section 5(1); “county government revenue” means all money derived by or on behalf of a county government from levies, rates, fees, charges or any other source authorised by the Constitution or an Act of Parliament; “county government security” means a security issued by the county government under section 144 and includes a treasury bill, treasury bond, treasury note, government stock and any other debt instrument issued by the county government; “County Public Debt” means all financial obligations attendant to loans raised and securities issued by the county government; “County Treasury” means a County Treasury established under section 103; “development expenditure” means the expenditure for the creation or renewal of assets; “development partner” means a foreign government, an international organisation of states or any other organisation prescribed by regulations for the purpose of this Act; “financial statements”, in relation to a financial year or other accounting period of the national government, county government, or a national government or county government entity, means— (a) the financial statements referred to in Part III and The Public Finance Management Act, 2012 32

Part IV of this Act; and (b) the financial statements prescribed by the Accounting Standards Board; “fiscal responsibility principles” means the principles of public finance specified in Article 201 of the Constitution, together with — (a) the principles of fiscal responsibility referred to in section 15, in relation to national government; and (b) the principles of fiscal responsibility referred to in section 107, in relation to a county government; “financial objectives” means the financial objectives set out in a Budget Policy Statement of the national government or in the County Fiscal Strategy Paper of the county governments; “Intergovernmental Budget and Economic Council” means the Council established under section 187; “internal auditing” means an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations, which helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes; “medium term” means a period of not less than three years but not more than five years; “National Exchequer Account” means the National Exchequer Account referred to in section 17; “national government entity” includes any department or agency of the national government and any authority, body or other entity declared to be a national government entity under section 4(1); “national government revenue” means all taxes imposed by the national government under Articles 206(1)(a) and (b) and 209 of the Constitution, excluding county government revenue; “national government security” includes a security The Public Finance Management Act, 2012 33 issued by the national government under section 53 and a treasury bill, treasury bond, treasury note, government stock and any other debt instrument issued by the national government; “National Treasury” means the National Treasury established by section 11; “Principal Secretary”, in relation to the National Treasury, means the person responsible for the administration of the National Treasury; “public money” includes— (a) all money that comes into possession of, or is distributed by, a national government entity and money raised by a private body where it is doing so under statutory authority; and (b) money held by national government entities in trust for third parties and any money that can generate liability for the Government; “publicise”, in relation to a document, means to make known to the public, through the national or local media— (a) the general nature of the document; and (b) how and where it may be accessed and read by members of the public; “publish”, in relation to a document, includes— (a) publishing the document in a newspaper, Government Gazette or other publication of general circulation in Kenya; or (b) publication of an abridged or summary versions of the documents without loosing the core content of the document; or (c) making the document available for reference at public libraries or offices of national government

entities or in archives of those institutions; or (d) posting the document on the internet on a Government website; or (e) if the document relates only to a county government or any of its entities— The Public Finance Management Act, 2012 34 (i) publishing the document in a newspaper or other publication of general circulation in the County; (ii) making the document available for reference at public libraries or offices of the county government or those entities; or (iii) posting the document on the Internet on a county government website; “receiver of revenue”— (a) in relation to the National government, means a person designated to be a receiver of revenue under

section 75; (b) in relation to the county government, means a person designated to be a receiver of revenue under section 157; “recurrent expenditure”— (a) in relation to the national government, means the expenditure that is incurred in operating the services provided by the national government; and (b) in relation to a county government, means the expenditure that is incurred in operating the services provided by that county government, but does not include expenditure incurred in creating or renewing assets belonging to or managed by that government; “regulations” means regulations made under this Act; “short term borrowing” means borrowing by a government by way of Treasury Bills, bank-overdraft or other instrument to cover temporary cash shortfalls and is repayable within twelve months; “state corporation” means a state corporation within the meaning of the State Corporations Act; “Treasury Single Account” — (a) in relation to the national government, means a centralised bank account system where all deposits The Public Finance Management Act, 2012 35 and payment transactions are processed for State Departments, Commissions and Independent Offices, and any national government entity which draws directly from the Consolidated Fund; (b) in relation to the county government, means a centralised bank account system established in each county where all deposits and payment transactions are processed for county departments and any other county entity which draws directly from the County Revenue Fund; “Urban Board” means a city or municipal board within the meaning of the Urban Areas and Cities Act, 2011; “vote” means money authorised by an appropriation Act for withdrawal from the Consolidated Fund or a County Revenue Fund; and “wasteful expenditure” means any expenditure that was incurred which could have been avoided had due care and diligence been exercised.

(2) Terms used in this Act which are also used in the Constitution have the same meaning as they have in the Constitution. Object of this Act. 3. The object of this Act is to ensure that— (a) public finances are managed at both the national and the county levels of government in accordance with the principles set out in the Constitution; and (b) public officers who are given responsibility for managing the finances are accountable to the public for the management of those finances through Parliament and County Assemblies. Declaration of entities as national government entities.

4. (1) The Cabinet Secretary may, with the approval of the Cabinet and Parliament, by order in the Gazette, declare a state corporation, an authority or any other body whose functions fall under the national government to be a national government entity for the purposes of this Act. (2) A declaration made under subsection (1) shall be The Public Finance Management Act, 2012 36 based on criteria prescribed by regulations. (3) The Cabinet Secretary shall, from time to time, and not less than once each year, publish in the Gazette a list of national entities declared under subsection (1).

(4) The Cabinet Secretary may, from time to time with the approval of the Cabinet and Parliament, by order in the Gazette, declare that a national government entity declared under subsection (1) shall, with effect from the date of the order, cease to be a national government entity for the purposes of this Act. Declaration of entities as county government entities. 5. (1) A County Executive Committee member for finance may, with the approval of the county executive committee and county assembly, by order in the Gazette, declare a county corporation, an authority or any other body whose functions fall under that county government to be a county government entity for the purposes of this Act.

(2) A declaration made under subsection (1) shall be based on criteria prescribed by regulations. (3) A County Executive Committee member for finance shall, from time to time, and not less than once each year, publish in the Gazette a list of the county entities declared under subsection (1). (4) A County Executive Committee member for finance may, from time to time with the approval of the county assembly, and by notice in the Gazette declare that a county government entity declared under subsection (1) shall with effect from the date of the order cease to be a county government entity for the purposes of this Act. Act to prevail in certain matters. 6. This Act shall prevail in the case of any inconsistency between this Act and any other legislation, on the following matters— (a) preparation and submission of budget estimates, including the time for doing so; (b) preparation and submission of accounts for audit, including the time for doing so; (c) borrowing, lending and loan guarantees; (d) raising of revenue and making of expenditures; (e) banking arrangements, including opening of bank accounts and investment of moneys; (f) establishment and management of public funds; The Public Finance Management Act, 2012 37 and (g) establishment and dissolution of state corporations.

PART II—PARLIAMENTARY OVERSIGHT OF NATIONAL FINANCES Responsibilities of Committees of Parliament Responsibilities of the National Assembly budget committee in public finance matters. 7. The committee of the National Assembly established to deal with budgetary matters has responsibility for the following matters, in addition to the functions set out in the Standing Orders- (a) discuss and review the Budget Policy Statement and budget estimates and make recommendations to the National Assembly; (b) provide general direction on budgetary matters; (c) monitor all budgetary matters falling within the competence of the National Assembly under this Act and report on those matters to the National Assembly; (d) monitor adherence by Parliament, the Judiciary and the national government and its entities to the principles of public finance and others set out in the Constitution, and to the fiscal responsibility principles of this Act; (e) review the Division of Revenue Bill presented to Parliament and ensure that it reflects the principles under Articles 187(2)(a), 201 and 203 of the Constitution; (f) examine financial statements and other documents submitted to the National Assembly under Part III of this Act and make recommendations to the National Assembly for improving the management of Kenya’s public finances; (g) in accordance with Articles 114, 218 and 221 of the Constitution — (i) make recommendations to the National Assembly on “money Bills”, after taking into account the views of the Cabinet Secretary; and The Public Finance Management Act, 2012 38 (ii) table in the National Assembly a report containing the views of the Cabinet Secretary in subparagraph (i); and (h) introduce the Appropriations Bill in the National Assembly. Responsibilities of the Senate budget committee in public finance matters.

8. (1) The Committee of the Senate established to deal with budgetary and financial matters has responsibilities for the following matters, in addition to the functions set out in the Standing Orders— (a) present to the Senate, subject to the exceptions in the Constitution, the proposal for the basis of allocating revenue among the Counties and consider any bill dealing with county financial matters; (b) review the County Allocation of Revenue Bill and the Division of Revenue Bill in accordance with Article 218(1)(b) of the Constitution at least two months before the end of the financial year; (c) examine financial statements and other documents submitted to the Senate under Part IV of this Act, and make recommendations to the Senate for improving the management of government’s public finances; and (d) monitor adherence by the Senate to the principles of public finance set out in the Constitution, and to the fiscal responsibility principles of this Act.