to a county government, means the County Fiscal Strategy Paper referred to in section 117; “county government entity” means any department or agency of a county government, and any authority, body or other entity declared to be a county government entity under