HIGHLIGHTED Public Finance Management - National Government Regulations 2015

SPECIAL ISSUE 209
Kenya Gazette Supplement No. 32 20th March, 2015
(Legislative Supplement No. 17)
LEGAL NOTICE NO. 34

THE PUBLIC FINANCE MANAGEMENT ACT
(No. 18 of 2012)
ARRANGEMENT OF REGULATIONS
Regulation
PART I―PRELIMINARY
1―Citation
2―Interpretation.
3―Application of the Regulations.
4―Object and purpose of the Regulations.
5―Officers to be conversant with Regulations.
6―Openness and accountability.
7―Cabinet Secretary to publish process and procedures for public
participation.
8―Monetary unit, accounting and reporting.
9―Financial management forms and manuals
10―Accounting responsibility not demised by audit.
11―Responsibility for handover by financial officer.
12―Application of secure signatures.
13―Signing blank or blind accountability documents.
14―Restricted use of green ink.
15―Restricted use of brown ink.
16―Use of indelible ink.
PART II—CORPORATE MANAGEMENT
17―Corporate governance.
18―Establishment of Public Finance Management Standing
Committees.
19―Roles and responsibilities of Standing Committees.
20―Duties and Responsibilities of the Accountant-General.
21―Presidential Warrants.
22―National Treasury Warrant
23―Responsibilities of Accounting Officers
24―Delegation by the Accounting Officer
25―Designation of Authority to Incur Expenditure Holder (AIE).
210 Kenya Subsidiary Legislation, 2015
PART III—FISCAL STRATEGY AND MACROECONOMIC

FRAMEWORK
26―Fiscal responsibility principles.
27―Budget Policy Statement.
28―Macroeconomic framework.
29―Contents of a fiscal framework.
30―Revisions to a fiscal framework.
PART IV—BUDGET PREPARATION
31―Responsibility for Preparing Annual Estimates of Expenditure
32―Budget preparation process.
33―Budget guidelines.
34―Determination of budget ceilings.
35―Budget estimates.
36―Budget review process.
37―Provisions in Appropriation Bills.
38―Vote on Account.
39―Approval of Annual Budget Estimates by National Assembly.
40―Supplementary budget estimates.
41―Budget classification and standard chart of accounts.
PART V—BUDGET EXECUTION
42—General rules relating to budget execution.
43—Accounting Officer to exercise budgetary control measures.
44—Accounting Officers to request cash on the basis of an approved
quarterly cash disbursement schedule.
45—Consolidation and approval of cash limits issued to Accounting
Officers.
46—Release of funds to meet expenditure.
47—Budget variation.
48—Budget reallocations.
49—Budget reallocation between programmes and sub- votes.
50—Advances from the Contingencies Fund.
51—Commitment for goods and services.
52—Vote Control Procedures.
53—Receipt of good or services beyond the stipulated period.
54—Unauthorized spending.
55—Monthly reporting obligations by Accounting Officer.
56—Contracts with multi-year financial implications.
57—Reorganization of government functions.
Kenya Subsidiary Legislation, 2015 211
PART VI—MANAGEMENT OF REVENUE AND OTHER

RECEIPTS
58—Classification of Government Revenue.
59—Format of estimates of revenue.
60—Basic principles in deciding whether the sums shall be applied
as AIA.
61—Main forms of receipts in development estimates.
62—Receiver of revenue.
63—Collector of revenue.
64—Responsibility for revenue management.
65—In-year reporting of revenue collection.
66—Fees for services rendered by the national government.
67—Agency services and revenue management.
68—Refund of revenue.
69—Format of annual and quarterly statements submitted by the
receivers of revenue.
PART VII—MANAGEMENT OF GRANTS AND DONATIONS
70—Definition of terms.
71—Gifts, donations and sponsorships.
72—Grants administration.
73—Disclosure of authorisation and disbursement.
Accounting and Reporting on Donations and Grants
74—Monies received by way of grants and donation to be paid into
a designated account.
75—Project selection criteria.
76—Project bank accounts.
77—Records of receipts and disbursements.
78—Responsibilities of NGO’s where project is implemented by
NGO.
79—Documents to be attached by NGOs where the project is
implemented by NGO’s.
PART VIII—TREASURY AND CASH MANAGEMENT
Consolidated Fund
80—Composition of the Consolidated Fund.
81—Process of receipts into the Consolidated Fund.
Cash and Banking Arrangements
82—Criteria for approval for opening and operating national
government entities bank accounts.
83—Guiding principles for cash management.
84—Surrender of end-year surplus cash balances.
85—Cheques and electronic payments.

86—Cash Management Advisory Committee.
87—Register and records of government bank accounts.
88—Authority to have access to government bank accounts.
89—Security for cash in transit.
90—Reconciliation of bank accounts.
Managing Imprest Transactions
91—Definition of imprest.
92—Determination of imprest levels.
93—Classes of imprests.
94—Duties of imprest holders.
Treasury Single Account
95—Establishment of a Treasury Single Account.
96—Operation of the Treasury Single Account.
PART IX—ACCOUNTING AND REPORTING
Form and Basic Structure of Government Accounts
97—Accounting period.
98—Charging of expenditure to year of accounts.
99—Account codes and standard chart of accounts.
100—Books of accounts to be kept by Accounting Officers.
101—Recording and reporting basis.
102—Financial records and automation of financial operations.
103—Accounting adjustments journal.
104—Vouchers.
105—Powers to delegate voucher approval.
106—Deposit accounts.
107—Clearance and suspense accounts.
108—Payments to beneficiaries residing outside Kenya.
109—Use of electronic systems for financial operations.
110—Restricted access to systems.
111—Procedures for Public Sector Accounting Standards Board.
PART X—EXPENDITURE MANAGEMENT AND CONTROL
112—Consolidated Fund Services.
113—Excess Vote.
114—Payments to which Accounting Officer objects.
115—Services and goods to be procured according to an approved
plan.
116—Recovery, disallowance and adjustments of payments.
117—Re-Vote of Budget.
118—Accountable documents.
119—Preservation of accountable documents books and records.
Expenditure in relation to human resources
120—Expenditure in relation to human resources.
121—Payroll certification by accounting officer.
122—Deduction codes to be assigned to all payroll deductions.
123—Remuneration of member of committee and commissions of
inquiry.
124—Services rendered by members during private time.
125—Compensation and ex-gratia payment.
Benefits and Allowances of Public Officers
126—Authority for loans and advances.
127—Benefits and allowances of Public officers.
Lease Financing
128—Lease financing transactions by accounting officer of national
government entities.
Management of Intergovernmental Transfers
129—Definitions of terms.
130—Duties of national accounting officer in managing
intergovernmental transfers to counties.
131—Duties of county accounting officer in managing
intergovernmental transfers.
132—Formats of annual reports on intergovernmental transfers.
133—Transfer made in error fraudulently.
134—Equitable Transfer before approval of County Allocation of
Revenue Bill.
135—Liability for costs in violation of principles of cooperate
government and intergovernmental relations.
PART XI—MONITORING AND REPORTING
136—Responsibility for monitoring, evaluation and reporting.
137—Footnotes to appropriation accounts.
138—Special national government public funds and state
corporations additional reporting requirements.
PART XII— ASSET MANAGEMENT
139—Responsibility for asset management.
140—Responsibility for national government inventory.
141—Accounting Officer responsibilities upon transfers of assets
and liabilities.
142—Assets accruing to the national government by operation of
the law.
143—Register of assets.
144— Purchase and capacity of official vehicles for certain

government officers.
Losses and Write-offs
145—Definition.
146—Accounting Officers responsibility of a national government
entity.
147—Revelation of offence.
148—Procedure for handling losses.
149—Categories of losses.
150—Investigation of every case of loss.
151 —Defective system.
152—Financial liability of officer.
153—Annual statement of losses.
154—Clarification on classification of losses.
155—Claims on damaged or incomplete goods.
156—Investigation of losses.
157 —Writing off of losses.
158—Interest payable on recoverable losses.
159—Right of the Auditor-General.
PART XIII—INTERNAL AUDIT AND AUDIT COMMITTEES
160—Mandate of internal auditors.
161—Compliance with professional standards and code of ethics.
162—Independence of the internal auditor.
The Internal Auditor-General Department of the National Treasury
163—Office of the Internal Auditor-General.
164—Functions of Internal Auditor-General Department.
165—The role of the Accounting Officer in risk management.
166—Performance appraisal.
167—Reporting material breaches and persistent material breaches.
168—Prohibition from conducting assurance services.
169—Disciplinary liability of internal auditors.
Internal Audit Planning, Performance and Reporting
170—Risk based audit assessment strategic plan.
171—Communicating results of audit assessments.
Implementation of Internal Audit Recommendations
172—Enforcement of internal audit recommendations.
173—Preparation and submission of quarterly and annual audit
reports.
Audit Committees
174—Establishment of audit committees.
175—Duties of audit committees.

176—Composition of audit committees.
177—Terms of appointment.
178—Vacancy of office.
Functions and responsibilities of Audit Committees
179—Meetings of the audit committee.
180—Code of conduct.
181—Remuneration and compensation.
182—Capacity building for audit committees.
PART XIV—PUBLIC DEBT MANAGEMENT
183—Guiding principles for national government borrowing.
184—Policy frameworks on public debt management.
185—Medium Term Debt Management Strategy.
186—Annual government borrowing programme.
187—Borrowing powers of the government.
188—Use of borrowed monies and credits obtained.
189—Formalization of agreements for loans.
190—Credit purchases.
191—Modes of payments (disbursements) loan funds.
192—Borrowing purposes.
193—Objectives of public debt management.
Public Debt Management Office
194—Functions of public debt management office.
195—Redemption, conversion and consolidation of loans.
196—Setting debt limit.
197—Criteria for issuance of government securities.
198—Issuance of government securities outside Kenya.
199—Reporting on public debt by counties and national government
entities .
200—Annual debt reporting.
201—Government guaranteed debt.
202—Eligibility and evaluation criteria for national government
guarantees.
203—Process of approving a guarantee for a national government
entity.
204—Approval of draft loan guarantee by Parliament.
205—Roles and responsibilities of accounting officers in debt
management operations.
Sinking Funds
206—Establishment of Sinking Fund.
PART XV—PUBLIC FUNDS
207—Criteria for establishment of public Funds.
208—Management and winding up of a national public Fund.

209—Winding up of a national government public Fund.
PART XVI—STATE CORPORATIONS
210—Definitions.
211—Declaration of national government entities and classification
of state corporations.
212—Scope and application.
213—Application for listing by governing bodies of undeclared
national government entities and state corporations.
214—Guiding principles for establishment of state corporations.
215—Criteria for establishing state corporations.
216—Dissolution of state corporations.
217—Evaluation of national government state corporations
performance.
218—Annual budget.
219—Dividends policy and surplus funds.
220—Quarterly reporting by government bodies.
221—Annual financial statements.
PART XVII—INTERGOVERNMENTAL FISCAL RELATIONS
222—Establishment, purpose and composition of the
Intergovernmental Budget and Economic Council.
223—Recovery plan and assumption of executive responsibilities of
the county.
PART XVIII—MISCELLANEOUS
224—Gazettement of financial, accounting and reporting formats.
THE PUBLIC FINANCE MANAGEMENT ACT

(No. 18 of 2012)
IN EXERCISE of the powers conferred by section 205 of the
Public Finance Management Act, 2012, the Cabinet Secretary for
finance makes the following Regulations:—
THE PUBLIC FINANCE MANAGEMENT (NATIONAL
GOVERNMENT) REGULATIONS, 2015
1. These Regulations may be cited as the Public Finance Citation.
Management (National Government) Regulations, 2015.
2. In these Regulations, unless the context otherwise requires— Interpretation.
“Act” means the Public Finance Management Act, 2012; No. 18 of 2012.
“Accountant-General” means the officer of the National Treasury

designated as the Accountant-General;
“Accounting Standards Board” has the meaning assigned to it
under section 2 of the Act;
“Accounting Unit” means organizational division in a
government entity responsible for accounting and financial services;
“Appropriation-in-Aid” means any revenue which a national
government entity receives and is approved by Parliament for
application by that entity to finance its activities;
“Appropriation Act” has the meaning as assigned to it under
section 2 of the Act;
“budget ceilings” means the maximum amount that the
government allocates in a given year to target sector or expenditure
category;
“Budget Circular” means a written instruction issued by the
Cabinet Secretary providing broad guidelines on the budget process of
the national government;
“benefit deduction” means a deduction on a payroll system
against an official’s salary for a debt arising from employment benefits;
“basic salary” means an officer’s salary excluding allowances;
“Cabinet Secretary” has the meaning assigned to it under section
2 of the Act;
“Cash flow” means is a financial statement that shows planned
inflow and outflow of resources over a period covering the financial
year in line with the activity level;
“collector of revenue” has the meaning assigned to it under
“collective agreement deduction” means a deduction on a
government payroll system against an official’s salary arising from a
collective agreement between the government and a union and is
registered in accordance with applicable law;
“Consolidated Fund Services “means a service the expense of

which is charged directly against and payable from the Consolidated
Fund under or by virtue of the Constitution or any Act of Parliament
other than an Appropriations Act;
“Contingencies Fund” has the meaning assigned to it under
“corporate governance” means the process and structure used to
direct and manage business affairs of the national government entities
towards enhancing prosperity and good governance with the ultimate
objective of realizing national long-term value while taking into
account the interest of all stakeholders;
“County Allocation of Revenue Bill” means the Bill annually
introduced into Parliament and enacted under Article 218(b) of the
Constitution;
“County Emergencies Fund” has the same meaning assigned to it
“County Government entity” has the same meaning assigned to it
“County Public Debt” has the same meaning as assigned to it
“debt” means an amount of money owed and already payable by
an official to any person and for the purposes of these Regulations,
includes insurance premiums deducted in terms of policies with long
and short-term insurers;
“deduction code” means a code issued by the Accountant-
General to enable a person to deduct money from an individual paid via
the government payroll system;
“discretionary deduction” means a deduction on the government
payroll system against an official’s salary, other than benefit, collective
agreement, state or statutory deductions;
“disposal” in relation to a capital asset, includes—
(a) the demolition, dismantling or destruction of the capital
asset; or
(b) any other process applied to a capital asset which results in
loss of ownership of the capital asset otherwise than by way
of transfer of ownership;
“Division of Revenue Bill” means the draft Bill annually
introduced into Parliament and enacted under Article 218(a) of the
Constitution;
“donation” has the meaning assigned to it under section 47 of the
Act;
“economy” means minimising the cost of resources used or
required to achieve priority objectives;
“effectiveness” means the extent to which a programme

intervention has attained, or is expected to attain, its objectives
efficiently in a sustainable manner;
“efficiency” means a measure of how economically resources or
inputs including fund, expertise and time are converted to results;
“estimates of expenditure” means—
(a) annual estimates of expenditure based on programmes and
sub-programmes prepared on a three-fiscal year rolling
basis, specifying the resources to be allocated and the
outcomes to be achieved and outputs to be delivered, the
estimates for the first year of every such period of three
fiscal years requiring appropriation by the National
Assembly; or
(b) supplementary estimates of expenditure appropriated by the
National Assembly;
“fair market value”, in relation to a capital asset, means the value
at which a knowledgeable willing buyer would buy and a
knowledgeable willing seller would sell the capital asset in an arm's
length transaction;
“financial statements” has the same meaning as assigned to it
under section 2 of the Act ;
“financial year” means the period of twelve months ending on
the 30th June in each year;
“governing body” means a body of person managing a public
entity and includes a commission, a board of trustees, a board of
directors and a management board;
“grant” has the meaning assigned to it under sections 47 of the
Act;
“grant recipient” has the meaning assigned to it under sections 47
of the Act;
“intended beneficiaries” has the meaning assigned to it under
“internal control” means a set of systems to ensure that financial
and other records are accurate, reliable, complete and ensure adherence
to the management policies of the Ministry, department or other agency
of Government, for the orderly and efficient conduct of the Ministry,
department or agency, and the proper recording and safeguarding of its
assets and resources;
“irregular expenditure” means expenditure, other than
unauthorized expenditure defined under this section, incurred in
contravention of or that is not in accordance with a requirement of any
relevant legislation, including—
(a) the Act;
(b) these Regulations;
(c) the Public Procurement and Disposal Act, 2005, or any No. 3 of 2005.
Regulations made in accordance with that Act; or
(d) any county legislation providing for procurement procedures
in that county government; or
(e) any other Act of Parliament.
“medium term” has the same meaning as assigned to it in the
Act.
“national government entity” has the meaning assigned to it
“Principal Secretary” has the meaning assigned to it under
“State corporation” has the meaning assigned to it under section
2 of the Act;
“public debt” has the meaning assigned to it under Article 214(2)
of the Constitution;
“public money” has the meaning assigned to it under section 2 of
the Act;
“public officer” has the meaning assigned to it under Article 260
of the Constitution;
“programme” means a group of independent, but closely-related,
activities designed to achieve a common outcome;
“receiver of revenue” has the meaning assigned to it under
“regulatory agency” means a national government entity
established by an Act of Parliament to ensure compliance with the
provisions of the act that established it;
“revenue” has the meaning assigned to it under section 2 of the No. 16 of 2011.
Commission on Revenue Allocation Act, 2012;
“revised estimates” refers to the supplementary budget estimates
and approved budget reallocations prepared and submitted under
“spending unit” refers to a government component for which
appropriation is allocated within the budget and which is authorized to
spend;
“sinking fund” means an account or pot of money or securities
set aside to pay for a bond, repurchase or early redemption of Treasury
Bonds;
“statutory appropriation” means the authority to spend money
allocated to the executive in accordance with the purposes specified in
the constitution or an Act of Parliament;
“statutory deduction” means a deduction on government payroll
system against a public officer’s salary, which is required or permitted
by a law, court order or arbitration award;
“subscription statement” is a statement showing the investor’s
holdings as registered on the Central Depository Securities (CDS)
Register at the Central Bank of Kenya;
“supplementary budget estimates” means additional request of

funds by the national government to Parliament;
“third party” has the meaning assigned to it under section 47 of
the Act;
“unutilized balances” means any amounts withdrawn from the
Consolidated Fund and appropriation in aid collections for purposes of
provision of basic services under an Appropriations Act and not
expended at the end of the financial year;
“unauthorized 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 the
purpose of the programme;
“value for money” means the economic, efficient and effective
utilisation of resources;
“vote” has the meaning assigned to it under section 2 of the Act;
“vote-on-account” means a special provision by which the
national government obtains the authority of the National Assembly for
a sum sufficient to incur expenditure on various items for a part of the
year, pending the consideration and approval of budget estimates for
that year; and
“wasteful expenditure” has the meaning assigned to it under
section 2 of the Act.
3. (1) These Regulations shall apply to— Application of the
Regulations.
(a) State departments;
(b) National government entities under Regulation 211 (2), (4)
and (5) of these Regulations;
(c) Public Funds under regulation 211(6) of these Regulations;
(d) any other person performing any act or doing such thing that
is provided for under this Act.
4. The object and purpose of these Regulations shall be— Object and purpose
of the Regulations.
(a) to provide means of administering the powers vested in the
Cabinet Secretary for the National Treasury under the
Constitution, the Act and any other related legislation;
(b) to harmonize and standardize their application throughout
government service in controlling and managing the
finances;
(c) to set out a standardized financial management system for
use in Government service which is capable of producing
accurate and reliable accounts free from errors, fraud and
which will be useful in management decisions and statutory
reporting;
(d) to provide for the conduct of fiscal relations between the

national and county governments;
(e) to ensure accountability, transparency and the effective,
economic and efficient collection and utilization of public
resources.
5. All Accounting Officers shall ensure that all public officers Officers to be
conversant with
under their control have access to copies of these Regulations and the Regulations.
public officers shall ensure they are fully conversant with the contents
of these Regulations.
6. (1) Subject to national security considerations, the public shall Openness and
accountability.
be provided with full access to financial information in a timely
manner for purposes of seeking public input, by —
(a) establishing a focal point to facilitate access to financial
information or;
(b) making information available in the media or;
(c) presenting information in national languages, summarised
and user-friendly forms; or
(d) making financial information available on websites that
allow for information to be downloaded.
(2) The National Treasury shall arrange for effective public
participation during the development of their annual budget estimates
including the publication of citizens’ budgets which shall explain and
summarize the budget proposals.
(3) The dates for the sectoral forums and the venues shall be
publicly announced one week in advance, and an annual calendar of
events released at the start of the financial year.
7. (1) For purposes of public participation in planning and Cabinet Secretary to
publish process and
budgeting process there shall be participatory structures and processes procedures for
that shall encompass a broad range of strategies, including— public participation.
(a) open forums, written submissions, online platform and

media;
(b) specifications of venues of public participation; and
(c) indicative dates of public participation.
(2) The Cabinet Secretary shall notify the general public through
a notice in the gazette or at least two newspapers of wide circulation on
the venue or manner of submitting written submissions
(3) The documents submitted to Parliament and any other
published documents shall be published and publicised within 7 days of
presentation.
(4) The Cabinet Secretary shall give a responsibility statement
confirming the extent to which general public was consulted
particularly on the Budget Policy Statement and Sector Working
Groups.
8. (1) The Kenya shillings shall be the unit of account for Monetary unit,
accounting and
drawing up and implementing the national budgets, presenting and reporting currency.
reporting accounts.
(2) Despite the provisions of paragraph (1) of this regulation,
certain operations may be carried out in international currencies subject
to conditions laid down in these Regulations or other financial
instruments.
9. (1) National Treasury shall publish financial manuals and Financial
management forms
forms which may be used by national government entities to support and manuals.
implementation of these Regulations.
(2) The financial manuals and forms issued in accordance with
these Regulations shall facilitate adoption of international standards
and emerging best practices.
(3) The publications under paragraph (1) of this regulation shall
be made with the approval of the Cabinet Secretary.
(4) The financial manuals shall contain relevant procedures for
the budget preparation, budget execution, keeping of books of
accounts, formats of financial statements and Government standard
chart of accounts issued by the National Treasury.
10. The responsibilities of internal and external auditors Accounting
responsibility not
exercised in accordance with the Constitution, the Act and other diminished by audit.
legislation shall not diminish the Accounting Officers’ responsibility to
maintain financial discipline as required by the Act and these
Regulations.
11. The accountability of a public officer vacating an office shall Responsibility for
handover by
not be completed until the financial and accounting records kept by financial officers.
him or her have been properly handed over in writing to an officer
taking over his or her duties and attested by their supervisor, but this
does not preclude the public officer from handing over any other
documents required under any other law or government policy.
12. (1) Any public officer signing any document or record Application of
secure signatures.
pertaining to a financial transaction shall ensure that the signature is
given in such a manner so as to preclude subsequent alteration or
addition to the information contained in such document or record.
(2) The signature of any public officer shall not be binding on an
Accounting Officer or a public officer performing a financial function
unless a specimen of the signature is duly communicated in advance to
the relevant public officer or any other person performing a financial
function.
(3) If a public officer no longer occupies a public office, the
Accounting Officer shall nullify that officer’s specimen signature and
communicate the same to all relevant public officers or any other
person performing a financial function, within a reasonable time.
13. (1) A public officer shall not sign a blank or incomplete Signing blank or
blind accountability
cheque, record or other document, pertaining to a financial transaction. documents.
(2) It shall be the duty of any public officer signing any

document or record pertaining to a financial transaction to read and
satisfy himself or herself that it is proper to give his or her signature
and his or her signature shall be evidence of acceptance of
responsibility for the document, whether the public officer read it or
not.
(3) The signing of a document contrary to paragraph (1) and (2)
shall constitute an offence under the Act.
14. A public officer, except the President or the Auditor-General, Restricted use of
green Ink.
shall not use green ink or green pencil in recording or transacting any
official financial transaction.
15. A public officer other than the Cabinet Secretary, the Restricted use of
brown ink.
Principal Secretary, the Internal Auditor-General or Head of Internal
Audit, shall not use brown ink or brown pencil in recording or
transacting any official financial transaction.
16. (1) Financial records and documents shall be written in Use of indelible ink.
indelible ink.
(2) An entry in a financial record or document shall not be
obliterated, erased or altered by being written over.
(3) Payment in connection with any document bearing an
alteration, obliteration or erasure shall be refused by the relevant public
officer or any other person unless countersigned, but this shall not
apply to a cheque or official receipt.
(4) A person who contravenes the provisions of this regulation
commits an offence under the Act.
PART II—CORPORATE MANAGEMENT
17. (1) Every national government entity to which the Act and Corporate
governance.
these Regulations apply shall include in their annual financial report as
provided for under section 81 of the Act, a statement by each entity’s
Accounting Officer on compliance of the entity with these Regulations
under this part.
(2) Where the entity is not fully compliant with these
Regulations, the Accounting Officer of that entity shall identify the
reasons for non-compliance and indicate the steps being taken to
become compliant.
(3) The statements made in the report under this regulation shall
be submitted to the Cabinet Secretary.
18. (1) There is established in every national government entity a Establishment of
Public Finance
committee to be known as the Public Finance Management Standing Management
Committee (hereinafter referred to as the “Standing Committee) to Standing
provide strategic guidance to the entity on public finance management Committees.
matters.
(2) Each Standing Committee shall comprise of the following—
(a) the Accounting Officer as chairperson of the Standing
Committee;
(b) an officer designated by the Accounting Officer as secretary

of the Standing Committee and who shall be either the head
of the finance or accounts units or head of both finance and
accounts units of the entity; and
(c) heads of departments or administrative units dealing with
public finance management matters.
(3) The Standing Committee shall meet as often as is necessary
but at least once every quarter so as to coordinate management of
public finance for entities and shall be accountable to the Cabinet
Secretary responsible for the entity or in case of Parliament, Judiciary,
Independent Offices and Commissions, to the head of that entity.
(4) The Standing Committee may establish sub-committees for
the better carrying out of its roles and responsibilities under this
regulation.
19. (1) The Standing Committee shall generally be responsible Role and
responsibilities of
for— the standing
committee.
(a) ensuring that there is prioritization on resources allocated to
a national government entity for the smooth implementation
of the entities mission, strategy, goals, risk policy plans and
objectives;
(b) regularly reviewing, monitoring budget implementation and
advice on the entities accounts, major capital expenditures
and reviewing performance and strategies at least on a
quarterly basis;
(c) identifying risks and implementation of appropriate
measures to manage such risks or anticipated changes
impacting on the entity;
(d) reviewing on a regular basis the adequacy and integrity of
the entity’s internal control, acquisition and divestitures and
management information systems including compliance with
applicable laws, regulations, rules and guidelines;
(e) establishing and implementing a system that provides
necessary information to the stakeholders including
stakeholder communication policy for the entity in line with
Article 35 of the Constitution;
(f) monitoring the effectiveness of the corporate governance
practices under which the entity operates and propose
revisions as may be required, from time to time;
(g) monitoring timely resolution of audit issues; and
(h) any other matter referred to it from time to time by the
responsible Cabinet Secretary or in the case of Parliament,
Judiciary, independent office and commissions, the head of
that entity.
(2) The Standing Committee shall submit a quarterly report of its
work including any recommendations to the responsible Cabinet
Secretary or in case of Parliament, Judiciary, Independent Offices and

Commissions, to the head of that entity.
20. The Accountant-General Department shall be responsible Duties and
responsibilities of
for— the office of the
Accountant-
General.
(a) advising the national government on accounting and
reporting matters;
(b) overseeing the implementation of the approved government
accounting standards;
(c) designing and development of governments’ accounting
systems both manual and computerized;
(d) providing advice to national government on the best and
appropriate financial reporting formats;
(e) providing link between local and international accounting
standards bodies on matters relating to public sector
financial reporting;
(f) developing guidelines for accounting staffing levels and
training to ensure technical competence and knowledge of
financial accounting and reporting, advising on accounting
and financial matters;
(g) overseeing the implementation of the approved government
accounting standards, policies, bases and concepts;
(h) advising governments on cash and treasury management;
(i) administering the Consolidated, Equalization and
Contingencies Funds;
(j) advising the Public Accounts Committee of Parliament on
accounting matters.
(k) administering the Scheme of Service for Accountants; and
(l) policy development and research.
21. (1) Once the Annual Appropriation Bill or Supplementary Presidential
warrants.
Bill has been assented to, the Cabinet Secretary shall obtain
presidential warrants authorizing issues from the Consolidated Fund in
accordance with the respective Appropriation Acts.
(2) The Presidential Warrants in paragraph (1) of this regulation
shall be transmitted to the Controller of Budget by the Cabinet
Secretary to authorize withdrawals in accordance with Article 228 of
the Constitution.
22. On receipt of the Presidential warrant, the Cabinet Secretary National Treasury
warrant.
shall issue a National Treasury warrant granting authority to
Accounting Officers to incur expenditure for the year in respect of their
votes.
23. (1) Accounting Officers shall, in accordance with Article Responsibilities of
Accounting Officers.
226(2) of the Constitution and section 68(1) of the Act, be accountable
to the National Assembly—
(a) for management of their departments public finances,

including whether sufficient resources have been allocated to
a particular program;
(b) for ensuring the most effective means of achieving desired
program outcomes are used;
(c) for maintaining effective systems of internal control and the
measures taken to ensure that they are effective; and
(d) for measures taken to prepare the financial reports that
reflect a true and fair financial position of the entity.
(2) In addition to the responsibilities of Accounting Officers
provided for in the Act, an Accounting Officer designated under the
Constitution, the Act or any other Act, shall —
(a) comply with any tax, levy, duty, pension, commitments and
audit commitments as may be provided for by legislation;
(b) where he or she reasonably believes that an unauthorized, or
irregular expenditure has occurred, immediately report, in
writing, particulars of the expenditure to the relevant
authority with a copy to the National Treasury; or
(c) before transferring any funds to an entity within or outside
government, ensure that there is a written assurance from the
entity that it shall implement effective, efficient and
transparent financial management and internal control
systems, or, if such written assurance is not or cannot be
given, render the transfer of the funds subject to conditions
and remedial measures requiring the entity to establish and
implement effective, efficient and transparent financial
management and internal control systems;
(d) enforce compliance with any prescribed conditions if the
respective government entity gives financial assistance to
any other entity or person in accordance with the law;
(e) take into account all relevant financial considerations,
including issues of propriety, regularity and value for
money, where policy proposals affecting the Accounting
Officer’s responsibilities are considered, and where
necessary, bring those considerations to the attention of the
relevant authority;
(f) promptly consult and seek the prior views of the National
Treasury on economic viability and financial implications
on any new entity which a state department, or state organ
intends to establish or in the establishment of which it took
the initiative;
(g) not commit national government entities to any liability for
which money has not been appropriated provided that
expenditure for projects or programs implemented beyond
one financial year is provided for in the subsequent
financial years; and
(h) comply, and ensure compliance by national government

entities with the provisions of the Act and these Regulations.
24. (1) The Accounting Officer of a national government entity Delegation by the
Accounting Officer.
may delegate to a public officer, in writing, any of the Accounting
Officer powers or functions under the Act or these Regulations.
(2) In exercising powers and functions under a delegation, the
public officer shall comply with any lawful directions of the
Accounting Officer.
(3) The delegation in this regulation may include the authority to
incur expenditure in accordance with any limits prescribed by the
Accounting Officer.
(4) Delegation of power does not take away the responsibility of
the accountability from the Accounting Officer.
25. (1) An accounting officer may authorize a public officer Designation of
public officers as
under their national government entity to be an Authority to Incur AIE Holder.
Expenditure Holder (AIE).
(2) An Accounting Officer who finds it necessary to authorize a
public officer in another Ministry or county government to incur
official expenditure on his or her behalf, shall do so by issuing an
Authority to Incur Expenditure addressed to the Accounting Officer of
the national government or county government entity.
(3) The designation of AIE Holder shall be in writing in the form
prescribed by the National Treasury.
(4) An Accounting Officer shall maintain a register of all AIE
Holders designated under the Act.
(5) Where an Accounting Officer delegates this authority, the
accounting officer shall remain responsible for any expenditure
incurred as a result of that delegation.
PART III—FISCAL STRATEGY AND MACRO-ECONOMIC
FRAMEWORK
26. (1) In addition to the fiscal responsibility principles set out in Fiscal responsibility
principles.
section 15 of the Act, the following fiscal responsibility principles
shall apply in the management of public finances—
(a) national government’s expenditure on the compensation of
employees (including benefits and allowances) shall not
exceed 35 percent of the national government’s equitable
share of the revenue raised nationally plus other revenues
generated by the national government pursuant to Article
209 (4) of the Constitution;
(b) for the avoidance of doubt, the revenue referred to in
paragraph (a) shall not include revenues that accrue from
extractive natural resources, including oil and coal;
(c) the national public debt shall not exceed 50 percent of Gross
Domestic Product (GDP) in net present value terms;
(d) the annual fiscal primary balance shall be consistent with the
debt target in paragraph (b).
(e) for avoidance of doubt, the requirement under section 15 (2)
(a) of the Act shall exclude the loan redemption receipts for
on-lent loans but shall include loan interest receipts and
penalties on loans; and
(f) pursuant to section 15(5) of the Act, the national government
expenditure on development shall be at least thirty percent in
line with the requirement under Section 15(2)(a) of the Act,
(g) if the national government does not achieve the requirement
of regulation 15(1)(f) above at the end of that financial year,
the Cabinet Secretary shall submit a responsibility statement
to Parliament explaining the reasons for the deviation and
provide a plan on how to comply with the provisions of
section 15 (2)(a) of the Act in the subsequent years.
(2) The Cabinet Secretary shall, in line with prudent management
of risks envisioned in section 15(2)(e) of the Act, in the budget policy
statement, include a statement of fiscal risks outlining the potential
policy decisions and key areas of uncertainty that may have a material
effect on the fiscal outlook and the statement and shall further
include—
(a) fiscal risks arising from macroeconomic shocks, including
matters touching on real GDP growth, inflation, commodity
prices, and interest and exchange rates and adverse impacts
from regional and international economy;
(b) potential policy decisions affecting revenue, tax payer
behavioural responses and court decisions that are likely to
affect revenue bases and overall tax collections and revenue
and government income, which may include tax concessions
(or tax expenditures), increase in tax rates, tax minimisation
and avoidance by tax payers and rates;
(c) potential policy decisions that could increase or decrease
expenses depending on decisions taken, and which constitute
risks to the fiscal forecasts only to the extent that they cannot
be managed within existing baselines or budget allowances;
(d) potential capital decisions that are risk to the fiscal forecasts
only to the extent that they cannot be managed within
existing national government balance sheet.
(e) matters dependent on external factors such as the outcome of
negotiations or international obligations; and
(f) a list of contingent liability, including debt guarantees,
pension liability and pending bills.
(3) Despite the provisions of paragraph (2) of this regulation, the
Cabinet Secretary may exempt from disclosure items of risk if in his or
her opinion the disclosure—
(a) may prejudice substantial economic interests of Kenya,

security or defines of Kenya, International relations of the
government and on-going litigation and negotiation; or
(b) may compromise the government in a material way in
negotiation, litigation or commercial activity; or
(c) may result in a material loss of value to the government.
(4) The Cabinet Secretary may disclose the specific fiscal risks
if—
(a) their impact in his or her view is significant enough;
(b) a decision has not yet been taken but it is reasonably
possible (but not probable) that the matter shall be approved
or the situation is likely to occur;
(c) it is reasonably probable that the matter will be approved or
the situation will occur, but the matter cannot be quantified
or assigned to particular years with reasonable certainty;
(d) any other matters the National Treasury considers, using
their best professional judgement that the matters may have
a material effect on the fiscal and economic outlook but are
not certain enough to include in the fiscal forecasts.
27. (1) For the avoidance of doubt, the Budget Policy Statement Budget Policy
Statement.
submitted under section 25(2) of the Act, shall contain an assessment
of the current state of domestic economy by—
(a) providing an assessment of the impacts of regional and
international economy on the medium macroeconomic
framework and its outlook;
(b) indicating allocation of available resources between the
national and county levels of government and among county
governments;
(c) providing a macroeconomic framework underlying the
budgetary and fiscal policy over the medium term;
(d) providing a medium-term fiscal framework defining a top-
down aggregate resource envelope;
(e) providing a statement of fiscal responsibility principles, as
specified in the Act and these Regulations and indicating
whether the fiscal strategy adheres to these principles; and
(f) providing a summary of programmes that are of national
interest for the forthcoming year.
(2) In addition to the provisions under section 25(4) of the Act,
the Budget Policy Statement shall contain a fiscal risk statement,
including, any commitments and contingent liabilities not included in
the fiscal forecasts, and all other circumstances which may have a
material effect on the fiscal and economic forecasts and which have not
already been incorporated into the fiscal forecasts, as well as
information on the losses and outstanding payments of the State
Corporations.
(3) Before tabling a report containing recommendations on the

Budget Policy Statement for adoption by Parliament in accordance
with section 25(7) of the Act, the relevant committee of Parliament
shall seek the views of the Cabinet Secretary on its recommendations.
(4) Once the Budget Policy Statement is adopted by Parliament,
it shall serve as the basis of expenditure ceilings specified in the fiscal
framework.
(5) The ceiling for the development expenditure and personnel
spending of the national government budget shall be approved by
Parliament and be binding for the next two budget years.
(6) The National Treasury shall include a statement explaining
any deviation to the provisions of paragraph (4).
28. (1) The macroeconomic framework shall contain information Macroeconomic
framework.
on the macroeconomic situation and forecasts for—
(a) the current budget year and three further years and actual
outturns for the previous budget years including—
(i) gross domestic product and its components;
(ii) consumer prices and gross domestic product deflator;
(iii) current account position of the balance of payments;
(iv) savings and investment balance;
(v) assumptions underpinning the forecasts; and
(b) the medium term macroeconomic forecasts affecting fiscal
policy.
29. (1) The fiscal framework in the Budget Policy Statement Contents of a fiscal
framework.
shall contain—
(a) updated forecasts expressed in Kenya shillings and as a
percentage of gross domestic product for the current budget
year and three further years and actual results for the
previous budget years for the consolidated general
government budgets for—
(i) level of budgetary revenues by classification of the
main categories of revenues;
(ii) level of budgetary expenditures by economic and
functional classifications;
(iii) capital expenditures;
(iv) the overall balance and primary balance position;
(v) level of public debt and publically guaranteed debt;
(vi) key assumptions on which the above numbers are
based;
(vii) sensitivity analysis taking account of possible changes
in macroeconomic and other conditions; and
(viii) any other information the Cabinet Secretary

determines is material to fiscal strategy;
(b) an explanation of the fiscal policies in relation to fiscal
responsibility principles, and any temporary measures to be
implemented to ensure compliance, if necessary.
(c) an analysis and explanation of—
(i) revenue policy, including planned changes to taxes and
policies affecting other revenues;
(ii) deficit and debt policy, including an analysis of debt
sustainability; and
(iii) expenditure policy, including expenditure priorities,
aggregate expenditure intentions, including for the
consolidated budget, county consolidated budgets; and
expenditure ceilings and other targets or limits implied
by or required by the fiscal responsibility principles;
(d) an analysis of the consistency of the updated fiscal strategies
with the previous fiscal strategies, providing an explanation
of any significant changes.
(2) The Cabinet Secretary shall gazette effective dates and give
general guidelines and formats for preparing a consolidated general
government accounts for statistical purposes.
30. (1) The fiscal framework in regulation 29 , may be revised as Revisions to the
fiscal framework.
a result of—
(a) a significant and unexpected change in macroeconomic
indicators and assumptions ; or
(b) policy changes arising from change of government.
PART IV—BUDGET PREPARATION
31. (1) The Accounting Officer shall ensure that the draft Responsibility for
preparing annual
estimates relating to her or his department are prepared in conformity estimates of
with the Constitution, the Act and these Regulations. expenditure.
(2) The Accounting Officer is responsible, in particular for

ensuring that—
(a) all services which can be reasonably foreseen are included in
the estimates and that they are within the capacity of her or
his national government entity during the financial year;
(b) the estimates have been prepared are complete and accurate
as possible;
(c) the estimates have been framed with regard to economy and
efficiency;
(d) the requisite authority has been obtained, where necessary,
before provision is made in the estimates; and
(e) the estimates are submitted to the National Treasury in the
manner and format to be issued by the Cabinet Secretary.
32. (1) The budget preparation process for the following financial Budget preparation
process
year (N+1) shall start not later than the 30th August of the current
financial year (N) with the issuance of the annual budget circular by the
Cabinet Secretary and in compliance with formats and
recommendations contained in these circulars or guidelines,
instructions and the financial manual.
(2) The budget sector working groups shall, on the basis of
budget sector ceilings contained in the Budget Review and Outlook
Paper (BROP), submit by January of each year (N) the sector reports to
the National Treasury which shall include printed estimates for the
current year (N) and for the forthcoming financial year (N+1) and two
outer years on a rolling basis (N+2), (N+3).
(3) The estimates for the sector referred to in paragraph (1) shall
be consistent with regulation 29.
(4) Budget proposals shall be submitted in the prescribed formats
that support program-based budgeting and classification of expenditure
in economic classes.
(5) All budget proposals shall be supported by the national
government entity’ strategic plan.
(6) The preparation and submission of estimates shall be done
exclusively through prescribed automated integrated financial
management systems.
(7) On receipt of sector reports from sector chairs, the Cabinet
Secretary shall convene public sector forums to receive inputs from the
public.
(8) The proposed sector ceilings for the next three financial years
contained in the Budget Review and Outlook Paper (BROP) may be
firmed up or readjusted in the Budget Policy Statement submitted in
February of financial year (N) and adopted by Parliament by February
28 of same financial year (N).
(9) The approved Budget Policy statement shall be published on
the National Treasury website.
(10) Following the approval of the Budget Policy Statement, the
national government entities, or agencies shall finalize their estimates
for years (N+1), (N+2) and (N+3) by March 31 of Financial year (N)
and submit to the Cabinet Secretary.
(11) Budget estimates shall be reviewed and consolidated and the
draft budget estimates submitted to Cabinet by April 15th of the
financial year (N).
(12) Budget estimates of the national government entities, or
agencies shall be reviewed and consolidated and the annual budget
estimates submitted to Parliament, by April 30 of financial year (N).
33. Unless provided otherwise in the Act, these Regulations or Budget guidelines.
any other guidelines developed in furtherance of the Act or these
Regulations, the following guidelines shall be observed at all times
during budget formulation and approval—
(a) all revenue and expenditure shall be entered into the national
government budget estimates ;
(b) expenditure entered in national government budget estimates
shall be authorised for one financial year only;
(c) budget shall be balanced;
(d) the Kenyan shillings shall be the unit of account for drawing
up and implementation of the national government budgets,
as well as the presentation of those accounts;
(e) total budget revenue shall cover total budget expenditure and
therefore—
(i) except as provided by legislation, there shall be no use
of specific revenue to finance specific expenditure;
and
(ii) appropriation shall be for a specific purpose or a
specific programme or item of expenditure; and
(f) budget estimates shall take into account expenditure
priorities which contributes to the realization of the required
output and desired policy outcome.
34. The budget ceiling contained in the Budget Policy Statement Determination of
budget ceilings.
shall take into account—
(a) the aggregate resource envelope following the forecast of
major revenue and expenditure categories (the latter
according to both economic and administrative
classification);
(b) the non-discretionary expenditure (debt service, wages and
other related items);
(c) the overall expenditure taking into consideration the fiscal
rules;
(d) breakdown of the overall expenditure into recurrent and
development expenditure by sector ceilings; and
(e) expenditure priorities as set out in national government
policies.
35. (1) Each Accounting Officer may cause any proposed budget Budget estimates
audit
estimates to be examined and reported on by the internal audit unit of
that national government entity.
(2) The Accounting Officer referred to in paragraph (1) shall take
into account any recommendations made in respect thereto before
submitting estimates to the National Treasury.
(3) A person who fails under this regulation to provide
information, or submits information which that person knows to be
misleading or incorrect shall have committed an offence under the Act.
36. (1) On receipt of estimates from Accounting Officers the Budget review
process.
Cabinet Secretary shall cause to be conducted Budget discussions to
review estimates of the entities concerned in order to ensure that these

plans and estimates are in accordance with the macro-economic policy
and fiscal framework.
(2) Where the budget review in paragraph (1) necessitates
changes, the Cabinet Secretary, may require an Accounting Officer to
make adjustments to the estimates.
37. Appropriation Bills shall provide for — Provisions in
Appropriation Bills.
(a) the Votes and programs of the financial year;
(b) financial provision in respect of certain activities of the
national governments during that financial year; and
(c) enabling the withdrawal out of the Consolidated Fund, or
any other national public fund.
38. (1) Where the Appropriations Act is not assented to or is not Vote on account.
likely to be assented before the first working day of the financial year,
the Speaker to the National Assembly, with approval of National
Assembly, shall communicate to the Cabinet Secretary grant of
authority to withdraw from the Consolidated Fund of monies of an
amount not exceeding one-half of the amount included in the estimates
in accordance with section 39(7) of the Act.
(2) Accounting officers shall make necessary entries in their
books in respect of the amount of the vote on account approved.
(3) Moneys withdrawn under paragraph (1) shall be for the
purpose of meeting expenditure on the government’s programmes and
activities in respect of the financial year—
(a) up to fifty (50%) percent of the estimated of budget for the
financial year submitted to the National Assembly; or.
(b) until such a time the Appropriation Act is assented to.
(4) Funds withdrawn from the Consolidated Fund under this
regulation may be utilized only for services for which funds have been
provided for in the budget estimates submitted to National Assembly.
(5) The funds provided for in paragraph (2) shall be regarded as
forming part of the funds appropriated in the relevant annual budget
estimates for that financial year.
39. Where Parliament approves any changes in the annual Approval of the
Annual Budget
estimates of budget under section 39 of the Act, any increase or Estimates by the
reduction in expenditure of a Vote, shall not exceed one (1%) percent National Assembly
of the Vote’s ceilings’.
40. (1) Each Accounting Officer shall, within the guidelines of Supplementary
budgets estimates
the supplementary budget circular and in conformity with budget
guidelines issued by the Cabinet Secretary, prepare revised budget
estimates in the format to be issued by the Cabinet Secretary.
(2) Prior to incurring any expenditure under paragraph (1),
Accounting Officers shall seek the approval of the National Treasury,
and if approval is granted by the Cabinet Secretary, it shall be
communicated to the Accounting Officers through a notification which

shall be copied to the Auditor-General and the Controller of Budget.
(3) The purpose for which approval is sought for a
supplementary budget shall be —
(a) unforeseen and unavoidable, in circumstances where no
budget provision was made; or
(b) unavoidable, in circumstances where there is an existing
budgetary provision which however is inadequate.
(4) For purposes of paragraph (3), the following shall not be
considered unforeseen and unavoidable expenditure—
(a) expenditure that, although known when finalising the
estimates of the original budget, could not be accommodated
within allocations; and
(b) tariff adjustments and price increases.
(5) Accounting Officers may seek supplementary budget if the
expenditure cannot be met by budget reallocation under section 43 of
the Act.
(6) The request for supplementary budget in paragraph (5) shall
be presented in a format that facilitates comparison with the original
budget and shall contain all the information necessary to enable a
decision on the application to be reached and shall include—
(a) the Vote, program, sub-programme and broad expenditure
category which it is desired to supplement, the original sum
voted thereon and any supplements which may have since
been added;
(b) the actual expenditure and the outstanding liabilities or
commitments against the item on the date when the request
is made;
(c) the amount of the supplement required, the reasons why the
supplement is necessary and why it has not been possible to
keep within the voted provision;
(d) the basis for the calculation underpinning the supplementary;
(e) the proposed source of financing of the additional
expenditure;
(f) an analysis of the fiscal impact of the additional expenditure,
or of the implications, if any, for the planned outputs and
outcomes of the affected programmes;
(g) any implied deviation from the Medium Term Expenditure
Framework (MTEF) and the financial objectives; and
(h) the latest fiscal projections.
(7) The national government entity requesting additional funds
through a supplementary budget process shall submit a memorandum
to the National Treasury on a date determined by National Treasury.
(8) For the avoidance of doubt, budget allocations for new policy
options and service delivery initiatives shall only be considered when
introduced in the annual estimates in accordance with the procedure
laid down in the Act and these regulations.
(9) In approving any estimates under sections 43 and 44 of the
Act, the National Assembly approval shall not exceed ten (10) percent
of the approved budget estimates of a program or Sub-Vote unless it is
for unforeseen and unavoidable need as defined in section 21 of the
Act.
41. (1) The national government budget estimates and each Budget classification
and the standard
county government’s budget estimates shall be prepared, accounted for chart of accounts.
and reported in accordance with the Government of Kenya budget
classification and chart of accounts issued by the National Treasury.
(2) As much as practicable, these classifications shall be
designed to support financial and economic reporting requirements in
the Act and generally accepted international standards.
PART V— BUDGET EXECUTION
42. (1) Overall control of national government budget execution General rules
relating to budget
shall be exercised through strict application of the following general Execution.
rules, which shall apply to all transactions with the specific exception
of debt service payments—
(a) debt service payments shall be a first charge on the
Consolidated Fund and the Accounting Officer shall ensure
this is done to the extent possible that the government does
not default on debt obligations;
(b) debt payments shall be made whether or not they meet the
general rules provided that the Cabinet Secretary reporting
of any excess over appropriations, with full explanations of
the circumstances, to Parliament in the next quarterly
reporting cycle; and
(c) other than temporary treasury liquidity management
operations, no payment shall be made from the Consolidated
Fund as a direct charge, except under an item identified in
the annual budget estimates.
43. An Accounting Officer shall— Accounting Officers
to exercise
budgetary control
measures.
(a) sign financial statements thereby making himself or herself
responsible for their correctness;
(b) ensure that public funds entrusted to their care are properly
safeguarded and are applied for purposes for only which
they were intended and appropriated by the National
Assembly;
(c) ensure all appropriation-in-aid due to national government
entity are collected and properly accounted for in
accordance with the relevant laws, rules and regulations;
(d) manage control and ensure that policies are carried out
efficiently and wastage of public funds is eliminated; and
(e) ensure each national government entity has an audit
committee in place.
44. (1) Accounting Officers shall provide the National Treasury Accounting Officers
to request cash on
with an annual cash flow plan as a requisition for funds needed for the basis of an
that financial year. approved quarterly
cash disbursement
schedule.
(2) National government entities shall execute their approved
budgets based on the annual appropriation legislation, and the approved
annual cash flow plan with the exception of unforeseen and
unavoidable spending dealt with through the Contingencies Fund, or
supplementary estimates.
(3) The annual cash flow plans prepared by Accounting Officers
shall be broken down into a three months rolling basis and shall be
adjusted to reflect any implementation realities in consultation with the
National Treasury.
(4) As far as possible, quarterly cash flow projections prepared
by the Accounting Officers shall be supported by a procurement plan
approved in accordance with the Public Procurement and Disposal Act. No. 3 of 2005.
45. (1) The National Treasury shall consolidate all expenditure Consolidation and
approval of cash
requirements and projections as forwarded by Accounting Officers, limit to be
compare with the projected revenues including net domestic communicated to
borrowing, and thereafter in consultation with Accounting Officers, accounting officers.
agree an indicative annual cash flow forecast limit for that financial
year.
(2) The National Treasury shall issue a National Treasury
circular communicating the cash flow projections agreed with the
Accounting Officers.
(3) In the event of unanticipated cash flow fluctuations, the
National Treasury shall inform the Accounting Officers through a
circular requesting them to review and submit revised cash flow
projections in line with the guideline set out in the circular.
46. (1) The basis for requisition of funds for grant of credit on the Release of funds to
meet expenditure.
account of the accounting officer for authorization of a withdrawal by
the Controller of Budget from the national exchequer account shall be
based on the approved cash flow plans communicated to that
accounting officer to the National Treasury.
(2) Release of Funds from the Consolidated Fund to national
government entities shall be in accordance with the authority granted
by the Controller of Budget together with the written instructions of the
National Treasury.
(3) The National Treasury shall make requisition from the
Controller of Budget as necessary for the exchequer withdrawal of
funds which shall be placed to the credit of an accounting officers’
entity account.
(4) Pursuant to the grant of credit in paragraph (3), the National

Treasury shall issue an exchequer notification informing the accounting
officer of the amounts authorized.
(5) The National Treasury may require accounting officers to
review their cash flow plans in line with changes in revenue realization,
shortfalls in borrowing and unforeseen expenditures.
(6) The National Treasury shall publish and publicize the
quarterly liquidity position reports reflecting the impact of revenue
collection efforts, spending and public debt operations on the cash
position of government.
47. (1) The Accounting Officer shall inform his or her Budget Variation.
responsible Cabinet Secretary immediately of any circumstances that
are likely to affect materially the budgetary results either through
revenue and expenditure or other receipts and payments of the national
government entity.
(2) The Accounting Officer shall inform his or her responsible
Cabinet Secretary of actions taken to mitigate any budget variations.
(3) The responsible Cabinet Secretary shall take the necessary
steps to bring to the notice of the Cabinet Secretary, any warnings of
significant or material budget variations.
48. (1) For purposes of section 43(3) of the Act, Accounting Budget reallocation.
Officers, may authorize reallocation of funds within
programmes or sub-votes provided that—
(a) this does not affect the total voted provision;
(b) the provisions in the budget of the programme or sub-vote
from within which the funds are to be transferred are
unlikely to be utilized;
(c) reallocation is in accordance with donor conditions in the
case of reallocation impacting on donor-funded expenditure;
(d) the reallocation does not affect the voted provisions from
wage to non-wage expenditure or from capital to recurrent
expenditure; and
(e) allocations earmarked by the National Treasury for a
specific purpose may not be used for other purposes, except
with Treasury’s approval.
(2) Accounting Officers shall keep a register of all budgetary
reallocations and use it to prepare a report of all reallocations to the
National Treasury not later than the 10th day of each month and the
report shall state measures taken by the Accounting Officer to mitigate
against future reallocations.
(3) The report referred to in paragraph (2) shall state the impact
that the reallocations may have had on program objectives, planned
program outputs and outcomes.
(4) The National Treasury shall consolidate all reallocations and
include them in the next revised budget.
(5) The reallocations under this regulation shall be approved by

the respective Accounting Officer of the entity.
49. The reallocations by the National Treasury in terms of section Reallocation
43(2) of the Act shall be included in the next revised budget for between
submission to and approval by the National Assembly. programmes and
sub-votes.
50. (1) For an accounting officer to access the contingencies fund Advances from the
in accordance with section 21 of the Act, that accounting officer shall Contingencies Fund
first identify resources within his or her vote through identification of
savings for re-allocation before applying for financing from the
Contingencies Fund.
(2) If an accounting officer is satisfied that there are no savings
within his or her vote and the need meets the criteria set under section
21 of the Act and paragraph (1), the accounting officer shall—
(a) give reasons why he or she believes the need meets the
criteria under section 21 of the Act;
(b) issue a certificate, countersigned by the Cabinet Secretary of
that entity, confirming that the need meets the criteria under
section 21 of the Act and paragraph (1); and
(c) submit the request to the Cabinet Secretary for
consideration.
(3) The Cabinet Secretary shall consider the request and assess if
the need meets the criteria set under section 21 of the Act and may
approve it or reject it.
51. (1) All commitments for supply of goods or services shall be Commitment for
goods or services.
done not later than May 31st each year except with the express approval
of the accounting officer in writing.
(2) Expenditure commitments for goods and services shall be
controlled against spending and procurement plans approved by the
responsible Accounting Officer, based on allocations and allotments
from approved budgets.
(3) The Accounting Officer of that government entity shall make
an expenditure commitment only against the procurement plan
approved for that entity in accordance with the Public Procurement and
Disposal Act, 2005 and the Regulations made thereunder. No.3 of 2005.
(4) At minimum, a procurement plan shall include proper

descriptions of the procuring items, unit cost, the estimated contract
value, and the procurement method relating to the annual portion of a
multi-year contract and delivery schedule.
(5) Any changes to approved procurement plan during the year
shall be approved by the responsible Accounting Officer in
consultation with the Cabinet Secretary of the entity.
(6) Any public officer who contravenes the provisions of this
regulation commits an offence.
52. (1) Any public officer who holds any post involving, in any Vote Control
Procedure.
degree, the management of public funds, and in particular every officer
to whom is delegated the power to expend or receive such funds shall
in the Government’s interest and in his own interest, be aware of the
following essentials of vote control procedures—
(a) no public officer can spend or commit funds until he or she
has been properly authorized by means of an Authority to
Incur Expenditure (AIE) to do so;
(b) AIE holders shall be made to understand that the limit to
which they may spend is that prescribed by the authority and
not their expectations, however justified these may seem;
(c) the AIE issued to a public officer shall in the minimum
contain—
(i) the AIE number and to whom it is issued;
(ii) the authorized total expenditure;
(iii) a description of the expenditure item; and
(iv) the account code to which the expenditure is to be
debited;
(d) when the AIE is issued by the Ministry or State Department
or Agency, the allocation shall be entered as a commitment
in the Ministry’s or State Department’s or Agency’s master
vote book so as to ascertain at all times the availability of
uncommitted funds;
(e) accounting officers whose votes cover field programmes and
projects shall issue AIE’s to their field officers not later the
15th day of each quarter;
(f) public officers issued with AIE’s shall also be informed in
writing that the actual expenditures should not exceed the
limits authorized in the AIE’s;
(h) all AIE’s to field public officers shall show the following
details at the minimum and copies submitted to the Internal
Audit Department of the National Treasury and the Auditor-
General—
(i) the gross total amount of funds per vote allocated and
applied against the AIE issued; and
(ii) the total amount of AIA to be collected;
(j) each accounting officer shall cause records to be kept in such
a form as will clarify at any time, in respect of each of his or
her votes—
(i) the total amount of expenditure sanctioned for service of
the year;
(ii) the amount of the expenditure charged; and
(iii) any further known liabilities in respect of the year;

(k) the AIE holders shall note the following in terms of control of
expenditure—
(i) there shall be no divided responsibility and only the officer
to whom the AIE has been issued is permitted to commit or
incur expenditure against it; and
(ii) an AIE holder shall not wait for suppliers to submit
invoices in order to clear his or her commitment, but he or
she shall regularly have his or her outstanding
commitments checked and enquiries made from the
suppliers, particularly in the last three months of the
financial year.
53. (1) A local purchase order or local service order shall be valid Receipt of goods
and services beyond
for a period of thirty days from the date of issue. the stipulated period.
(2) Any public officer who receives goods or services beyond the
stipulated period specified in paragraph (1) commits an offence under
the Act.
(3) Any public officer involved in the processing of a payment
with regard to goods or services delivered after due date shall inform
the accounting officer of this anomaly before proceeding to process the
payment.
(4) The public officer in charge who fails to ensure that the local
service order or local purchase order is cancelled after thirty days
commits an offence under the Act.
54. (1) Except as provided for in the Act and these Regulations, Unauthorised
spending.
an Accounting Officer of an entity may not authorize payment to be
made out of funds earmarked for specific activities for purposes other
than those activities.
(2) A public officer who makes a payment contrary to paragraph
(1) commits an offence under the Act.
55. (1) An Accounting Officer of a national government entity Monthly reporting
obligations by
shall not later than the 10th day of each month submit a monthly Accounting Officers.
financial and non-financial budgetary report in the format to be issued
by the Cabinet Secretary relating to the activities of his or her national
government entity for the preceding month to the National Treasury
with copies to the Controller of Budget and the Auditor-General.
(2) The contents of the report under paragraph (1) shall
include—
(a) actual revenues including appropriations in aid;
(b) actual expenditures classified in economic classification as
follows—
(i) compensation to employees;
(ii) use of goods and services;
(iii) transfer to other levels of government;

(iv) capital expenditure;
(c) pending payments with an age of over ninety days;
(d) a projection of expected expenditure and revenue collection
for the remainder of the financial year;
(e) when necessary, an explanation of any material variances;
and
(f) a summary of the steps that are to be taken to ensure that the
projected expenditure and revenue remain within budget.
56. (1) A national government entity may enter into a contract Contracts with
multi-year financial
which will impose financial obligations on the national government implications.
entity beyond a financial year.
(2) Contracts imposing financial obligations in excess of one year
may only be concluded by the accounting officer only if—
(a) the accounting officer discloses all finalized and signed
contracts by the beginning of a financial year;
(b) they are budgeted for first before new projects are budgeted
by the accounting officer of the national government entity;
and
(c) the accounting officers secure the resources required in line
with the financing requirements set out in the contracts.
57. (1) The national government may make policy changes in a Reorganization of
government
financial year leading to— functions.
(a) creation of an additional Ministry or State Department and

national government entities;
(b) transferring certain functions or services of an existing
Ministry, State Department and agencies to —
(i) another existing Ministry , State Department; or Agency
(ii) a new Ministry or State Department or Agency;
(c) abolition of an existing Ministry or State Department or
Agency and transferring its functions or services to one or
more Ministry or State Department or Agency.
(2) Before embarking on accounting entries and other
adjustments, it shall be necessary to agree on the actual status of the
vote in respect of the following aspects of the affected functions and
services based on the ledger balances of a trial balance to be drawn on
a date to be communicated by the National Treasury—
(a) the gross budgetary provision;
(b) the approved A.I.A, if any, and whether in cash or credit
purchase;
(c) the approved development partner assistance and entity own
revenue whether in cash or credit purchase, if any;
(d) the net budgetary provision;

(e) the gross expenditure incurred;
(f) the amount of entity own revenue and development partner
assistance applied in cash or in credit purchases; and
(g) the sharing of amounts held in the below-the-line group of
accounts.
(3) When a Ministry or State Department or Agency is abolished,
its vote shall cease to function and consequently it shall be necessary to
extract a trial balance as at the date of abolition and to ascertain the
state of financial affairs of that vote which shall include—
(a) the budgetary provision;
(b) expenditure incurred; and
(c) cash balance
(4) The statement shall be accompanied by analysis of the below
the line group of account on the basis of which it should then be agreed
on the amount of the related budget provision, expenditure incurred
and the below the line balances to be shared out, if necessary.
(5) The Supplementary Appropriation Act shall provide the
details of the affected votes and the National Treasury shall inform the
affected Accounting Officers of the effective date when they shall
effect accounting entries in their books and other necessary inter-vote
adjustments.
(6) The book-keeping entries of a new vote shall be affected as
outlined in the National Treasury Guidelines issued.
PART VI—MANAGEMENT OF REVENUE AND OTHER
RECEIPTS.
58. (1) Government receipts may be classified into domestic Classification of
Government
receipts and external receipts. Revenues.
(2) Domestic receipts under paragraph (1) shall comprise of—
(a) domestic loans receipts;
(b) tax revenues; and
(c) non tax revenues including exchequer, non tax receipts and
Appropriation in Aid.
(3) External receipts under paragraph (1) shall comprise of —
(a) external Loans including exchequer loan receipts and direct
payments or credit purchase; and
(b) external grants including exchequer grant receipts and direct
payments.
59. (1) The estimates of revenues shall be in the format issued by Format of estimates
of revenue.
the National Treasury and shall include—
(a) the description of the source of revenue in terms of head code;
(b) estimated revenues;
(c) the receiver of revenue;

(d) for each revenue head, there shall be shown revenue items;
and
(e) the amounts and the nature of receipts.
(2) The estimates of revenue shall include the actual revenue for
the two previous financial years (N-2), (N-1), the current financial year
revenue estimates (N), and the projected revenue estimates for the next
two outer years (N+1) and (N+2).
60. (1) The following shall be the basic principles in deciding Basic principles in
deciding whether
whether sums shall be applied as Appropriation-In-Aid— sums shall be
applied as AIA.
(a) receipts arising directly out of expenditure on a service, the
primary purpose of which is not collection of revenue such as
user fees, user charges, or sale of stores and may be
Appropriated-In-Aid of the vote from which expenditure on
the service is met;
(b) Appropriations-In-Aid shall be applied against a vote;
(c) where miscellaneous receipts are individually and collectively
small, and circumstances of receipt unimportant in
themselves, such receipts may be credited to Appropriations-
in-Aid; and
(d) sums due as Appropriations-in-Aid in the previous year
should be credited to the Appropriations in Aid head of the
year in which they are actually received.
(2) Despite the provision under paragraph (1), the Cabinet
Secretary may designate any type of Appropriations-in-Aid as revenue
in furtherance of certain government policies.
61. The following shall be the main forms of receipts which Main forms of
receipts in
occur in development estimates— development
estimates.
(a) Appropriations-in-Aid inform of receipts collected by any
authorized national government agency or derived from the
sale of goods and services directly derived from projects
contained in the appropriate expenditure head;
(b) direct payments or Credit Purchases charged to the
appropriate head representing expenditure on the cost of
goods or services supplied and credited to the national
government entity, but such transactions may be carried out
only after National Treasury’s advice;
(c) loan and grant receipts through the national exchequer
account; and
(d) Tax and non-tax revenue through the national exchequer
account.
62. (1) A receiver of revenue designated by the Cabinet Secretary Receiver of revenue.
under section 75 of the Act shall be responsible for the collection of,
and accounting for, such items of revenue as the Cabinet Secretary may
specify.
(2) A letter for the designation of receiver of revenue under
paragraph (1) shall indicate his or her responsibility and the manner in
which he or she may delegate the duties of collection of revenue to
officers under him or her or of another national government entity.
(3) Notwithstanding the provisions of paragraph (2), the receiver
of revenue for loans and grants funds shall be the Principal Secretary to
the National Treasury, and the Cabinet Secretary shall specify such
items of revenue in the designation letter.
63. (1) In accordance with section 76 of the Act, the receiver of Collector of
revenue.
revenue shall authorize a public officer or any of the national
government entities to be a collector of revenue for national
government for the collection of, and accounting for, such items of
revenue as the receiver of revenue may specify.
(2) Except with the specific authority of the collector of revenue,
in no case may a public officer whose duty involves the posting of
assessment registers, rent rolls and similar documents be authorised to
collect public moneys or to post collections into a cash book.
64. (1) An accounting officer and a receiver of revenue are Responsibility for
revenue
personally responsible for ensuring that— management.
(a) adequate safeguards exist and are applied for the prompt
collection and proper accounting for, all national government revenue
and other public moneys relating to their Ministries, departments or
agencies;
(b) adequate measures, including legal action where appropriate,
are taken to obtain payment;
(c) official receipts are issued for all moneys paid to Government
of Kenya.
(2) An accounting officer or receiver of revenue who experiences
difficulty in collecting revenues due to the national government shall
report the circumstances to the Cabinet Secretary without delay.
(3) Except with the authority of the Cabinet Secretary, no
receiver of revenue or collector of revenue, may convert public moneys
received in local currency into foreign currency and vice versa.
(4) All public moneys collected by a receiver of revenue or
collector of revenue or collected and retained by a national government
entity, shall be paid into the designated bank accounts of the national
government and shall not be used by any public officer in any manner
between the time of their receipts and payment into the bank except as
provided by law.
(5) An Accounting Officer or receiver of revenue or collector of
revenue shall take disciplinary measures in line with the relevant
legislation against a public officer who contravenes the provisions of
paragraph (4).
(6) An accounting officer or receiver of revenue or collector of

revenue shall ensure adequate books of accounts are kept relating to
revenue collection and management.
(7) A public officer who makes payment from monies collected
under this regulation commits an offence under the Act.
65. (1) The Accounting Officer or receiver of revenue or In-year reporting of
revenue collection.
collector of revenue shall prepare a quarterly report not later than the
15th day after the end of the quarter.
(2) The quarterly report in paragraph (1) shall include —
(a) a statement of receipts and disbursements in such form as
the Public Sector Accounting Standards Board may
determine;
(b) a statement of arrears of revenue which shall be classified by
financial year; and
(c) reasons for material differences between approved estimates
and the actual revenue collected.
(3) The accounting officer or receiver of revenue or collector of
revenue shall include in the report under paragraph (1), the following
details in respect of each waiver or variation—
(a) the full name of each person benefiting from the waiver or
variation;
(b) the amount of tax, fee or charge affected by the waiver or
variation;
(c) the year to which the waiver or variation relates;
(d) the reasons for the waiver or variation; and
(e) the law in terms of which the waiver or variation was
granted.
(4) The quarterly report under paragraph (1) shall be submitted to
the National Treasury with a copy to the Auditor-General.
66. (1) The Accounting Officer of a national government entity Fees for services
rendered by the
may, when finalising their budgets, review all fees, charges or the rates, national
scales or tariffs of fees and charges that are not fixed by any law, and government.
that relate to revenue accruing to the Consolidated Fund.
(2) An Accounting Officer shall obtain approval from the
National Treasury for the proposed tariff structure.
(3) Information on the tariff structure shall be disclosed in the
annual report, including information on exemptions, discounts, free
services and any other aspect of material influence on the revenue
yield.
67. (1) When a national government entity renders agency Agency services and
revenue
services to another national government entity or a county government, management.
all revenue receipts collected shall be accounted for fully by the agent
to the receiver of revenue or collector of revenue or accounting officer.
(2) Any exception to paragraph (1) on the expenses arising from

the revenue administration costs shall be expressly agreed between the
national government entity and the respective receiver of revenue or
collector of revenue or accounting officer based a service level
agreement signed between them.
(3) When a national government entity renders agency services to
a county government all revenue receipts including agency receipts
collected shall be accounted for fully by the agent to the receiver of
revenue or collector of revenue or accounting officer and the expenses
arising from the revenue administration costs shall be agreed between
the national government entity and the respective county government
based a service level agreement signed between them.
(4) When a county government entity renders agency services to
a national government entity, all revenue receipts including agency
receipts collected shall be accounted for fully by the agent to the
receiver of revenue or collector of revenue or accounting officer and
the expenses arising from the revenue administration costs shall be
agreed between the county government and the respective receiver of
revenue or collector of revenue or accounting based a service level
agreement signed between them.
(5) Claims for agency services rendered on behalf of another
government entity, level of government, shall be based on actual
revenue collected and accounted for and shall be supported by original
vouchers and shall be reflected in their books of accounts of transacting
institutions.
68. (1) Refunds of revenue may become necessary because of Refund of Revenue.
collections or over-collections made in error or because, although
properly collected in accordance with an Act or regulation, provision
exists under the Act or regulation for the revenue to be reclaimed under
certain circumstances in the form of a rebate or drawback.
(2) Refunds of revenue and drawbacks under paragraph (1) shall
be in accordance with the relevant legislation.
(3) Any refunds under paragraph (1) shall be provided for under
an expenditure item appropriated by Parliament in an Appropriation
Act.
(4) Where the collection, over-collection or drawback is made in
the same financial year as that in which the revenue was originally
collected it may be authorised by the officer prescribed in the relevant
legislation to be charged as a debit item in the appropriate revenue
head.
(5) The receiver or collector of revenue shall together with the
refunds in paragraph (1) include assumptions underpinning the refund
estimates.
(6) The estimates of refunds submitted under paragraph (5) by
the receiver or collector of revenue shall include assumptions
underpinning the refund estimates.
69. The annual, quarterly and monthly statements by a receiver Format of annual
and quarterly
of revenue submitted to the National Treasury under section 76(3) of statements submitted
the Act shall be in the format to be gazetted by the Cabinet Secretary by receivers of
revenue.
and shall at the minimum include—
(a) the actual revenue received by the receiver and transmitted to
the national exchequer account;
(b) the actual revenue received by the receiver and not
transmitted to the national exchequer account;
(c) the revenue arrears due but not collected; and
(d) a responsibility statement by the receiver of revenue on the
revenue statement.
PART VII—MANAGEMENT OF GRANTS AND
DONATIONS
70. (1) For purposes of this Part— Definition of terms.
(a) “grant agreement” means an instrument that gives the power

to an agency to furnish money, property or materials to a
grantee and the grantee has freedom to pursue the grants
stated purpose, but the agency does not specify the matter of
performance of the work and is not substantially involved in
it;
(b) “financing agreements” are a document detailing
commitments for provision of goods, services and activities to
be performed by an organisation for the awarding agency and
contain specific objectives, direction, specifications, costs or
methods of performance; and
(c) “donor or development partner or external financier” is used
in this Part interchangeably to refer to the providers of
external resources.
71. (1) Upon approval by the Cabinet Secretary, an Accounting Grants, Donations
Officer may receive any grants, donation, sponsorship made in favour and sponsorships.
of the government entity irrespective of whether such sponsorship or
grants or donation is in cash or in kind provided that the Accounting
Officer confirms with the relevant national government entity that
donations given in kind are—
(a) not harmful to health and the environment; and
(b) in good and serviceable condition.
(2) All cash grants, donations or sponsorships shall be deposited
in the Consolidated Fund provided that—
(a) such grants, donation and sponsorship are from a credible
source from a person in good standing with the Government
of Kenya;
(b) such grants, donation and sponsorship are intended to address
government development policies.
(3) Where the purpose of the grant, donation, or sponsorship is
not apparent, the Cabinet Secretary shall have the discretion to instruct
the Accounting Officers on its application.
(4) A national government entity is not allowed to give another

national government entity cash donations to augment the budgetary
resources of designated departments.
(5) Grant, donations or sponsorships received during the year
shall be disclosed in the annual and quarterly financial statements.
72. (1) Projects implemented through grants, donations and Grants
administration.
sponsorships shall be aligned to the national development policies.
(2) In identification and designing of projects funded by
development partners, the areas covered and amounts allocated shall be
determined by objective criteria and as far as possible on need-based
formula which may include geographical area, population and poverty
index.
(3) The Accounting officer shall disclose the details under
paragraph (2).
(4) All grants and donations shall be appropriated by national
assembly before commencement of disbursements.
(5) Issues to do with tax exemptions, issuance of work permits,
counter-part personnel, counter-part funding, office space, demand
driven technical assistance, community contribution either in cash or in
kind shall be clearly spelt out in the grant agreements, and the
government and community contribution shall be properly assessed and
quantified in all grant supported projects.
(6) National government shall ensure grants are factored in the
budgets and counterpart funds appropriated accordingly.
73. (1) Where authorisation has been granted for the project to Disclosure of
authorisation and
start, the Accounting Officer shall ensure public disclosure to the disbursement.
intended beneficiaries within thirty days of the allocation and
disbursement of the grants.
(2) After disbursement of grants, the accounting officer shall
report within fifteen days after the end of each quarter to the intended
beneficiaries on the expenditures and performance achieved in relation
to the grant.
(3) During the project identification and design, the intended
beneficiaries shall be involved through public participatory approach
for planning.
(4) The views of the indented beneficiaries shall be received
during public forums provided for under paragraph (3) and their views
shall be considered appropriately or during budgeting process of the
next budget cycle.
(5) Where non-compliance by an accounting officer with grant
conditions is established through an audit or fiduciary review process,
the Cabinet Secretary may suspend the disbursements and institute
measures to recover any amounts misappropriated by the public officer.
Accounting and reporting on donations and grants
74. (1) All monies received by way of grants and donations shall Monies received by
way of grants and
constitute public monies and shall be paid into the Consolidated Fund. donations to be paid
into a designated
account.
(2) The Cabinet Secretary shall make provisions in the budget

estimates for grants and donations receivable in kind such as
commodity aid for purposes of raising cash locally.
(3) Where the quantum of the grant or donation referred to in
paragraph (2) is not known, a provision shall be included in the
estimates and when the quantum becomes known a supplementary
estimate shall be raised for the amount involved.
(4) Where grants and donations are receivable in kind, the value
of such donations shall be determined and included in the estimate and
reflected as expenditure in the financial year.
(5) Monies received for specified projects which have been paid
into the Consolidated Fund shall be released when required to the
appropriate project bank account.
(6) An accounting officer of a national government entity shall—
(a) cause to be kept and maintained proper books of accounts
and records in respect of all projects and donations;
(b) ensure that whenever projects are completed, the project
assets including buildings, plant, vehicles, furniture, fittings
and equipment are properly recorded and handed over to the
accounting officer in accordance with the financing
agreement;
(c) where no time frame is provided for the project, ensure that
the assets are handed over within three months from the date
of the closure of the project; and
(d) in the absence of any instructions to the contrary, ensure
that any unexpended balance standing in the credit of the
project account is paid into the Consolidated Fund.
75. It shall be the responsibility of the National Treasury to Project selection
criteria.
ensure that—
(a) any project approved for financing through grants and
donations has been approved by the accounting officer; and
(b) the project feasibility study report has been inspected and
approved by the relevant national government entity.
76. (1) For the purpose of disbursement of project funds, there Project bank
accounts.
shall be opened and maintained a project account for every project at
Central Bank of Kenya unless it is exempted by the Cabinet Secretary,
in writing, into which all funds shall be kept and such an account shall
be known by the name of the project for which it is opened and each
project shall maintain only one bank account.
(2) All foreign currency designated bank accounts shall be kept
at the Central Bank of Kenya for national government entities unless
exempted in writing by the Cabinet Secretary under paragraph (1).
(3) Every payment or instruction for payment out of the project
account shall be strictly on the basis of the approved estimates of
budget and financing agreement.
77. The Accounting Officer of a project shall compile and Records of receipts
and disbursements.
maintain a record showing all receipts, disbursements and actual
expenditure on a monthly basis in respect of every project and sub-
project and shall—
(a) make monthly interim financial returns;
(b) make quarterly financial management returns;
(c) submit a summary of the records for each quarter and year to
the division responsible for external resources in the National
Treasury not later than fifteen (15) days after the end of every
quarter
78. (1) Non-Governmental Organisations (NGO’s) that Responsibilities of
NGOs where the
implement development programs funded by public funds, including project is
donor funding shall be accountable through regular financial reporting implemented by
and submission of audited annual financial statements to the relevant NGO.
accounting officer in a format prescribed by the Public Sector
Accounting Standards Board.
(2) NGO’s referred to under paragraph (1) shall be registered by
the responsible national licensing authority and in accordance with the
relevant law under which that authority is established.
79. (1) Documents to be attached to the financial reports and Documents to be
attached by NGOs
annual audited accounts in regulation 78 shall include a certificate of where the project is
registration confirming that the NGO— implemented by
NGO.
(a) is a body corporate and separate from its members, with
perpetual succession;
(b) can engage in public interest activities and public fund-
raising throughout Kenya; and
(c) is eligible for such fiscal or other benefits and privileges, as
may be applicable to NGOs from time to time.
(2) In addition to requirements under paragraph (1), the NGO
shall also submit—
(a) its annual performance report outlining the activities
undertaken by the NGO in the year;
(b) an annual return reflecting details of its trustees, directors,
office bearers and auditors;
(c) its sources of funding;
(d) in the event of any amendment to its Constitution or
governance instrument during the financial year, a certified
copy of such amendment; and
(e) any such other information the NGO considers necessary.
PART VIII—TREASURY AND CASH MANAGEMENT
Consolidated Fund
80. (1) The National Treasury shall administer the Consolidated Composition of the
Consolidated Fund.
Fund in accordance with the constitutional provisions in Articles 206
and 209 (1),(2) and (4) in controlling revenue receipts to ensure that—
(a) all revenue receipts by the national government are paid into
the national exchequer account, except revenue receipts
reasonably excluded by the Constitution, the Act, or another
Act of Parliament; and
(b) withdrawals from the Consolidated Fund shall be done—
(i) in accordance with an appropriation by an Act of
Parliament;
(ii) in accordance with Articles 222 or 223 of the
Constitution;
(iii) as a direct charge against the Consolidated Fund as
authorised by the Constitution or an Act of Parliament.
(2) The administrator of the Consolidated Fund shall keep proper
books of accounts of the Consolidated Fund in accordance with
standards and formats prescribed by the Public Sector Accounting
Standards Board.
81. (1) Receivers of Revenue shall promptly deposit into Process of receipts
into Consolidated
National Exchequer Account all receipts due to the Consolidated Fund. Fund.
(2) The Receivers of Revenue shall promptly pay the revenue

received into the Consolidated Fund as soon as possible and in any case
not later than five (5) days after receipt thereof.
(3) The National Treasury shall issue a receipt to a Receiver of
Revenue to acknowledge the receipt of revenue thereof.
Cash and Banking Arrangements
82. (1) Subject to the provisions of section 28 of the Act, the Criteria for approval
of opening and
following criteria shall be considered by the National Treasury before operating national
granting approval to a national government entity to open and operate a government entities
national government bank account— bank accounts.
(a) all national government bank accounts shall be opened at the

Central Bank of Kenya, except—
(i) where the Central Bank of Kenya has no branch;
(ii) it is expressly provided for under a financing agreement
and with approval of the Cabinet Secretary;
(iii) where Central Bank of Kenya has confirmed in writing
it is unable to offer banking facilities;
(iv) where the National Treasury has granted authority to an
accounting officer or receiver of revenue or collector of
revenue to open and operate a bank account in a
commercial bank for purposes of revenue collection,
and that commercial bank shall have a wide branch
network and is government linked;
(b) any national government entity which draws over seventy
five (75) percent of its resources from the National
Exchequer Account shall apply for opening and operating
bank accounts at the Central Bank of Kenya, unless

exempted under paragraph (1);
(2) Where a national government entity is unable to comply with
the provisions under paragraph (1), it may apply for grant of Cabinet
Secretary approval to open and operate a bank account in a commercial
bank under special circumstances.
(3) All national government entities operating bank accounts
outside the provisions of paragraph (1) of this regulation, shall comply
with the provisions under paragraph (1) within six (6) months from
upon publication of these Regulations.
(4) Except with the prior authority of the National Treasury, no
accounting officer may open a bank account for the deposit, custody or
withdrawal of public moneys or other moneys for which he or she is
responsible in his or her official capacity or for the transaction of
official banking business.
(5) The authority of National Treasury shall be conveyed in
writing to the responsible Accounting Officer with a copy to the
Controller of Budget and the Auditor-General.
(6) National Treasury may prescribe the banking rules and the
maximum balance which may be held in any official Treasury Single
Account sub-account or other bank accounts, and if at any time this
balance seems likely to be exceeded the officer operating the accounts
shall consult National Treasury on the action to be taken.
(7) No official government bank account shall be overdrawn, nor
shall any advance or loan be obtained from a bank account for official
purposes beyond the limit, authorized by the National Treasury in line
with section 28(4) of the Act.
(8) The authority in paragraph (7) shall be conveyed in writing to
the responsible Accounting Officer and copied to the Auditor- General.
(9) Personal cheques shall not be deposited in an official bank
account.
83. (1) The National Treasury shall be responsible for Guiding principles
for cash
establishing sound cash management systems, procedures and management.
processes, to ensure efficient and effective banking and cash
management practices.
(2) For purposes of this regulation, sound cash management
includes—
(a) assessing the cash inflows and outflows expected at any one
time;
(b) ensuring payments, including transfers to other levels of
government and national-government entities are made
when due for efficient, effective and economical programme
delivery and the government’s normal terms for account;
(c) avoiding accumulation of idle balances;
(d) using short term borrowing only when it is necessary;

(e) avoiding prepayments for goods or services unless required
by the contractual arrangements with the supplier;
(f) accepting discounts to effect early payment only when the
payment has been included in the monthly cash flow
estimates provided to the National Treasury;
(g) pursuing debtors with appropriate sensitivity and rigour to
ensure that amounts receivable by the government are
collected and banked promptly;
(h) recognising the time value of money and managing
inventories to the minimum level necessary for efficient and
effective programme delivery, and selling surplus or under-
utilised assets.
(3) National government overdraft at the Central Bank of Kenya
shall be retired by the end of the financial year.
84. Not later than the 31st January of each year, each Accounting Surrender Of End-
Year Surplus Cash
Officer shall surrender to the National Exchequer Account unexpended Balances.
voted money or excess Appropriations-in-Aid, as confirmed by
Auditor-General in the audit report.
85. (1) All signatories in respect of cheques, or electronic Cheques and
electronic payments.
payments and fund transfers shall be designated by the Accounting
Officer and any changes in signatories shall be authorized by him.
(2) There shall be two authorized signatories to sign a cheque
drawn or electronic payment or fund transfer on a national government
bank account.
(3) The names and designation of those officers in paragraph (1)
and their specimen signatures shall be advised to the bank where the
account is held by the accounting officer, with copies of the advice sent
to the National Treasury, and any change in signatories shall be advised
in writing.
(4) The signatories under this regulation shall—
(a) initial the counterfoil or enter with their personal passwords;
(b) be equally responsible for the regularity of the payment; and
(c) thoroughly scrutinize the documents supporting the
payment.
(5) Spoilt cheques shall be marked prominently with the stamp
“Cancelled”, and fixed securely to the cheque-list used for controlling
the cheques issued each day.
86. (1) The Cabinet Secretary may establish a Cash Management Cash Management
Advisory
Advisory Committee. Committee.
(2) The Cash Management Advisory Committee established

under paragraph (1) shall be comprised of —
(a) the Principal Secretary of the National Treasury who shall be
the chair person or an officer designated by him or her;
(b) the department responsible for matters relating to accounting

policy within the National Treasury, which shall also
provide the secretariat;
(c) the department responsible for matters relating to economic
affairs in the National Treasury;
(d) the office of the public debt management in the National
Treasury; and
(e) the department responsible for matters relating to budget
matters in the National Treasury;
(2) The responsibilities of the Cash Management Advisory
Committee shall be determined by the Cabinet Secretary during its
establishment.
87. (1) The office of the Accountant-General shall maintain a Registers and
records of
register of all Treasury Single Account sub-accounts and other bank government bank
accounts opened by national government entities, including public accounts.
funds and donor funded projects.
(2) The office of the Accountant-General shall reconcile
periodically with the government bank accounts list, maintained by the
Central Bank of Kenya.
(3) The Accounting Officer of a national government entity shall,
by the 30th September of each year, provide the National Treasury with
an up-dated list of bank accounts held by the national government
entity.
(4) The list referred to under paragraph (3) shall include the
following information—
(a) name of the bank where the account is held;
(b) name of the bank account;
(c) type of bank account;
(d) signatories of the bank account;
(e) date on which the bank account was opened;
(f) the bank account number;
(g) purpose for the bank account, if different from the main
operational bank account of the government entity;
(h) the bank account balances as at the 30th June each year; and
(i) the reference number and date of the National Treasury,
letter granting approval for opening and operating the bank
account.
88. (1) The National Treasury , shall when granting authority to Authority to have
access to
Accounting Officers to open and operate bank accounts, require them government bank
to include as a pre-condition to that bank, that the Cabinet Secretary accounts.
may request bank statements for that account without any reference to
the authorized bank signatories of that bank account.
(2) The Cabinet Secretary may suspend the operations of any

government bank account or impose certain conditions, if he or she
reasonably believes the purpose of that account no longer exists, or that
fraud or fraudulent transactions are being undertaken in that specific
account and shall institute investigations immediately.
(3) The Cabinet Secretary may, where in his or her opinion finds
it necessary, share the report of the investigation carried out in
paragraph (2) with the Auditor-General and the Controller of Budget.
89. The Accounting Officers shall ensure that adequate Security for cash in
transit.
arrangements are made to protect both cash and staff for cash in transit
and such measures shall include the following—
(a) safe or strong rooms and restricted access to the cash
handling locations;
(b) police or armed security escorts;
(c) the security bags locked to the vehicle; and
(d) suitable transport and variation of movement, times, and
routes.
90. (1) Accounting Officers shall ensure bank accounts Reconciliation of
bank accounts.
reconciliations are completed for each bank account held by that
Accounting Officer, every month and submit a bank reconciliation
statement not later than the 10th of the subsequent month to the
National Treasury with a copy to the Auditor-General.
(2) Similar reconciliations shall be carried out when
responsibility for any bank account or cheque book is handed over
from one officer to another and on the occasion of any surprise
inspection or survey.
(3) Accounting Officers shall ensure any discrepancies noted
during bank reconciliation exercise, are investigated immediately and
appropriate action taken including updating the relevant cash books.
(4) The National Treasury shall analyse and review the bank
reconciliation statements submitted under paragraph (3) of this
regulation and take the necessary action.
Managing Imprest Transactions
91. (1) For the purposes of this regulation and Regulations 92, Definition of
imprest.
93, and 94, an imprest means a form of cash advance or a float which
the Accounting Officer may authorize to be issued to officers who in
the course of duty are required to make payments which cannot
conveniently be made through the cash office of a government entity or
bank account.
(2) The officer authorized to hold and operate an imprest shall
make formal application for the imprest through an imprest warrant.
(3) Funds disbursed for imprest shall not be kept or held in an
official bank account, but in a separate or personal bank account
operated by the imprest holder or in the form of cash under safe.
92. The Accounting Officer or AIE holder shall approve the Determination of
imprest levels.
establishment of an imprest facility including the maximum amount for
the specific purpose of that facility.
93. (1) There shall be three types of imprests, namely— Classes of imprests.
(a) Temporary or Safari imprest;

(b) Standing Imprest; and
(c) Special imprest.
(2) An imprest shall be issued for a specific purpose, and any
payments made from it, shall be only for the purposes specified in the
imprest warrant.
(3) Temporary imprests shall be issued mainly in respect of
official journeys and are intended to provide officers with funds with
which they can meet travelling, accommodation and incidental
expenses.
(4) Before issuing temporary imprests under paragraph (2), the
Accounting Officer shall ensure that—
(a) the main objective of the journey cannot be achieved by
other cheaper means;
(b) the applicant has no outstanding imprests;
(c) the applicant has been recorded in the imprest register
including the amount applied for;
(d) adequate funds are available against the relevant items of
expenditure to meet the proposed expenditure.
(5) A holder of a temporary imprest shall account or surrender
the imprest within 7 working days after returning to duty station.
(6) In the event of the imprest holder failing to account for or
surrender the imprest on the due date, the Accounting Officer shall take
immediate action to recover the full amount from the salary of the
defaulting officer with an interest at the prevailing Central Bank Rate.
(7) If the Accounting Officer does not recover the temporary
imprest from the defaulting officer as provided for in this regulation the
Accounting Officer commits an offence as provided for under the Act.
(8) In order to effectively and efficiently manage and control the
issue of temporary imprests, an accounting officer or AIE holder shall
ensure that no second imprest is issued to any officer before the first
imprest is surrendered or recovered in full from his or her salary.
(9) If the accounting officer or AIE Holder fails to comply with
the provisions of paragraph (8), he or she commits an offence as
provided for under the Act.
(10) If an imprest is to be recovered from any public officer by
instalments, the Accounting Officer shall personally authorize such
recovery and such moneys shall no longer be an imprest but an
unauthorized advance from Government Funds, and in addition to the
interest charged under paragraph (6), the Accounting Officer shall take
appropriate disciplinary action against the officer concerned for the
abuse of the imprest.
(11) Standing Imprest shall be intended to be in operation for a
time and requires bringing the cash level of the advance continuously
up to the agreed fixed level by systematic re-imbursement of expenses.
(12) Standing imprest shall involve personal responsibility as it
shall be issued to an officer in his or her own name, and not to the
holder of an office.
(13) When an imprest holder leaves the service, or is transferred,
he or she shall surrender the total standing imprest which includes cash
plus payment vouchers which together amount to the fixed level of the
imprest, and a new imprest issued to his or her successor.
(14) The holder of a standing imprest shall keep a memorandum
cash book to record all receipts and payments and the balance on hand
shall agree with the cash balance recorded in the cash book, and in the
absence of any receipts, the actual cash balances plus the expenses paid
shall equal at all times the fixed level of the imprest for which the
imprest holder is personally responsible.
(15) When the imprest holder needs to have his or her funds
replenished, he or she shall send an abstract and analysis of his
memorandum cash book, plus originals of the supporting payment
vouchers to accounts division.
(16) If the accounts division in paragraph (15) is satisfied that the
expenditure has actually been incurred, that it has been incurred for the
intended purposes, and there is no irregularity in the payment vouchers,
it shall arrange for the analysed expenditure to be posted to the various
heads and items, and arrange for the cash to be transferred to the
imprest holder so as to “top-up” his or her fund.
(17) In addition to paragraph (16) the head of accounts division
shall also ensure that frequent spot checks are made of the standing
imprest itself by a responsible officer as follows—
(a) count the cash on hand;
(b) confirm that the actual cash on hand corresponds with the
balance on hand as recorded in the cash book;
(c) confirm that all movements (expenses and receipts) since the
last check have been properly recorded and are properly
documented;
(d) ensure that the documents justify the difference between the
fixed imprest level and the actual cash balance; and
(e) report on any anomalies found to the head of the accounts
section.
(18) Any Special Imprest utilized for any expenditure on services
of a confidential nature, the purpose and the particulars of which
cannot be made public, shall be supported by a certificate that the
money has been paid, and a declaration by the Cabinet Secretary

responsible for the national government entity and the relevant
Accounting Officer that they have satisfied themselves that the money
has been properly expended, and has not been used to supplement the
emoluments of any officer.
94. An officer holding an imprest shall ensure that— Duties of Imprest
holders.
(a) the imprest issued to him or her shall be used for the
intended purpose only;
(b) the imprest moneys and any payment vouchers awaiting
replenishment are adequately safeguarded at all times;
(c) proper cash sale receipts are received for all payments out
of the imprest;
(d) the full amount of the imprest can be accounted for at all
times in cash, stamps, money at bank and completed
payment vouchers; and
(e) goods purchased through imprest are taken on charge and
certificate issued.
Treasury Single Account
95. (1) The National Treasury hereby establishes a Treasury Establishment of a
Treasury Single
Single Account (TSA) pursuant to section 28(2) of the Act, which Account.
shall become operational within six (6) months upon commencement
of these Regulations and shall be kept at the Central Bank of Kenya.
(2) The Cabinet Secretary shall from time to time issue Treasury
Single Account guidelines to accounting officers for the operations of
the Treasury Single Account.
96. (1) The National Treasury shall ensure operating cash Operation of a
Treasury Single
balances in the Treasury Single Account sub-accounts are kept to a Account.
minimum through consolidation into a Treasury Single Account.
(2) The Treasury Single Account shall reflect at the minimum the
following features—
(a) unified banking arrangements to enable the National
Treasury to have proper oversight of national government
cash inflows and outflows on these bank accounts;
(b) that no national government entity shall operate bank
accounts outside the Treasury Single Account unless
expressly authorized by the Cabinet Secretary;
(c) notwithstanding the requirement under sub-paragraph (b),
the Cabinet Secretary may authorize exemption from the
requirements of sub-paragraph (b); and
(d) the comprehensive consolidation of government controlled
public monies encompassing all government cash resources,
including National Exchequer Account, special funds, trust
funds and other public funds unless expressly exempted by
the Cabinet Secretary.
(3) National government deposits or exchequer releases to

national government entities by the National Treasury shall be
deposited in the Treasury Single Account sub-accounts and shall form
part of cash balances of these accounts.
(4) Unless exempted by an Act of Parliament or by judicial order,
all deposit bank accounts of the national government’s entities shall be
sub-accounts of the Treasury Single Account for the national
governments.
PART IX—ACCOUNTING AND REPORTING
Form and Basic Structure of Government Accounts
97. (1) The accounts of the national government entities shall Accounting period.
record transactions which take place during a financial year running
from the 1st July to the 30th June.
(2) Government accounts may be kept open for adjustments or a
financial year may be kept open for a month in the following financial
year for completion of the following end of year accounting
processes—
(a) in respect of the transactions of the 30th June each year to
capture expenditure for field services;
(b) for carrying out certain inter-departmental agency
adjustments; and
(c) for closing the accounts of special funds and Suspense
accounts.
(3) Adjustments may also be made after the close of the year by
journal entries for the correction of accounts due to miss-postings or
misclassifications impacting on fair presentation of financial statements
that may be noticed after 30th June each year.
(4) An actual cash transaction taking place after the 30th June,
shall not, however, be treated as pertaining to the previous financial
year even though the accounts for that year may be open for the
purposes mentioned under paragraphs (2) and (3).
(5) The National Treasury shall issue guidelines on the closure of
the financial year not later than the 15th May of each year.
98. (1) The date of payment of any amount shall determine the Charging of
expenditure to year
date of the recording of the transaction in the accounts. of accounts.
(2) Advance payment shall not be paid to suppliers of services
and goods unless provided for in the contractual terms and conditions
contained in a valid contract signed between the procuring entity and
the supplier.
99. (1) As a general rule, the classification of financial Account codes and
standard chart of
transactions in national government entity’s accounts shall be based on accounts.
the standard chart of accounts approved by the National Treasury.
(2) The approved estimates of expenditure shall form the basis of
the accounts for the financial year.
(3) Every entry in the accounts shall be supported by a voucher

or other approved document gazetted by the Cabinet Secretary
containing the full details, clear narrations and particulars of the item or
items to which it relates.
100. Accounting Officers shall keep in all offices concerned with Books of accounts to
be kept by
receiving cash or making payments a cash book showing the receipts Accounting Officers.
and payments and shall maintain such other books and registers as may
be necessary for the proper maintenance and production of the accounts
of the Vote for which he or she is responsible.
101. (1) The structure of the reporting formats shall be based on Recording and
reporting basis.
the requirements of the Act.
(2) The Cabinet Secretary may from time to time amend the
reporting formats in accordance with the prescribed standards set by
the Public Sector Accounting Standards Board.
(3) The National Treasury shall issue financial instructions and
guidelines on application of accounting policies, bases, standards and
classification to be applied in financial reporting in line with the
standards set by the Public Sector Accounting Standards Board.
(4) An Accounting Officer shall prepare the financial statements
in a form that complies with the relevant accounting standards
prescribed by the Public Sector Accounting Standards Board, not later
than three months after the end of the financial year and submit them to
the Auditor General with a copy to the County Treasury, the Controller
of Budget and the National Treasury.
(5) Any expenditure on services of a confidential nature, the
purpose and the particulars of which cannot be made public, shall be
supported in the accounts by a certificate that the money has been paid,
and a declaration by the Cabinet Secretary responsible for the national
government entity and the relevant Accounting Officer that they have
satisfied themselves that the money has been properly expended, and
has not been used to supplement the emoluments of any officer.
(6) For the purposes of this Regulation, an accounting officer
shall only classify expenditure as confidential expenditure, if the
expenditure—
(a) is likely to prejudice the security, defence or international
relations of the Government of the Republic of Kenya;
(b) is likely to involve the disclosure of confidential
deliberations or decisions of the Cabinet or of a committee
of the Cabinet;
(c) is likely to divulge any confidential information
communicated in confidence by the national government to
a county government or a by a county government to the
national government and which would prejudice national
security or relations between the two levels of government;
(d) would unfairly prejudice the commercial interests of
anybody or person; and
(e) is likely, for any other reason, to form the basis for a claim
by a foreign state or persons on the national government or
county government in a judicial proceeding.
(7) The Accounting Officer shall be required under a closed door
session, and is permitted, to disclose to a special or joint committee of
Parliament and the President information or any other document on the
nature of confidential expenditure under this Regulation.
102. (1) Financial records may be maintained in manual or Financial records
and automation of
electronic form. financial operations.
(2) An Accounting Officer shall take all reasonable precautions

to guard against damage, destruction of or falsification of any financial
record required to be kept by the provisions of the Act and these
Regulations.
(3) An Accounting Officer shall satisfy himself or herself that
where an alteration of a financial record requires the authorization,
approval and, or deletion of any transaction or data whether electronic
or manual by any means other than in writing, that there is sufficient
audit trail which shall identify the person who approved the
transaction.
103. (1) Journal entries prepared for all adjustments shall be Accounting
adjustments journal.
authorised by the accounting officer or an officer designated by him or
her before posting them in a financial record.
(2) In all cases journal vouchers shall be supported by sufficient
explanations, authorisations and documentation to facilitate accounting
adjustments to be understood.
104. (1) All receipts and payments vouchers of public moneys Vouchers.
shall be properly supported by pre-numbered receipt and payment
vouchers and shall be supported by the appropriate authority and
documentation.
(2) All receipt and payment vouchers shall be or made out in
indelible ink and shall contain adequate narration of the particulars of
the services, goods or works procured and being paid for.
(3) All amounts appearing in a voucher shall be written in words
as well as in figures.
105. (1) An Accounting Officer or any other officer delegated in Powers to delegate
voucher approval.
writing by him or her may authorize payment vouchers on his or her
behalf for expenditure chargeable to his or her vote, provided such
expenditure is in respect of and within the provision of the services in a
National Treasury warrant, in accordance with law, regulations, tariff,
contract or agreement that may be applicable, and does not require
special authority in terms of any law, regulation or National Treasury
instruction.
(2) Accounting Officers may prescribe the financial limits and
other conditions within which this authority in paragraph (1) may be
exercised.
106. Unless otherwise exempted by an Act of Parliament, any Deposit accounts.

deposit which has remained unclaimed for 5 years may, with the
approval of the Cabinet Secretary, be paid into Consolidated Fund and
thereafter the Accountant-General may refund the deposit to any
person entitled thereto, if he or she is satisfied that the claim is
authentic.
107. (1) All the transactions relating to clearance and suspense Clearance and
suspense accounts.
accounts shall be supported by authentic and verifiable source
documents, clearly indicating the approved allocation.
(2) Where it is necessary and to account for revenue and
expenditure transactions in a clearing or suspense account, the
Accounting Officer shall ensure that—
(a) amounts included in clearing or suspense accounts are
cleared and correctly allocated to the relevant cost centres on
a monthly basis;
(b) monthly reconciliation’s are performed to confirm the
balance of each account; and
(c) reports on uncleared items are prepared on a monthly basis
and submitted to the National Treasury.
(3) The National Treasury shall prescribe in the financial manual
procedures to be used for management of balances in suspense or
clearing accounts.
108. Wherever practicable all payments of public monies made to Payments to
beneficiaries
persons outside Kenya shall be made by direct payment or payment residing outside
advice through the Central Bank of Kenya to such persons’ banks Kenya.
account or use of banker’s draft or through the national payment
system.
109. (1) For efficient and effective utilisation of electronic Use of electronic
systems for financial
systems in processing financial data, the National Treasury shall operations.
develop and regularly issue standard operating procedures and
instructions on the automated integrated financial management system
operations, use and maintenance.
(2) The Principal Secretary shall designate a person or persons in
writing to administer the automated integrated financial management
system.
(3) The system administrator shall ensure compliance of assigned
responsibilities and when necessary take appropriate measures.
110. (1) The Accounting Officer for a national government entity Restricted access to
systems.
shall institute appropriate access controls needed to minimise breaches
of information confidentiality, data integrity and loss of business
continuity.
(2) Access controls to be instituted shall include—
(a) uniform application forms for registration of new users,
deregistration of users and modification of user roles;
(b) processes of safeguarding completed application forms;

(c) segregation of duties;
(d) use of multi-factor authentication including standardization
of user primary identity linked to national identification
numbers, payroll numbers and assigned responsibilities; and
(e) utilization of appropriate password length for login.
(3) Users of the system under this regulation shall—
(a) not use or attempt to use the automated public financial
management system without the authorisation of the system
administrator;
(b) take all reasonable steps to maintain the integrity of
passwords and other security mechanisms;
(c) where a password becomes insecure or potentially insecure,
as soon as is practicable, implement a new secure password;
(d) not do anything that damages, restricts, jeopardises, impairs
or undermines the performance, usability, reliability,
confidentiality or accessibility of any digital information
system, programme, or other stored information data;
(e) not alter , delete or in any other way interfere with, any
information, data or files;
(f) be responsible for any unlawful entry on the automated
public financial management system using such persons
password;
(g) undertake any tasks assigned; and
(h) take all measures to ensure that on the last day of each
month, the financial period of the month is closed.
(4) Failure to adhere to the closing of financial periods or to
adhere to operational protocols in paragraph (3) shall be an offence
under the Act.
111. (1) The Public Sector Accounting Standards Board shall be Procedures for the
Public Sector
accountable to the Cabinet Secretary for matters relating to finance for Accounting
the effective, efficient and economical fulfilment of its purpose and Standards Board.
objectives.
(2) The Public Sector Accounting Standards Board shall prepare
and submit to the Cabinet Secretary a report indicating—
(a) their annual work plan demonstrating its priorities and
agenda on how it intends to meet its objectives and
responsibilities for following financial year; and
(b) their annual activities demonstrating the extent to which its
plans and mandate were achieved.
(3) The Cabinet Secretary may from time to time request a report
from the Public Sector Accounting Standards Board on its mandate and
such report shall be submitted within two weeks from the date of the
request.
PART X—EXPENDITURE MANAGEMENT AND CONTROL

112. (1) Where the Constitution or an Act of Parliament provides Consolidated Fund
Services.
for some specific categories of expenditure to be a direct charge on the
Consolidated Fund, such expenditures shall be included in the recurrent
budget estimates of the national government as part of the Consolidated
Fund Services.
(2) the Consolidated Fund Services shall be provided for in the
recurrent estimates, but shall not be subject to Parliamentary debate nor
to the expenditure limited by estimates nor vote on account;
(3) Consolidated Fund Services shall be administered by the
National Treasury.
(4) The National Treasury may arrange for another Accounting
Officer to make payment in the first place on its behalf against
subsequent reimbursement from the appropriate Vote of the
Consolidated Fund Services.
113. (1) If an Accounting Officer finds, after Appropriation Excess Vote.
Accounts are completed, that he or she has spent more than the total
vote, that Accounting Officer shall seek Parliamentary approval of the
National Assembly through the Cabinet Secretary for that Excess Vote.
114. (1) An Accounting Officer who is instructed by his or her Payments to which
an Accounting
Cabinet Secretary to make payment which for any reasons the Officer objects.
accounting officer has concerns, the Accounting Officer shall raise
those concerns in writing to the Cabinet Secretary.
(2) In the event that the Cabinet Secretary approves in writing for
the processing of the payment despite the concerns raised by the
Accounting Officer under paragraph (1), the Accounting Officer shall
obey the instructions without further responsibility.
(3) Upon payment, the accounting officer may proceed as
provided for under section 68(3) of the Act, and may send a copy of the
report to the Auditor-General.
115. (1) All purchases of goods, works and services from Goods, works and
services to be
suppliers, including capital investments, shall comply with the procured according
provisions prescribed in the Public Procurement and Disposals Act, to an approved
2005, and the Regulations made thereunder and shall have the prior procurement plan.
No.3of 2005.
approval of the Accounting Officer.
(2) Every year a procurement plan shall be prepared by
Accounting Officers to form the basis for procurement activities
undertaken by government entities in the fiscal year.
(3) The procurement plan in paragraph (2) shall, where
necessary, include estimated costs of procurement, insurance, clearing,
forwarding, warehousing and demurrage charges for goods imported
and have to undergo clearing and forwarding through ports of entry
into the country.
116. (1) Amounts charged to Voted Funds, which are recovered Recovery,
disallowance and
in the financial year in which payment was made, shall, on or before adjustment of
the closing of books of that financial year, be allocated to the budget payments.
item that was originally debited.
(2) Such amounts which are recovered after the closing of books
of a financial year shall be paid to the Consolidated Fund, provided that
such amounts have not been allocated to a clearing or suspense account
during the financial year in which payment was made.
117. (1) Where an A.I.E holder observes that it will not be Re- Vote of Budget.
possible to utilize all the funds allocated for a particular project in a
given financial year, the AIE holder shall inform the accounting officer
not later than February.
(2) The Accounting Officer will then surrender the resources to
the National Treasury and the National Treasury shall ensure that the
funds are re-voted for the project in the following financial year in
order to continue the implementation of the project.
118. (1) Accountable documents whether manual or electronic Accountable
documents.
shall be under strict control at all times and they shall include—
(a) indent forms (for supplies from government printer or
government stores);
(b) local purchase order;
(c) local service order;
(d) authority to incur expenditure;
(e) cheques;
(f) receipt books; and
(g) imprest warrants;
(2) The Accounting officer shall keep his or her stock of
accountable documents whether manual under lock and key, issuing
them in accordance with the daily needs of the service, and keeping an
accurate up-to-date record of their use by means of continuity control
sheets.
(3) Where the accountable documents are in electronic form, the
accounting officer shall ensure appropriate mechanism are put in place
for safeguarding and tracking them.
119. (1) Accounting Officers shall, subject to the provisions of Preservation of
accountable
the relevant national legislation, retain certain documents , of whatever documents, books
kind and such documents shall be preserved in the following and records.
circumstances—
(a) where they may be of value to the national archives; or
(b) if they are the subject of unfinished audit enquiries; or
(c) if they are likely to be needed for pension purposes.
(2) After the expiry of the retention periods under paragraph (3)
of this regulation, the information may, if required, be secured in an
alternative form that ensures the integrity and reliability of the data and
ensures that the information can be reproduced, where necessary.
(3) Subject to the overriding consideration under paragraph (1),
certain class of documents and records are to be preserved for a
stipulated minimum period of time as detailed in the Table below—
S/No Type of document Preservation period

1. Principal ledger 10 years
2. Cash books 10 years
3. Journals 3 years
4. Payment vouchers 5 years
5. Paid cheques or 3 years
electronic payments
6. Completed indent 12 months after the end of the financial
warrants year to which they relate.
7. Completed order 12 months after the end of the financial
forms year to which they relate.
8. Duplicate receipts 12 months after the end of the financial
year to which they relate.
9. Duplicate payment 12 months after the end of the financial
vouchers year to which they relate.
10. Receipt books: 6 months after date of completion but
(a) Fully used must be inspected by the Auditor
(b) Obsolete, partly General and the disposal noted in the
used main counterfoils receipts, book
registers.
Expenditure in relation to Human Resources

120. (1) Personnel management activities relating to the Expenditure in
relation to human
authorization of appointments, the authorization of payments and the resources.
recording of those payments may not be performed by the same officer.
(2) The budgetary allocation for personnel costs shall be
determined on the basis of a detailed costing of a human capital plan of
a national government entity as approved by the state department
responsible for public service management matters, the Public Service
Commission and National Treasury.
(3) The Accounting Officer of a government entity shall ensure
that the personnel cost of all appointees, as well as promotion and
salary increases, can be met within the budgetary allocation voted for
the national government entity.
(4) The responsible national government state department
responsible for public service management matter, the public service
commission, shall only approve establishment of new public service
positions after getting confirmation of availability of budgetary
provisions from the National Treasury.
(5) For purposes of ensuring sustainable wage bill, where the
Cabinet Secretary intends to approve any changes under this regulation,
he or she may consult the Salaries and Remuneration Commission.
(6) No change relating to the above matters shall be introduced
into the expenditure estimates of the respective national government
entity without the requisite authority.
121. (1) Personnel costs shall be classified based on the Payroll certification
by accounting
Government Finance Statistics Manual and the standard chart of officer.
accounts used in capturing government expenditure.
(2) Each employee shall be linked to a program in the budget of a
national government entity’s Vote.
(3) At least once every month, the accounting officer shall certify
the correctness of the payroll.
122. (1) The National Treasury shall set requirements for issuing Deduction codes to
be assigned to all
payroll deduction codes for all discretionary and non-discretionary payroll deductions.
deductions.
(2) The Accounting Officer shall specify the purpose for which
the code is applied for.
(3) The National Treasury may levy a fee on the discretionary
deductions which shall be paid by the receiving institution.
123. (1) Remunerative benefits and other allowances for Remuneration of
members of
members and the staff of the secretariat of special committees and committees and
commissions of enquiry shall be determined by the national commissions of
government entity responsible for matters relating to public service inquiry.
management in consultation with the Public Service Commission and

the Cabinet Secretary taking into account the recommendations by the
Salaries and Remuneration Commission.
(2) The remuneration of all members of a commission or
committee shall be disclosed as foot notes to the financial statements of
the national government entity by the accounting officer.
124. Where the chairperson request a non-official member of a Services rendered by
members during
commission or committee to render services in his or her private time, private time.
other than the normal preparations for meetings, the person may be
paid an allowance as determined by the relevant Accounting Officer.
125. No offer of compensation in settlement of any claim against Compensation and
ex-gratia payment.
the Government or ex gratia payment may be made without a prior
authority of the National Treasury, except where powers are available
to the Accounting Officer.
Benefits and Allowances of Public Officers
126. (1) The accounting officer may only authorize salary Authority for loans
and advances
advances for public officers under him or her to be paid if there exists a
budgetary provision in his or her Vote.
(2) No staff loan or advance which is properly chargeable to a
head of expenditure shall be debited to a salary advance expenditure
item.
127. (1) The Cabinet Secretary may by way of a gazette establish Benefits and
allowances for
a mechanism for public officers to access loans including car loans, Public Officers..
mortgage housing loans, motor cycle and bicycle loans.
(2) Despite the provisions of paragraph (1), the Cabinet Secretary
may issue guidelines on benefits and allowances for public officers by
way of a notice in Kenya Gazette.
Lease Financing
128. (1) For the purpose of this regulation, a lease is regarded as Lease financing
transactions by
a contract that gives the lessee (the renter) the right to the use of accounting officers
property, plant or equipment for a fixed period of time with a fixed of state and county
schedule of payments to the lessor (the owner). departments.
(2) The accounting officer of a state or county department may,

for the purpose of conducting the government entity’s business, enter
into operating lease transactions.
(3) The accounting officer of a state or county department may
under no circumstances enter into finance leases (non-operating lease)
without the approval of the relevant National Treasury.
(4) For the purpose of paragraph (3), a lease is considered to be a
finance lease if—
(a) the lease transfers ownership of the asset to the government
entity by the end of the lease period;
(b) the government entity has the option to purchase the asset at
a price which is expected to be sufficiently lower than the
fair value at the date the option becomes exercisable, so that
at the inception of the lease it is reasonably certain that the
option will be exercised;
(c) the lease term is for the economic life of the asset even if the
title is not transferred;
(d) at the inception of the lease, the present value of the
minimum lease payments amount to at least 90 % of the fair
value of the leased asset;
(e) the leased asset is of a specialised nature such that only the
government entity can use the asset without major
modifications being made;
(f) the lessor’s losses associated with cancellation of the lease
by the lessee is borne by the lessee; and
(g) the leased asset cannot be easily replaced by another asset.
(5) The National Treasury shall monitor all finance lease
transactions and report.
Management of Intergovernmental Transfers
129. For purposes of Regulations 130, 131, 132, 133, 134 and Definitions of terms.
135—
(a) “national Accounting Officer” refers to an Accounting
Officer of a national government entity; and
(b) “county Accounting Officer” refers to an Accounting
Officer of a county government entity.
130. (1) A national government accounting officer transferring a Duties of National
Government
conditional or unconditional allocation to a county government in Accounting Officers
accordance with an Act of Parliament shall be responsible for— in managing
intergovernmental
transfers to counties.
(a) ensuring that transfers to a county government—

(i) are made in accordance with the frameworks governing
the conditional and unconditional transfers to county
governments;
(ii) are deposited only into the County Revenue Fund of a
County Government; and
(iii) are made in accordance with the relevant Act of
Parliament unless the allocations are withheld or
stopped in terms of Article 225 of the Constitution;
(b) ensuring that the transfer of funds is done only after
information required in terms of the laws and frameworks
governing intergovernmental transfers has been secured and
all relevant information has been provided to the National
Treasury.
(2) Upon approval of the County Allocation of Revenue Bill by
Parliament, the Cabinet Secretary shall communicate the frameworks
under paragraph (1)(b), to county governments within fifteen days after
the approval.
(3) A national government accounting officer who transfers any
conditional allocation to a county government shall, in addition to any
other requirement in terms of the Act or any other applicable law or
framework governing the allocation, monitor and evaluate the financial
and non-financial performance of programmes, fully or partially
funded by the allocation and submit to the National Treasury—
(a) a quarterly report within 30 days after the end of each
quarter;
(b) an annual report within three months after the end of the
financial year;
(c) the attendant conditions of any conditional grant to a county
accounting officers.
(4) The reports referred to in paragraph (3) shall include
information that—
(a) indicate the total amount of funds transferred to each county
government;
(b) indicate the amount of funds withheld or stopped from any
county government, the reason for withholding or stopping
and the action taken by the national government Accounting
Officer and the county government Accounting Officer to
deal with the matters that necessitated the withholding or the
stoppage of the transfer;
(c) indicate any reductions or additions of conditional or
unconditional allocations to county governments authorized
by the National Treasury;
(d) indicate the funds, if any, spent by the national government
Accounting Officer on the administration of the transfer to
the counties; and
(e) that may be required under the relevant law or framework

governing the transfer by the National Treasury.
131. (1) A county government Accounting Officer— Duties of County
government
Accounting Officers
in managing
intergovernmental
transfers.
(a) shall be responsible for ensuring compliance with
requirements of the relevant law and frameworks governing
the management of conditional and unconditional transfers
from the national government;
(b) shall ensure all transfers from the national government are
included separately in the County Government’s
Appropriation Bill.
(c) shall monitor and evaluate the financial and non-financial
performance of programmes funded by a conditional and
unconditional transfer from the national government and
prepare and submit to the relevant national accounting
officer —
(i) a quarterly report within 15 days after the end of each
quarter in a format prescribed by the Public Sector
Accounting Standards Board;
(ii) an annual report within two months after the end of each
financial year in a format prescribed by the Public
Sector Accounting Standards Board;
(d) the reports submitted in paragraph (1)(c) under this
regulation shall specify—
(i) actual transfers received by the county government
from the national government;
(ii) actual expenditure incurred in respect of the transfer;
(iii) any reallocations authorised by the relevant national
accounting officer;
(iv) to what extent the county government complied with the
provisions of the Act, these Regulations and met the
conditions provided for in the relevant framework of
such a transfer;
(v) the steps taken to deal with non-compliance with any of
the provisions of the Act and these Regulations or the
conditions provided for in the relevant frameworks of
such a transfer;
(vi) the extent to which the objectives and outputs of the
transfer were achieved;
(vii) any other information as may be specified in the
relevant framework for that transfer and any other
information accounting officer may determine.
132. The National Treasury may provide additional guidelines on Formats of annual
reports on
how national government Accounting Officers and County government intergovernmental
Accounting Officers reports on conditional transfers on a quarterly and transfers.
annual basis, to facilitate the audit of transfers to county governments.
133. (1) Despite the provisions of any other law, where it is Transfer made in
error or fraudulently.
determined that the transfer of funds to a county government was done
in error or fraudulently such a transfer shall be regarded as not legally
due to that county government.
(2) An erroneous transfer contemplated in paragraph (1), may be
recovered immediately or set-off against future transfers to that county
government, which would otherwise become due to the county
government.
134. (1) If the County Allocation of Revenue Bill submitted to Equitable transfer
before approval of
Parliament for a financial year has not been approved by Parliament or County Allocation
is not likely to be approved by Parliament, by the beginning of the of Revenue Bill.
financial year, the Controller of Budget may authorize withdrawals of
up to fifty (50%) percent from the Consolidated Fund based on the last
County Allocation of Revenue Act approved by Parliament for the
purposes of meeting expenditure of the county governments for the
financial year.
(2) The authority under paragraph (1) shall cease upon accent of
the County Allocation of Revenue Act for the financial year.
(3) The transfer to county governments made under paragraph (1)
under this regulation shall form part of their equitable transfer for the
financial year.
135. (1) Any state organ involved in an intergovernmental Liability for costs
incurred in violation
dispute regarding any provision of this Act or any division of revenue of principles of
matter or allocation shall, before approaching a court to resolve such cooperate
dispute, make every effort to settle the dispute with the other state governance and
intergovernmental
organ concerned, including exhausting all alternative mechanisms relations.
provided for resolving disputes in relevant legislation.
(2) If a court is satisfied that a state organ, in an attempt to
resolve a dispute has not exhausted all the mechanisms for alternative
dispute resolutions as contemplated in section 35 of the
Intergovernmental Relations Act, 2012, and refers the dispute back for No.2 of 2012.
the reason that the state organ has not complied with subsection (1), the
expenditure incurred by that state organ in approaching the court shall
be regarded as wasteful expenditure.
(3) The costs in respect of such wasteful expenditure referred to
in paragraph (2) shall, in accordance with a prescribed procedure, be
recovered without delay from the person who caused the state organ
not to comply with the requirements of paragraph (1).
PART XI—MONITORING AND REPORTING
136. (1) The Cabinet Secretary responsible for matters relating to Responsibility for
monitoring,
planning shall prescribe a framework for monitoring and reporting on evaluation and
non-financial performance for use by accounting officers in evaluation reporting.
of. programmes and projects by measuring—
(a) financial indicators which shall capture expenditures on the

implementation of programmes and projects;
(b) outputs indicators which shall measure what is directly
supplied through the implementation of the programmes and
projects; and
(c) outcome or results indicators of the programme or projects
which capture the expected effects on intended beneficiaries
of the programme or project.
(2) The Cabinet Secretary responsible for matters relating to
planning, shall also set up a system that shall facilitate efficient and
effective data collection, storage and exchange to monitor and report
on non-financial -performance of the national government entity’s
individual programmes and projects.
(3) An Accounting Officer shall put in place efficient and
effective systems to monitor and report on non-financial -performance
for his or her national government entity’s individual programmes and
projects based on the prescribed format under paragraphs (1) and (2)
and submit a report to the Cabinet Secretary responsible for planning
with a copy to the Auditor-General.
(4) The Cabinet Secretary responsible for planning shall
consolidate all the reports received under paragraph (2), and submit a
report to the Cabinet Secretary and publish and publicize it within
seven (7) days after submitting it to the Cabinet Secretary.
137. (1) An Accounting Officer shall provide footnotes to the Footnotes to
appropriation
annual financial statements prepared and submitted to the Auditor- accounts.
General pursuant to section 81 of the Act.
(2) The footnotes to the financial statements referred to under
paragraph (1) of this regulation, shall at the minimum include—
(a) the details of Appropriation-in-Aid;
(b) excess Appropriation-in-Aid, if any;
(c) reasons for material differences between approved estimates
and actual expenditure, or actual collection of
Appropriation-in-Aid;
(d) losses and write-offs;
(e) nugatory and similar payments, compensation and ex-gratia
payments;
(f) arrears of Appropriation-in-Aid and Appropriation- in-Aid
abandoned; and
(g) advances appropriately analysed, including imprests.
(3) Where, in respect of any footnotes referred to, in this
regulation, there is nil return that particular footnote shall be omitted
entirely.
138. An accounting officer of a national government entity shall special public funds
and state
disclose in the annual financial and non-financial report a list of special corporations
funds or state corporations controlled by national government entity. additional reporting
responsibilities.
PART XII—ASSET MANAGEMENT

139. (1) The Accounting Officer of a national government entity Responsibility of an
accounting officer of
shall take full responsibility and ensure that proper control systems a national
exist for assets and that — government entity
on assets.
(a) preventative mechanisms are in place to eliminate theft,
security threats, losses, wastage and misuse;
(b) movement and conditions of assets can be tracked; and
(c) stock levels are at an optimum and economical level.
(2) The Accounting Officer shall ensure that processes and
procedures both electronic and manual are in place for the effective,
efficient, economical and transparent use of the government entity’s
assets.
(3) The National Treasury shall provide guidelines on assets
management.
140. (1) Accounting Officer shall be responsible for the proper Responsibility for
national government
custody, care and use of government inventories under their control, entity inventory.
including imported goods in vessels awaiting discharge and in customs
warehouses awaiting clearance.
(2) Despite paragraph (1) under this regulation, an Accounting
Officer shall be responsible for the general management of government
inventories held within that national government entity.
(3) Accountability shall only be discharged when government
inventories have been—
(a) consumed in the course of public business and records are
available to show that the government inventories have been
consumed;
(b) worn out in the normal course of public business and
removed from the stores records and has been approved by
accounting officer or they have been disposed of in
accordance with the Public Procurement and Disposals Act,
2005; or No. 3 of 2003.
(c) lost, stolen, destroyed, damaged or rendered unserviceable
other than by fair wear and tear, and if removed from the
store’s record and has been approved in line with section 69
of the Act.
(4) If accounting officer is satisfied that the retention of any
government inventories is no longer in the public interest, the
accounting officer may authorize disposal in accordance with the
Public Procurement and Disposals Act, 2005, and the Regulations No. 3 of 2003.
made thereunder.
(5) Removal from the store’s record under paragraph (3) shall be
reported to National Treasury by the accounting officer.
(6) Where an Accounting Officer has reason to believe that any
person—
(a) has received government inventory and has not duly handed
it over;
(b) has received government inventory for which the person is

accountable but has not duly accounted for it; or
(c) has in hand government inventory which has not duly been
applied to the purpose for which they were collected,
the Accounting Officer shall serve a notice on the public officer
requesting that within a time specified in the notice, the person shall
pay for, account for, or apply the inventory and submit to the
Accounting Officer satisfactory evidence that this has been done.
(7) The Accounting Officer of a government entity shall in
consultation with a technical department review, at least annually
when finalising the budget, all fees, charges, rates, tariffs or scales of
fees or other charges relating to the letting of state property to ensure
sound financial planning and management.
141. (1) When assets or liabilities of a government entity are Accounting
Officers’
transferred to another government entity or other institution in terms of responsibilities upon
legislation or following a reorganization of government functions, the transfer of assets and
Accounting Officer for the transferring government entity shall be liabilities.
required to—
(a) identify an inventory of such assets and liabilities; and
(b) provide the Accounting Officer for the receiving government
entity or other institution with necessary records, including
human resource records of staff to be transferred.
(2) Both the Accounting Officer for the transferring national
government entity and the Accounting Officer for the receiving
national government entity or other institution shall sign the inventory
when the transfer takes place.
(3) The Accounting Officer for the transferring national
government entity shall file a copy of the signed inventory with the
National Treasury and the Auditor-General within two weeks of the
transfer.
142. Where any money, property or right accrues to the national Assets accruing to
the Government by
government by operation of law, the National Treasury, may exercise Operation of Law.
all powers, authority and prerogatives, and fulfill any obligation on
behalf of national governments.
143. (1) The Accounting Officer shall be responsible for Register of assets.
maintaining a register of assets under his or her control or possession as
prescribed by the relevant laws.
(2) The register of land and buildings shall record each parcel of
land and each building and the terms on which it is held, with reference
to the conveyance, address, area, dates of acquisition, disposal or major
change in use, capital expenditure, lease hold terms, maintenance
contracts and other pertinent management details.
(3) All items of furniture and equipment issued for a
government’s quarters or offices, large tools for government works,
plant, equipment, vehicles or launches (large motor boats) shall be
recorded in a register.
(4) All acquisitions or assignment of immovable property shall

be notified to the National Treasury.
(5) All acquisitions or assignment of land with or without
buildings shall be notified to the National Treasury.
144. (1) Official vehicles purchased for use by Cabinet Purchase and
capacity of official
Secretaries, Speakers of the National Assembly and the Senate, the vehicles for certain
Chief Justice, the Attorney-General, Secretary to the Cabinet and the government officers.
Head of Public Service, shall not exceed 2600 cc for saloon cars and
3000 cc for 4 x 4 utility vehicles.
(2) Official vehicles purchased for use by Principal Secretaries,
Accounting Officers, Judges of the Supreme Court and Court of
Appeal, Director of Public Prosecution, Clerk of the National
Assembly and the Senate, Heads of Constitutional Commissions and
Independent Offices, commissioners of constitutional commissions,
Inspector-General of Police shall not exceed 2400 cc for saloon cars
and 3000 cc for 4 x 4 utility vehicles.
(3) Official vehicles purchased for use by other officers on Job
Group R and above and High Court Judges and Chief Executive of
state corporations shall not exceed 2000 cc for saloon cars and 2900 cc
for 4 x 4 utility vehicles.
(4) This section shall not apply in case of vehicles for official use
by the President and the Deputy President.
(5) The Cabinet Secretary may by way of notice in the gazette
specify category of offices and the category of vehicles to be used by
those public officers.
(6) Any person who contravenes the provisions of this regulation
commits an offence.
Losses and Write offs
145. For purposes of this Sub-Part, the term losses includes— Definition.
(a) actual loss or destruction of, or damage (other than fair wear
and tear) to, or failure to account for the disposal of public
money, stamps, securities or property, movable or
immovable (including any money or other property not
belonging to the national government which is held or used
by an officer in his official capacity either alone or jointly
with any other person); or
(b) non-collection of any moneys due or belonging to national
government, or for collection of which the national
government is responsible; or
(c) payments made or liabilities incurred without or in excess of
any statutory, administrative or any other authority,
including nugatory and similar payments and payments
arising from incorrect certificates, and irregular or excess
issues of stores, rations, etc.; or
(d) unauthorized use of national government stores, vehicles
buildings, equipment or any other property, or of service
(e.g. repair workshops) provided for official purposes; or
(e) compensation and similar payments (including third party

claims in respect of vehicle accidents) legal and court costs
and any other additional expenditure or liability which was
avoidable and need not have been incurred.
146. (1) When a loss as defined in this regulation is discovered, Accounting officers
responsibility for a
the Accounting Officer shall investigate the circumstances of the national government
loss— entity.
(a) to ascertain the extent and amount of the loss; or

(b) to determine whether control or operational arrangements
need to be improved in order to prevent the occurrence of
similar losses in the national government entity; or
(c) to determine whether any offence or other fault of a public
officer has been revealed by the loss.
147. Where investigations reveals that an offence has been Revelation of
offence.
committed, it shall be dealt with in accordance with the relevant laws
pertaining to criminal offences, as appropriate, and the relevant
disciplinary measures but the investigation of a loss shall not constitute
a disciplinary enquiry.
148. (1) A loss may be revealed by defalcation or loss due to any Procedure for
handling losses.
cause, and thereafter investigation proceedings shall be commenced
immediately and a report made to the Accounting Officer and where
necessary to the police;
(2) The report referred to under paragraph (1), shall give details
on the amount involved and any other information available including a
brief account of actions to prevent further loss, and effect recovery.
(3) On receipt of the report, the accounting officer shall give
instructions regarding accounting entries, if any, to be made and any
other action which appears to him or her to be necessary.
(4) Where a liability has been established for a third party,
payment shall be made, provided that there is no reason to suspect that
the third party had any responsibility for the loss and the payment shall
not await the results of the investigations of the loss.
(5) If the loss falls within the accounting officers powers under
section 69 (1) of the Act, he or she shall authorize the write off of the
loss up to an amount not exceeding hundred thousand (KSh. 100,000)
shillings in any one incidence and submit a report to the National
Treasury and the Auditor-General.
(6) If the loss falls within the Cabinet Secretary’s powers under
section 69 (2) of the Act, the accounting officer shall seek the approval
of the Cabinet Secretary to authorize him or her to write off the loss of
an amount exceeding the one hundred thousand (KSh. 100,000)
shillings but not exceeding one percent of the national governments’
entity’s approved estimates excluding the Consolidated Fund Services
in any one incidence.
(7) The approval of the Cabinet Secretary shall be communicated
to the accounting officer in writing with a copy to the Auditor-General.
(8) Any loss exceeding the threshold for the Cabinet Secretary
shall fall within the Cabinet powers under section 69 (3) of the Act, the
Accounting Officer shall—
(a) seek the approval of the Cabinet through the Cabinet
Secretary to authorize him or her to write off the loss
exceeding one percent of the national government entity’s
approved budget in any one incidence;
(b) the approval of the Cabinet shall be communicated to the
Accounting Officer through the Cabinet Secretary in writing
with a copy to the Auditor General;
(c) the approval of the Cabinet shall be communicated to the
Accounting Officer through the Cabinet Secretary in writing
with a copy to the Auditor General;
(9) The accounting officer shall also make a disclosure in the
financial statements of that national government entity.
149. (1) For the purposes of this regulation, cash deficiency is a Categories of losses.
loss arising from a deficiency of cash or other negotiable instruments,
whether it arises from a simple cash shortage or from the use of
fictitious entries or vouchers to conceal the existence of a deficiency.
(2) Revenue losses may arise from—
(a) uncollectable revenue when debts due to national
government cannot be collected by reason that the debtor
cannot be traced or is insolvent; and
(b) failure to assess or collect in circumstances which preclude
subsequent assessment or collection, and include any loss of
interest caused by delay in making payments into the
appropriate public funds or from the making of irregular
advances.
(3) Expenditure losses may arise from—
(a) irrecoverable overpayments, when an excess payment has
been made by error and recovery cannot be effected because
the recipient cannot be traced or is otherwise incapable of
making repayment;
(b) nugatory payments, which arise in circumstances such as,
the incurrence of a penalty in which a national government
entity has been legally obliged to make payment, but for
which no corresponding receipt of goods or services has
been derived;
(c) fraudulent payments which arise from transactions which
involve a breach of the Criminal Code, by the use of Cap.75.
falsified documents or certificates to steal money or other
property belonging to a Government and it is not
recoverable.
(4) Inventory and equipment losses may arise from—
(a) deficiencies, including fraudulent issues of stores from stock

and issues of stores without proper evidence of use;
(b) damage or deterioration of goods in stock; or
(c) loss by accident in so far as they relate to equipment and
inventories in use.
(5) Financial losses may arise from—
(a) irrecoverable advances and loans when moneys due to a
national government entity cannot be recovered by reason of
a debtors default and include default on National
Government Guarantees;
(b) irregular advances and loans when money cannot be
recovered because a national government entity cannot
establish a claim against any person or institution, as in the
case of expenditure wrongly charged to advances, or
advances and loans made without agreement for recovery;
(c) reduction of financial asset where the value of any financial
asset has to be reduced by reason of failure or capital
restructuring of an enterprise; or
(d) losses on sale of securities where the losses are aggregated
with gains over the financial year, and any net loss is written
off at the end of the year.
(6) Miscellaneous losses may arise from—
(a) loss of fixed fee receipts; or
(b) the loss of safe keys of any government safe or the
compromise of any combination lock; or
(c) the cost of altering locks and providing new keys or
combinations; or
(d) the value of any missing items from the safe, or
(e) irrecoverable claims dealt with as laid down in these
Regulations.
150. (1) The accounting officer of a national government entity Investigation of
every case of loss.
shall cause an investigation to be conducted into every reported case of
loss, and where the accounting officer of that entity is implicated in the
loss, the Cabinet Secretary shall be the appropriate authority to cause
investigation to be conducted.
(2) In the case where the investigation report implicates the
accounting officer, Cabinet Secretary shall revoke the designation and
also report the matter to the relevant authority.
151. If the report of the investigating authority indicates that Defective systems.
systems currently in operation, including those for the training of staff
are defective, the accounting officer of the national government entity
shall consult with the National Treasury to consider measures for
rectification.
152. (1) Recovery of the value of a loss, whether by recovery Financial liability of
officers.
proceedings under these Regulations, shall constitute a settlement of a
civil claim against the officer arising from the loss.
(2) Recovery of a loss shall not be a substitute for criminal

prosecution or disciplinary proceedings.
153. The Accounting officer shall maintain a register of all losses Annual statement
of losses.
incurred by his or her national government entity and attach a list of all
losses incurred during that year to the financial statements submitted to
the Auditor-General for audit with a copy to the National Treasury.
154. Where any doubt arises on the correct classification of a loss Clarifications on
classification of
or the accounting procedure required the directions of the National losses.
Treasury shall be sought.
155. Where goods are received damaged or incomplete and such Claims on damaged
or incomplete goods.
goods are subject to a claim on suppliers, insurers or carriers, they shall
not constitute a loss until the claims prove irrecoverable.
156. (1) The fact that losses arise from un-collectable revenue, Investigation of
losses
irrecoverable overpayments, or irrecoverable claims at the time of
disposal does not preclude the prior investigation of circumstances of
the losses.
(2) Applications for write off shall be accompanied by an
investigation report indicating whether remedial accounting or other
action is necessary.
157. (1) An Accounting Officer may only write off losses if he or Writing off of
losses.
she is satisfied that —
(a) all reasonable steps have been taken to recover the losses
and the loss is irrecoverable; or
(b) he or she is convinced that —
(i) recovery of the loss would be uneconomical;
(ii) it would be to the advantage of the state to effect a
settlement of its claim or to waive the claim.
(2) An Accounting Officer shall ensure that all losses written off
are done in accordance with this Act, these regulations or any other
relevant legislation.
158. Interest may be charged on recoverable losses at the Central Interest payable on
recoverable losses.
Bank Rate.
159. The authorization of disposal of a case of loss does not Right of the
Auditor- General
prejudice the right of the Auditor-General to carry out further
investigation.
PART XIII—INTERNAL AUDIT AND AUDIT
COMMITTEES
160. (1) Internal auditors shall— Mandate of internal
auditors.
(a) review and evaluate budgetary performance, financial
management, transparency and accountability mechanisms
and processes in national government entities, including
Parliament and Judiciary;
(b) have a duty to give reasonable assurance through the audit
committee on the state of risk management, control and
governance within the organization; and
(c) review the effectiveness of the financial and non-financial

performance management systems of the entities.
161. Internal auditors shall comply with the International Compliance with
professional
Professional Practices Framework as issued by the Institute of Internal standards and code
Auditors from time to time and shall conduct audits in accordance with of ethics.
policies and guidelines issued by the Public Sector Accounting
Standards Board to ensure uniformity and consistency across national
government.
162. (1) The Head of Internal Audit unit under a national Independence of the
internal auditor.
government entity shall enjoy operational independence through the
reporting structure by reporting administratively to the Accounting
Officer and functionally to the Audit Committee.
(2) An Accounting Officer shall ensure that the organizational
structure of the internal audit unit facilitates —
(a) the entity to accomplish its internal audit responsibilities;
(b) the internal auditor with sufficient authority to promote
independence and to ensure broad audit coverage, adequate
consideration of internal audit reports;
(c) appropriate action to be taken on internal audit
recommendations; and
(d) the internal auditor to be independent of the programs,
operations and activities he or she audits to ensure the
impartiality and credibility of the internal audit work
undertaken.
(3) The internal auditor shall have unrestricted, direct and prompt
access to all records, officials or personnel holding any contractual
status and to all the premises and properties of the entity.
(4) The internal auditor shall respect the confidential nature of
information and shall use such information with discretion and only in
so far as it is relevant to reach an internal audit opinion.
(5) All internal audit activities shall remain free of influence by
any element in the organization, including matters of audit selection,
scope, procedures, frequency, timing, or report content to permit
maintenance of an independent and objective mental attitude necessary
in rendering reports.
(6) Internal auditors shall have no direct operational
responsibility or authority over any of the activities they review, and
accordingly, they shall not develop nor install systems or procedures,
prepare records, or engage in any other activity which would normally
be audited.
The Internal Auditor-General Department of the National
Treasury
163. (1) The office of the Internal Auditor-General shall be an Independence of
Internal Auditor-
office in the National Treasury. General.
164. (1) The Internal Auditor-General, in leading the internal Functions of Internal
Auditor-General
audit function within the National Treasury, is responsible for policy
formulation and strategic direction of internal audit function within the Department.
national government entities including—
(a) advising the Cabinet Secretary and the Principal Secretary
on emerging issues in internal auditing;
(b) developing and implementing the use of innovative
approaches in performing independent assessment of
systems, controls and efficiencies guided by professional
standards;
(c) supporting the entities efforts to achieve their objectives;
(d) promoting national government-wide risk management and
provide the management with consulting services to improve
the overall national government operations;
(e) providing capacity building for both levels of governments
including developing curriculum, training materials and
undertake training for audit committees; and
(f) reporting annually to the National Treasury on the internal
audit function performance.
165. (1) The Accounting Officer shall ensure that the national The role of
Accounting Officer
government entity develops— in risk management.
(a) risk management strategies, which include fraud prevention
mechanism; and
(b) a system of risk management and internal control that builds
robust business operations.
166. (1) Each year the internal audit unit of a national Performance
appraisal.
government entity shall assess its own effectiveness through an internal
performance appraisal and shall carry out annual review of the
performance of the internal audit activity commenting on its
effectiveness in the annual report to National Treasury.
(2) Each year the Audit Committee shall carry out annual review
of the independence, performance and competency of the internal audit
unit and comment on their effectiveness in the annual report.
(3) At least once every three years but not more than five years,
internal audit unit shall undergo a professional assessment of its
effectiveness undertaken by a professionally recognized body or
institution.
167. When indications of fraud, material breaches and wasteful Reporting material
breaches and
expenditure have been identified in a State Organ, or any other national persistent material
government entity in sections 92 of the Act, the head of the internal breaches.
audit unit shall immediately notify the Cabinet Secretary.
168. An internal auditor shall not perform audit assignments for Prohibition from
conducting
providing assurance relating to activities and structures on which he or assurance services.
she has provided consulting services or in which he had been employed
over in the last twenty four months.
169. Heads of internal audit units and the internal auditors shall Disciplinary liability
on internal auditors.
bear legal and disciplinary liability for failure to discharge their
responsibilities under the Act and these Regulations:
Provided that assurance procedures alone even when performed

with due professional care shall not be a guarantee that all significant
risk shall be identified.
Internal Audit Planning, Performance and Reporting
170. (1) Internal audit planning shall be carried out on the basis Risk based audit
assessment strategic
of risk assessment and shall be set out in a three-year strategic plan, on plan.
the basis of which an annual internal audit unit plan shall be developed.
(2) The annual work plan developed in paragraph (1) of this
regulation shall be—
(a) submitted to the audit committee by the 15th February each
financial year; and
(b) approved by the audit committee and shared with the
Accounting Officer of that entity, in sufficient time for
inclusion in the budget of that entity.
171. (1) The findings and recommendations arising from each Communicating
results.
internal audit assignment shall be promptly reported to the accounting
officers.
(2) The final report, including the actions taken by the accounting
officer shall be reported to the audit committee in the format
determined by the Cabinet Secretary.
(3) When updating the management of the progress of an audit
assignment, the internal auditor shall—
(a) give an oral preliminary report which shall be confirmed in
writing within seven (7) days;
(b) discuss the findings, conclusions and recommendations with
the auditee;
(c) issue a signed written report after each internal audit
assignment that is objective, clear, concise, constructive and
timely;
(d) give reports which clearly present the purpose, scope and
results of the audit; and
(e) give reports with recommendations for potential
improvement, suggestions of corrective actions and
acknowledgement of satisfactory performance.
Implementation of audit recommendations
172. (1) The accounting officer of the concerned entity shall be Enforcement of
internal audit
responsible for the implementation of the recommendations made in recommendations.
the audit reports and shall develop response and action plan which he
or she shall submit to the Chairperson of the audit committee within
fourteen days.
(2) The response and action plan submitted to chairperson of the
audit in paragraph (1) of this regulation shall be submitted to the Audit
Committee for follow up to ensure their implementation.
173. (1) Each head of internal audit shall prepare a quarterly Preparation and
submission of
internal audit report which shall cover areas provided for in guidelines quarterly and annual
and shall be in the format issued by the Cabinet Secretary. audit reports.
(2) The quarterly report in paragraph (1) of this regulation shall

be submitted within 14 days of the end of the quarter to the accounting
officer of the concerned entity, the Audit Committee and the National
Treasury.
(3) At the end of each financial year, the Internal Auditor-
General shall prepare for the national government clear and
comprehensible annual report that consolidates the quarterly audit
assurance reports prepared by all internal audit units in national
government entities, in accordance with formats prescribed by the
Accounting Standards Board.
Audit Committees
174. (1) Subject to paragraph (2) of this regulation, each national Establishment of
audit committees.
government entity shall establish an audit committee.
(2) The National Treasury, where deemed necessary, may
approve the sharing of one audit committee by two or more entities.
(3) In the case of a shared audit committees referred to in
paragraph (2), the appointing authorities of the concerned entities shall
jointly appoint the chairperson and members of the joint audit
committee in consultation with the National Treasury.
(4) There shall be a minimum of three members, excluding a
person who shall be appointed to represent the National Treasury in
each audit committee and a maximum of five.
(5) The chairperson of an audit committee shall be independent
of the national government entities, be knowledgeable of the
organization, have the requisite business and leadership skills and shall
not be a political office holder.
(6) In addition to paragraph (5), majority of members appointed
to the audit committee shall not be past or present employees of the
entity, and shall not have served as an employee or agent of a business
organisation which has carried out any business with the concerned
entity in the last two years.
(7) All members of an audit committee shall—
(a) have a good understanding of government operation,
financial reporting or auditing; and
(b) have a good understanding of the objects, principles and
functions of the entity to which they are to be appointed.
(8) Each Accounting Officer of an entity shall ensure that the
audit committee is adequately funded and supported.
(9) The chairperson of an audit committee shall not serve
concurrently as a member of any other audit committee of the
concerned national government entity, but its members can serve in up
to a maximum of three audit committees at the same time.
(10) The Public Sector Accounting Standards Board shall

prescribe guidelines for appointment of audit committees to be
approved and gazetted by the Cabinet Secretary.
175. The main function of the audit committee shall be to— Duties of the audit
committees.
(a) support the Accounting Officers with regard to their
responsibilities for issues of risk, control and governance
and associated assurance but the responsibility over the
management of risk, control and governance processes
remains with the management of the concerned entity; and
(b) follow up on the implementation of the recommendations of
internal and external auditors.
176. (1) The Accounting Officer of a national or county Composition of
audit committees.
government entity shall not be a member of the audit committee, but
shall attend a meeting of the audit committee by the invitation of the
chairperson of the committee.
(2) Audit Committee members shall be persons of integrity and
meet the requirements of Chapter Six of the Constitution.
177. (1) Members of audit committees shall be appointed, for a Terms of
appointment.
term of three years and shall be eligible for re-appointment for a further
term of three years.
(2) Despite the provision of paragraph (1), after expiry of every
term at least one third of the committee shall retire and not be eligible
for re-appointment.
(3) The roles and responsibilities of the audit committee shall be
laid out in the guidelines issued by the Public Sector Accounting
Standards Board.
178. (1) A person shall cease to be a member of an audit Vacancy of office.
committee if —
(a) that person is convicted of a criminal offence and sentenced
to a term of imprisonment of not less than six months; or
(b) that person is absent from two consecutive regular meetings
of the committee without leave of absence; or
(c) that person resigns, in writing, from the audit committee; or
(d) that persons’ term of office expires; or
(e) that person ceases to be a member by virtue of withdrawal of
his or her nomination to the audit committee by the
nominating institution; or
(f) that person becomes an employee or officer of the concerned
entity; or
(g) that person is discovered to have a conflict of interest as
described in at the time of his appointment and failed to
disclose it; or
(g) the audit committee is disbanded.
(2) The National Treasury shall be informed of any contemplated

termination of the services of a person serving on an audit committee
for its concurrence.
Functions and responsibilities of the audit committee
179. (1) The audit committee shall meet at least once in every Meetings of the
audit committee.
three months.
(2) Each member of the audit committee shall have one vote.
(3) The audit committee shall make decisions by resolution.
(4) In the event of a tie vote, the chair shall be entitled to cast a
second vote.
(5) A majority of the members of the audit committee that
includes at least fifty (50%) percent plus one member shall constitute a
quorum for the meetings of the committee.
(6) The chair of the audit committee shall—
(a) ensure that minutes are taken at each meeting and provided
to the members of the committee before the next meeting;
(b) have access to management, the head of internal audit and
external auditors; and
(c) send or cause to be sent —
(i) all notices of audit committee meetings at least fourteen
days before the meeting; and
(ii) all minutes of audit committee meetings.
(7) If at any meeting of the audit committee the chair is not
present, the members shall elect a chair for purposes of conducting that
meeting.
180. Any code of conduct of public officers shall also apply to Code of conduct.
members of the audit committee in relations to their functions, powers
and duties as members of the committee.
181. (1) Members of the audit committee shall be paid an Remuneration and
compensation.
allowance on account of attendance of audit committee meetings as
determined by National Treasury in consultation with other relevant
entities.
(2) A national government entity shall reimburse members of its
audit committee for expenses incurred while attending to audit
committee duties.
182. The accounting officer shall— Capacity building
for Audit
Committees.
(a) provide capacity building to all public national government
entity audit committees;
(b) provide policies and guidelines on audit committees;
(c) monitor the effectiveness of audit committees; and
(d) provide periodic updates of Audit committee activities
through the website.
PART XIV—PUBLIC DEBT MANAGEMENT

183. (1) National government borrowing shall be guided by the Guiding Principles
for national
following principles— government
borrowing
(a) need to ensure stability of domestic financial markets;
(b) promotion of inter-generational equity in the sharing of
burdens and benefits of public borrowing;
(c) determination of thresholds of borrowing rights for both
levels of government;
(d) use of objective criteria for evaluating national government
entities or county government eligibility for national
government debt guarantee; and
(e) prudence and equity in setting limits for debt stock levels for
each county government.
184. The policy framework in the management of public debt Policy frameworks
in public debt
shall comprise of the medium term debt management strategy. management.
185. (1) Any borrowing by the national government shall be Medium term debt
management
informed by the medium term debt management strategy, which shall strategy.
be reviewed annually, prepared and executed by the Public Debt
Management Office in accordance with the delegated authority by the
Cabinet Secretary.
(2) Medium term debt management strategy shall be formulated
annually on a three year rolling basis.
(3) The Strategy shall be approved by the Cabinet.
(4) The medium term debt management strategy shall be
prepared taking into account —
(a) the borrowing needs of the Republic of Kenya;
(b) prevailing macro-economic conditions;
(c) prevailing conditions of the financial markets; and
(d) any other relevant factors.
(5) The public debt management strategy shall entail minimising
borrowing costs with a prudent degree of risks.
186. (1) The medium term debt management strategy shall be Annual national
government
implemented through the annual borrowing programme for each fiscal borrowing
year. programme.
(2) The annual borrowing programme shall include issuance of

government securities and disbursement of external loans for the fiscal
year and show indicative dates of such issuance and disbursements.
187. (1) The Cabinet Secretary shall derive powers to raise loans Borrowing powers
of the government.
for the Government of Kenya from section 49 of the Act.
(2) The national government may from time to time borrow
within and outside Kenya such sums of money in such amount and on
such terms and conditions as to interest, repayment, disbursement or
otherwise as the Cabinet Secretary may think fit, in any of the

following manners—
(a) by issuing external government securities; or
(b) by issuing Treasury Bills or Treasury Bond or stock; or
(c) by advances from Central Bank of Kenya under the Central
Bank of Kenya Act; or Cap. 491.
(d) by bank overdraft on Exchequer Account or any other public
account; or
by any other loan or credit evidenced by instruments in writing.
188. All sums borrowed under the Act shall be expended only on Use of moneys
borrowed and credits
the activities included in the approved estimates of expenditure of the obtained.
national government entities.
189. Negotiation with foreign governments and agencies for Formalisation of
agreements for
external loans shall culminate into and shall be formalised into one of loans.
the following recognised instruments—
(a) loan agreements;
(b) exchange of letters that constitute an agreement;
(c) subscription agreements in regard to external government
securities; and
(d) national government guarantee.
190. Where development partner have opted to give loans Credit purchases.
through credit purchase or commodity loan arrangements, for the
purposes of budgeting and accounting the following procedures shall
be followed—
(a) the amount of expenditure and matching direct payment as
agreed and as applicable, shall be included in the
development estimates under separate items;
(b) accounting officer shall apply through the National Treasury
for utilisation of the credit purchase facility in the prescribed
manner as set-out in the loan instrument;
(c) after supplying goods or services, the development partner
shall notify National Treasury of the amount disbursed
against the loan;
(d) the National Treasury shall record the amounts disbursed as
a drawing against each loan facility;
(e) the National Treasury shall forward invoices and debit
advices to the accounting officer concerned to bring the
expenditure involved into account; and
(f) the accounting officer shall, on satisfying herself or himself
of receipt of goods and services, record the transactions in
the stores ledger card and the accounting officer shall notify
the National Treasury on the receipt of goods and services.
191. The procedure to be followed in the disbursement of loan Modes of payment
(disbursement) loan
funds shall be defined in the respective agreement and shall generally funds.
assume one or more of the following methods—
(a) credit purchase; or

(b) direct disbursement to the Consolidated Fund or any other
public fund established by an Act of Parliament for a
specific purpose; or
(c) reimbursement, where the government pays for goods and
services supplied and later on claim reimbursement from the
financier.
192. The national government may borrow in pursuant to the Borrowing purposes.
requirements of section 49 of the Act for the purpose of—
(a) financing national government budget deficits;
(b) borrowing for purposes of cash management;
(c) honouring obligations under outstanding national
government guarantees;
(d) refinancing outstanding debt or repaying a loan prior to its
date of repayment;
(e) mitigation against adverse effects caused by an urgent and
unforeseen event in cases where the contingency fund has
been depleted;
(f) mitigation against significant balance of payment
imbalances; and
(g) meeting any other development policy objectives that the
Cabinet Secretary shall deem necessary, consistent with the
law, and as Parliament may approve.
193. The objectives of public debt management are to ensure Objectives of public
debt management.
that the government’s financing needs and its payment obligations are
met at the lowest possible cost over the medium to long term, with a
prudent degree of risk, and to promote development of the domestic
debt market while ensuring the equitable sharing of benefits and
burdens of public debt between the current and future generation.
Public Debt Management Office
194. (1) In addition to the provisions of section 63 of the Act, Functions of public
debt management
the functions of the Public Debt Management Office established under office.
section 62 shall be to—
(a) prepare and update an annual medium-term debt
management strategy including debt sustainability analysis
in accordance with regulations;
(b) prepare and review an annual borrowing programme as
appropriate including the auction calendar to facilitate
auction of government debt securities;
(c) participate in negotiation meetings with government
creditors, and provide technical support to the Cabinet
Secretary on public debt operations;
(d) assess the risks in issuing any guarantees including
contingent liabilities inherent in public private partnership
projects, and prepare reports on the method used for

assessment and the results thereof for the attention of the
Cabinet Secretary;
(e) facilitate the recovery of any payments including interest
and other costs incurred by Government due to the
honouring of outstanding guarantees;
(f) prepare annual debt management report which shall include
outstanding guarantees, outstanding lending and government
on-lending by Government;
(g) monitor and keep track of debt levels;
(h) to keep timely, comprehensive and accurate records of
outstanding Government debt, guarantees and lending in an
appropriate database;
(i) advise on all debt servicing obligations of Government;
(j) prepare and publish debt statistical bulletins regularly;
(k) prepare forecasts on Government debt servicing and
disbursements as part of the yearly budget preparation;
(l) compile, verify and report on all Government debt arrears
and design a strategy for the settlement of those arrears;
(m) monitor that the disbursements of loans raised by
Government are in accordance with agreed disbursement
schedules;
(n) formulate External Resources Policy;
(o) assess, mobilize, negotiate and allocate all external resources
including the consolidation of the donor commitment
register in the annual national budget;
(p) examine and scrutinise proposals for financing projects of a
national government entity from an accounting officer;
(q) formulate and harmonize policies and coordinate matters
relating to employment of Kenyan nationals and
appointment of expatriate consultants and technical
assistance as experts and consultants in projects supported
by development partners;
(r) ensure adherence to the accepted guidelines and procedures
for procurement involving funds provided under foreign aid;
(s) coordinate, review and monitor the utilization of external
resources including joint programming, joint work plans,
joint visits, joint implementation, and monitoring and
evaluation;
(t) profile external resources and maintain the accounts thereof;
(u) formulate an external resource mobilization strategy to guide
the national and county governments in external resource
mobilization including monitoring;
(v) liaise for external economic relations with international

development agencies;
(w) coordinate all international agreements involving financial
economic and technical co-operation dealing predominantly
with economic and financial issues;
(x) programme and manage financing of fellowships,
scholarships and foreign training offers from bilateral and
multilateral sources;
(y) ensure harmonization, alignment and coordination of
external resources in line with international conventions of
which Kenya is a member state thereof;
(z) monitor disbursement and absorption of external resources
including reporting of the same by both national and county
governments;
(aa) formulate guidelines and procedures for reporting and
recording budget estimates and expenditure for external
resource;
(bb) provide guidance and capacity development to county
governments in the assessment, mobilization, negotiation
and allocation of all multilateral and bilateral external
resources for implementation of development partners;
(cc) support aid effectiveness initiatives and to use country
systems in the management of external resources and where
there is need, support in strengthening them rather than
avoiding them;
(dd) ensure linkages of the National Treasury with NGOs and
coordination of NGOs through the formation of a National
Consultative Forum; and
(ee) perform such other functions as may be determined by the
Cabinet Secretary.
195. (1) The Cabinet Secretary may, on such terms and Redemption,
conversion, and
conditions as he or she may determine, and, when necessary, with the consolidation of
concurrence of the lender— loans.
(a) repay any loan prior to the redemption date of that loan; or
(b) convert the loan into any other loan; or
(c) consolidate two or more loans into an existing or new loan.
196. (1) Pursuant to section 50(2) of the Act, the debt limit at Setting debt limit
any given time shall not exceed the net present value of the total public
debt that is determined in accordance with fiscal responsibility
principles under regulation 26 (1)(c) of the these Regulations.
(2) In addition to the debt limit under paragraph (1), the annual
thresholds for the annual borrowing by the national and county
governments and their entities as required by section 50(5) of the Act
shall be set by Parliament.
(3) The debt limit under paragraph (1) of this regulation shall be
specified annually in the budget policy statement and the medium term
debt management strategy paper.
(4) The annual new government debt and guarantees shall be
consistent with the debt limits set out under paragraph (1) of this
regulation.
(5) For the purposes of monitoring compliance with the limits
under paragraph (1), the amount of government debt and government
guarantees which are not denominated in shillings shall be recalculated
at the prevailing exchange rate of the Central Bank of Kenya.
197. (1) The issuance of government securities to raise debt Criteria for issuance
of government
capital shall be by way of auction or such other method as Cabinet securities.
Secretary may determine.
auction of domestic government securities shall take into account the
following factors—
(a) pricing of the domestic government securities;
(b) refinancing risk of the domestic governance securities;
(c) the market stability when taking up domestic government
securities; and
(d) the borrowing programme which is consistent with the
medium term debt strategy and budget policy statement.
(3) The Cabinet Secretary may establish an auction committee
responsible for the issuance of government securities for the purpose of
financing the budget deficit comprised of—
(a) Head of Public Debt Management Office;
(b) the Governor, Central Bank of Kenya or his or her nominee;
(c) Head of the accounting policy within the National Treasury;
and
(d) Head of Economic Affairs.
(4) The Cabinet Secretary shall appoint a chairperson among the
members mentioned under paragraph (3) in this regulation.
(5) The Public Debt Management Office shall provide the
secretariat to the Committee.
(6) Where national government securities are to be issued other
than by auction, their terms and conditions shall be subject to the prior
approval of the Cabinet Secretary.
(7) The Committee may co-opt the relevant County Executive
Committee Member or his or her representative on need basis.
198. (1) The issuance of government securities outside Kenya Issuance of
government
shall be in such mode as the Cabinet Secretary shall approve in securities outside
accordance with the Act. Kenya.
(2) Despite the provisions of paragraph (1) in this regulation, the

issuance of external government securities shall take into account the
following factors—
(a) pricing of the foreign government securities;

(b) refinancing risk of the foreign governance securities;
(c) the impact on exchange rate stability when taking up foreign
government securities; and
(d) the borrowing programme which is consistent with the
medium term debt strategy and budget policy statement.
199. (1) National government entities and each County Treasury Reporting on public
debt by counties and
shall submit to the National Treasury a report on public debt in a national government
format prescribed by the Accounting Standards Board within two entities.
months after the end of the financial year.
(2) The report to be submitted under paragraph (1), shall include
at the minimum the following information—
(a) review of previous year’s financing of budget deficit;
(b) composition of domestic debt;
(c) composition of external debt;
(d) on-lent loans and contingent liabilities;
(e) debt strategy and debt sustainability;
(f) outlook for the medium term; and
(g) any commitment fees and penalties paid on any undisbursed
amounts of a loan.
200. (1) Not later than three months after the end of each Annual debt
reporting.
financial year, the Cabinet Secretary shall prepare and submit an
annual report to Parliament on public debt in the format set by the
Cabinet Secretary.
(2) The annual public debt report under paragraph (1) shall
include the following information—
(a) Review of previous year’s financing of budget deficit;
(b) composition of External debt;
(c) publicly guaranteed debt;
(d) on-lent loans and contingent liabilities;
(e) debt strategy and debt sustainability;
(f) outlook for the medium term; and
(g) any commitment fees and penalties paid on any undisbursed
amounts of a loan.
201. (1) All financial obligations for which the National Treasury Government
guaranteed debt.
has issued guarantees on behalf of and for the account of the
government in full compliance with the Act shall be government
guaranteed debt.
(2) The Cabinet Secretary shall participate in the negotiations on
the contracting of a guaranteed loan by advising the borrower on the
best financial terms available, and shall sign on behalf of the national
government agreements on the issuance of a government guarantees or
guarantee letters.
(3) Any proposals for amendments to the loan agreement for

which a guarantee is already issued shall be done with prior approval of
the Cabinet Secretary.
(4) Borrowers under government guaranteed loans shall provide
to the Cabinet Secretary, on a quarterly basis, information on the
disbursements and repayments of funds under the loan.
(5) Where necessary, the Cabinet Secretary may request
additional information on National Government guaranteed loans from
the national government entities and county governments.
(6) The terms and conditions for national government entities
applying for government guaranteed financing and the government
guarantee issuance procedures shall be determined by the Cabinet
Secretary with the approval of Parliament.
(7) Call under a national government entity guarantee or county
governments guarantee shall be due only in the event—
(a) a borrower has not effected a full or partial payment on a
loan in accordance with the loan agreement terms and
conditions; and
(b) a creditor has notified the Cabinet Secretary after taking
steps and actions provided for in the loan agreement for
collection of the amounts due from the borrower within a
period of one month from the date of default.
(8) The Cabinet Secretary shall require the borrower to explain
the circumstances surrounding the default and the measures being
taken to correct the situation within fifteen after notification by the
creditor.
(9) Where the requirements under paragraph 7(b) have not been
provided for in the government guarantee issuance agreement, the
Cabinet Secretary shall determine together with the creditor the actions
to be taken where a payment on a national government guarantee is
due, as well as the time limits within which the national government
should pay the overdue amount.
(10) The national government shall, from the date of the payment
under a national government guarantee, enter into the creditor’s rights
under the loan agreement to the amount of then payment made.
(11) The Cabinet Secretary shall take necessary actions provided
for under sections 61 and 94 of the Act.
202. Pursuant to the provisions of section 58 of the Act, the Eligibility and
evaluation criteria
capital project expenditures of— for national
government
guarantees.
(a) county governments for which a guarantee is requested, shall

meet the following requirements—
(i) the borrower shall demonstrate that the project could not
be financed on reasonable terms and conditions without
a government loan;
(ii) provide the projected cash flow clearly setting out

projected disbursement schedule and repayment plan;
(iii) the borrower shall contribute a substantial portion of
project funds from their own resources and in any case
not less than fifteen (15) percent;
(iv) a national government entity or county government that
defaults on a loan shall be put on an agreed financial
recovery programme by the National Treasury;
(v) it is a feasible project that has been approved by the
national government entity or county government entity
as may be required by national or county legislation;
(vi) the application of the guarantee shall be submitted with
a draft loan agreement; and
(vii) any other guidelines consistent with the Act as may be
gazetted by the Cabinet Secretary;
(b) national governments entities for which a guarantee is
requested, shall meet the following requirements—
(i) the national government entity shall demonstrate that
the project could not be financed on reasonable terms
and conditions without a loan;
(ii) provide the projected cash flow clearly setting out a
projected disbursement schedule and repayment plan;
(iii) the national government entity shall contribute at least
fifteen (15) percent of the project cost from their own
resources;
(iv) it is a feasible project that has been approved by the
governing body as required under these Regulations;
(v) concessionality of the proposed loan is fully evaluated
by the national government and is determined to be at
the acceptable level of grant element as per the
borrowing strategy;
(vi) satifies all the fiscal responsibility principles set out in
the Act and these Regulations;
(vii) the National Treasury has confirmed that the lender is
of good credibility and standing with the Government
of Kenya; and
(viii) any other guidelines as Cabinet Secretary to the
National Treasury may prescribe in a government
gazette.
203. Pursuant to the provisions of section 58(2)(a) of the Act, Process for
approving a
and in addition to provisions under regulation 202, the following guarantee for a
procedures shall apply in relation to a national government entity— national government
entity.
(a) before seeking a national government guarantee, the
governing body of the national government entity shall
approve the borrowing including its terms and conditions;
(b) after approval by the governing body, the Chief Executive

Officer of the entity shall submit the proposed loan
agreement and a sessional paper to the Cabinet Secretary
responsible for the national government entity for approval
of the borrowing, including its broad terms and conditions;
(c) upon approval under paragraph (b), the Chief Executive
Officer shall submit the final draft loan financing agreement
and the approval of the governing body and the Cabinet
Secretary responsible for the entity to the Cabinet Secretary
requesting for the guarantee of the final loan financing
agreement;
(d) the Cabinet Secretary may reject a request for loan
guarantee with reasons and communicate the same to the
concerned chief executive officer;
(e) upon approval of a loan guarantee request, the Cabinet
Secretary shall seek the legal opinion of the Attorney
General.
(f) upon receiving the views of the Attorney-General and taking
them into account, the Cabinet Secretary to the National
Treasury shall submit a sessional paper to Parliament with
recommendations seeking its approval.
(g) the Cabinet Secretary shall communicate the decision of
Parliament on the draft loan guarantee to the respective chief
executive officer; and
(h) upon approval by Parliament the Cabinet Secretary to the
National Treasury shall issue a loan guarantee.
204. (1) Upon recommendation by the Cabinet Secretary to the Approval of draft
loan guarantee by
National Treasury, Parliament may approve a draft loan guarantee Parliament
document as provided under section 58(2)(f) of the Act, only if it is
satisfied that—
(a) the guarantee is in the public interest;
(b) the borrowers financial position is strong enough to enable
the borrower to repay the loan proposed to be guaranteed
and to pay interest and other charges based on projected
revenue streams;
(c) concessionality of the proposed loan is fully evaluated by the
national and county governments and is determined to be at
the acceptable level of grant element as per the borrowing
strategy;
(d) the loan investments are geared towards stimulating
economic growth in a county government; and
(e) all legal issues relating to financial agreements, tripartite
signing, and subsidiary agreements are fully addressed.
205. For the purposes of debt management operations and loan Roles and
responsibilities of
administration, the accounting officers of a national government entity accounting officers
shall be responsible for the following— in debt management
operations and loan
administration.
(a) preparing project proposals and submitting them for

approval to the National Treasury;
(b) where authorisation has been granted for the project to start,
the Accounting Officer shall ensure public disclosure to
intended beneficiaries within thirty days of the allocation
and disbursement of the loan;
(c) after disbursement of loans, the loan recipients accounting
officer shall report within fifteen days after the end of each
quarter to the intended beneficiaries on the expenditures and
performance achieved in relation to the loan;
(d) ensuring that during the project identification and design, the
intended beneficiaries are involved through the public
participatory approach to planning through public forums to
enhance leadership, ownership, social accountability and
sustainability of the project;
(e) preparing expected disbursements profiles;
(f) submitting loan disbursement claims for approval by the
National Treasury;
(g) making comments on draft loan agreement from the
National Treasury;
(h) participating in all consultations and negotiations of all loan
agreements for projects and programmes under their
jurisdiction; and
(i) implementing, monitoring and evaluating, in close
collaboration with the national government entity
responsible for National Planning, all projects and
programmes within their jurisdiction.
Sinking Fund
206. (1) There is hereby established a national government fund Establishment of
Sinking Fund.
to be known as the Sinking Fund to be administered by the Head of the
Public Debt Management Office.
(2) The purposes of Sinking Fund shall be the payment of
expenses of, or incidental to, redemption of an issue of Government
securities and the redemption of an issue of Government securities.
(3) The Cabinet Secretary shall, upon approval of these
Regulations, publish in the Kenya Gazette the guidelines for the
management of the Fund.
PART XV—PUBLIC FUNDS
207. (1) The establishment of a public Fund shall at the minimum Criteria for the
establishment of a
meet the following requirements— public Fund.
(a) be initiated through a proposal by the Cabinet secretary

responsible for the national government entity under which
the functions of the Fund fall clearly setting out the
justifications and submit it to the Cabinet Secretary;
(b) the Cabinet Secretary shall certify in writing that the

functions and the public services to be delivered through the
Fund cannot be delivered through the structure of budget
appropriations;
(c) provide a clear justification as to why a fund structure is
deemed appropriate for improved service delivery in light of
the legislative and policy mandate of the national
government entity;
(d) the administration costs of the Fund shall be a maximum of
three (3%) percent of the approved budgets of the Fund;
(e) the Cabinet Secretary responsible for the national
government entity functions shall confirm in writing that the
establishment of the Fund and it’s continued existence will
not depend on annual financing from the national exchequer;
(f) a Fund that has a lifespan of less two years shall not be
approved unless it is for unforeseen and urgent need;
(g) the Cabinet Secretary shall grant approval in writing before
establishment of Fund;
(h) the Cabinet Secretary responsible for the entity shall
demonstrate how the activities of the proposed Public Fund
shall fit in the overall Medium Term Plan and Budget Policy
Statement; and
(i) the initial approval for establishment of a national public
Fund shall be for a maximum period of ten (10) years,
beyond which Cabinet and Parliament approvals shall be
sought.
Cabinet Secretary may from time to time issue further guidelines on the
establishment of national public Funds.
208. The Cabinet Secretary shall provide for the management, Management and
winding up of a
operation and winding up procedure in the guidelines for establishing national public
each Fund which shall be in accordance with the Act and these Fund.
Regulations.
209. (1) Where the lifespan of Fund lapses, the process of Winding up of
national government
winding up shall commence within six (6) months from the date of the public Fund.
lapse.
(2) The final report after winding up the Fund shall be submitted
to Parliament and the Auditor-General for audit.
(3) The Cabinet Secretary may dissolve a public Fund where the
Cabinet Secretary responsible for a department operating a public Fund
considers that a public Fund has successfully completed the specific
objective for which it was created.
PART XVI —STATE CORPORATIONS
210. (1) For the purposes of this Part— Definitions.
(a) “governing body” in relation to a public entity, means a

commission, a board of directors, a board of trustees, board
of governors, and council; and
(b) “government owned enterprise” means an organisation
which—
(i) is a legal person under the ownership and control of the
national government;
(ii) has been assigned financial and operational powers to
carry on a business activity; and
(iii) as its main business, supplies goods or services in
accordance with ordinary commercial principles; and
(iv) is financed wholly or substantially from sources that do not
require annual appropriation by National Assembly, or
imposition of a tax, levy or other charge under legislation.
211. (1) Pursuant to section 4 of the Act, the Cabinet Secretary Declaration of
national government
may by notice in the Gazette declare and classify national government entities and
entities in accordance with the Schedules as indicated in this classification of state
Regulation. corporations.
(2) All State Organs including constitutional institutions and

independent offices shall be categorised as Schedule 1 national
(3) National Government owned enterprises operating on the
basis of commercial principles shall be listed as Schedule 2 national
(4) Regulatory agencies shall be categorised as Schedule 3
national government entities.
(5) Executive agencies, public universities and public tertiary
education institutions, national referral health institutions, boards and
commissions fully or partially funded through the national government
budget shall be categorised as Schedule 4 national government entities.
(6) National Public Funds established under the Constitution,
national legislation or subsidiary national legislation shall be classified
as Schedule 5 national government entities.
(7) The Cabinet Secretary shall have powers to amend the
Schedules classified under this regulation in accordance with the
provisions of the Act and this regulation.
212. The provisions of the Act and these Regulations shall apply Scope and
application.
to all national government entities declared under regulation 211 of
these Regulations.
213. (1) The Cabinet Secretary responsible for a national Application for
listing by governing
government entity that should have been declared or ought to be bodies of undeclared
declared under the Act and these regulations as a national entity but has state corporations.
not been declared in either of the Schedules, shall notify the Cabinet
Secretary, in writing of that the national government entity is not listed
or ought to be listed in the Schedules within 30 days after the

gazettement of these Regulations.
(2) The Cabinet Secretaries of the responsible national
government entities under paragraph (1) shall submit the following
information to the Cabinet Secretary in support of its application for
listing—
(a) name of the public entity;
(b) its main function or business activities;
(c) department responsible for the public entity;
(d) legal instrument under which the entity was established;
(e) dates of its establishment and financial year end;
(f) names of members of the governing body controlling the
public entity;
(g) its registered address and telephone numbers;
(h) name of the chief executive officer;
(i) name of the chief financial officer;
(j) name of the company secretary, if any;
(k) authority responsible for appointing the chief executive
officer and governing body;
(l) subsidiaries, if any, under the ownership control of the
entity;
(m) latest audited financial statements;
(n) amount of budgetary fiscal transfers received over the past
three financial years; and
(o) most recent strategic plan of the public entity.
214. The following principles shall apply when determining Guiding principles
for the establishment
establishment and dissolution of a Public Corporation under section 86 of state corporations.
and 182 of the Act—
(a) there shall be a role for national government entity to fill a
gap left by the market forces through—
(i) social inclusion, where the national government entity
addresses social inequity by redistributing resources in
ways that improve opportunity and support for
individuals, families and communities, allowing them to
participate in the economy and society consistent with the
national government’s social inclusion agenda; or
(ii) correction of market failure, where the national
government entity’s activity shall address market failures
by improving social and economic welfare through
improved resource allocation, where the benefits of
national government intervention outweigh its cost;
(b) activities promoted by the corporation shall have clear and

consistent objectives and be effective in achieving their
national objectives and represent value for money for the
expenditure of taxpayer funds;
(c) a government owned enterprise shall operate on commercial
principles and with a defined commercial income stream that
substantially supports the associated commercial activities;
(d) where activities involving tax expenditures demonstrate that
public expenditure is less effective in achieving the national
government objective but can effectively be undertaken on a
commercial basis;
(e) there is no overlap or duplication of functions when
establishing a state corporation within the national
government.
215. (1) In exercising the powers under section 182 of the Act, Criteria for
establishing state
the Cabinet Secretary and National Assembly shall be guided by corporations.
regulation 214, this regulation and any other relevant regulation of
these Regulations.
(2) A state corporation may be established only with the prior
approval of the Cabinet, with reference to a legislation enacted to
govern the establishment, management and dissolution of such
government commercial enterprises.
(3) In order to establish a state corporation or a subsidiary of a
state corporation—
(a) the responsible Cabinet Secretary shall submit a written
business case to the Cabinet Secretary , with detailed
justification for establishing the state corporation or the
subsidiary;
(b) the business case in paragraph subparagraph(a) shall be
informed by a feasibility assessment of the proposed state
corporation or the subsidiary for the purpose of
ascertaining—
(i) the economic and financial viability of establishing the
state corporation;
(ii) whether the proposed activity cannot be conducted
through an existing corporation or the parent
department;
(iii) whether or not there is need to establish a new
corporation;
(iv) the functions and objective that its establishment is
supposed to attain;
(v) how the activities of the proposed corporation will fit in
the department’s legislative mandate and medium term
strategy, and aid the realization of the objectives of the
programmes associated with that department;
(vi) how it shall impact the fiscal position of the

government; and
(vii) the amount of government share;
(c) the feasibility and viability assessment conducted under
subparagraph (b) shall be submitted to the Cabinet for
approval.
(4) Upon approval of the business case by the Cabinet, the
necessary establishment processes shall be undertaken by the relevant
department as required by a legislation on formation, management and
dissolution of state corporations to allow it perform the functions
stipulated in the instruments for incorporation;
(5) The national government entity responsible for investment
portfolio management in the National Treasury shall be constantly
updated on the progress of a state corporation.
(6) The department responsible for investment portfolio
management in the National Treasury shall conduct regular review of
state corporation to assess the relevance of the mandate and the
justification for their continued existence and where necessary make
recommendations to the Cabinet for the dissolution or merger of
corporations.
216. (1) A state corporation may be dissolved only with the prior Dissolution of State
Corporations.
approval of the Cabinet, with reference to legislation enacted to govern
the establishment, management and dissolution of such state
corporation.
(2) Subject to the provisions of a legislation enacted for the
formation, management and dissolution of state corporations, a state
corporation may be dissolved—
(a) upon expiry of the lifespan of the state corporation as may be
defined in the instrument of establishment;
(b) where a state corporation has carried out the mandate for
which it was created;
(c) upon reorganization of the corporation and associated
government functions, and
(d) upon a merger of the corporation with another.
(3) The accounting officer related to the corporation in question
shall follow-up implementation of the findings and eventual
recommendations for dissolution to ensure compliance.
(4) The Cabinet Secretary may by notice in the gazette prescribe
guidelines for dissolution and mergers of state corporations.
(5) Upon approval by Cabinet of the recommendations to
dissolve or merge state corporations, the Cabinet Secretary shall cause
the dissolution or merge the corporation with another.
(6) Upon dissolution of a state corporation, the funds
corresponding to government equity in the corporation shall be
deposited into the Consolidated Fund.
(7) Upon ceasing of an entity to be a public entity, the Cabinet

Secretary shall vest all the assets and liabilities to the responsible
national government entity.
(8) No national state corporation shall vest its assets in another
entity without prior approval of the Cabinet.
(9) The provisions of this regulation shall be subject to the
provisions of a legislation enacted for the formation, management and
dissolution of state corporations, or the Act of Parliament establishing
that state corporation.
217. (1) The Cabinet Secretary responsible for public Evaluation of state
corporation’s
investments, in consultation with Cabinet Secretary shall annually performance.
agree on the performance targets with the governing body for a
national government entity listed in Schedule 2 and 3.
(2) The annual performance contract shall document the
mandated key performance measures and indicators to be attained by
the national government entity as agreed between the governing body
and the responsible Cabinet Secretary, who shall give the governing
board policy direction.
(3) The Cabinet Secretary responsible for finance shall establish
procedures for quarterly reporting to the Cabinet Secretary responsible
for the controlling department in order to facilitate effective
performance monitoring, evaluation and implementation of corrective
actions.
(4) Without limiting the provisions of paragraph (3) of this
regulation, the National Treasury shall design the procedures by which
the Cabinet Secretary shall monitor the implementation of strategic
plans of Schedules 2 and 3 national government entities and assess
their performance and achievements.
(5) The Cabinet Secretary responsible for public investments
shall issue guidelines on performance reward and sanctions of
Schedules 2 and 3 national entities.
218. (1) The Cabinet Secretary responsible for the state Annual budget.
corporation shall approve the estimates of budget for the state
corporation and shall not later than January every year, submit to the
National Treasury for approval those estimates for the following
financial year.
(2) The National Treasury shall provide guidelines and the
format on which the budget shall be prepared.
(3) Budget estimates submitted under paragraph (1), shall be
classified as follows—
(a) compensation of employees;
(b) use of goods and services;
(c) transfers to other levels of government; and
(d) capital.
219. (1) The National Treasury shall prepare and issue dividend Dividends policy
and surplus funds.
policy guidelines on how national government entities referred to under
regulation 211(3) and (4) and remit dividends to the National Treasury.
(2) A regulatory authority established by an Act of Parliament
and referred to under regulation 211 (4), shall remit into Consolidated
Fund, ninety per centum of its surplus funds reported in the audited
financial statements after the end of each financial year.
(3) A regulatory authority to which this section applies shall be
exempt from the income tax.
(4) The governing body of a public entity listed in Schedule 2
referred to under regulation 211 (3), shall formulate an appropriate
dividend policy in line with the policy guidelines referred under
paragraph (1), and submit to the National Treasury and the respective
County Treasury.
220. (1) Pursuant to section 83(6) of the Act, the accounting Quarterly reporting
by governing bodies.
officer of a national government entity listed in Schedules 2, 3 and 4
shall prepare and submit quarterly financial and non-financial
statements within 15 days after the end of the each quarter to the
Cabinet Secretary responsible for the national government entity with a
copy to the National Treasury and the Auditor-General.
(2) The quarterly reports prepared under paragraph (1) shall be in
the format gazette by the Cabinet Secretary and shall include
information on—
(a) revenue, including funding from grants;
(b) expenditure;
(c) borrowing, including guarantees issued by the national
government and any outstanding loan arrears; and
(d) amount of profit or loss of the public entity for the quarter.
221. (1) The accounting officer for a national government entity Annual financial
statements.
listed in Schedule 2 and 3 shall prepare and submit annual financial and
non-financial statements in the format gazetted by the Cabinet
Secretary within three months to the Auditor General with copies to the
responsible Cabinet Secretary and the National Treasury.
(2) the annual financial and non-financial statements referred to
under paragraph (1), shall be prepared—
(a) in compliance with the International Financial Reporting
Standards and as prescribed by the Public Sector
Accounting Standard Board from time to time; and
(b) the annual financial statements must be approved by the
governing body.
PART XVII—INTERGOVERNMENTAL FISCAL
RELATIONS
222. (1) The Inter-governmental Budget and Economic Council Establishment,
purpose and
members shall exercise their mandate under the Act and these composition of the
Regulations in the spirit of cooperative governance. Intergovernmental
Budget and
Economic Council
(2) Reviews, resolutions and recommendations of the Inter-
governmental Budget and Economic Council shall be published on the
website of the National Treasury as soon as possible after their
preparation.
(3) The Intergovernmental Budget and Economic Council shall
be kept informed about the following—
(a) stoppage of funds to a county government and any national
government intervention in county government due to
serious or persistent material breaches of service delivery
imperatives;
(b) applications for national guarantees of county debts;
(c) changes in the laws and regulations governing public finance
management and sharing of revenue raised nationally;
(d) Budget calendar and budget process;
(e) the draft Budget Policy Statement prior to submission to the
Cabinet;
(f) the draft Annual Debt Management Strategy Paper, prior to
submission to the Cabinet;
(g) the draft Division of Revenue Bill and the draft County
Allocation of Revenue Bill, prior to submission to the
Cabinet;
(h) audit outcomes on financial and non-financial performance
information; and
(i) changes to the categorization and listing of national
(4) The Cabinet Secretary may take into account any
recommendation by the Council arising from any matter under
paragraph 3 of this regulation, prior to submission to the Cabinet.
(5) All scheduled meetings of IBEC should be clearly indicated
in the Budget Calendar issued by the National Treasury.
223. (1) The Cabinet Secretary may stop the transfer of funds to a Recovery Plan and
assumption of
county government immediately or in the alternative apply the executive
provisions of section 96 (3) of the Act. responsibilities of
the county.
(2) Where the Cabinet Secretary decides to use the alternative
provided for under section 96(3)(b) of the Act, the Cabinet Secretary
shall notify, in writing, the county government and Cabinet Secretary
responsible for devolved government of the need to assume executive
functions of a county that has failed to address material breaches in
service delivery as per the directive in section 96 of the Act.
(3) The issuance of a notification under section 96 of the Act
shall not amount to assumption of executive functions of the county by
the national government.
(4) The notification issued under paragraph (1) shall—
(a) specify the serious material breaches and persistent material

breaches which a county government has committed;
(b) invite the county government to make written
representations with regard to its efforts to address the
serious material breaches or persistent material breaches to
mitigate stoppage of funds; and
(c) give a reasonable time period for the county government to
respond to the Cabinet Secretary’s request.
(5) The Cabinet Secretary shall consider representations as made
by the relevant county government and decide, with concurrence of the
Joint Intergovernmental Technical Committee, whether or not to
proceed with the assumption of county functions on the basis of an
approved county recovery plan.
(6) For purposes of section 94 of the Act, a State organ or public
entity shall be in serious material breach if in any financial year, it
operates a primary fiscal deficit that is inconsistent with the fiscal
targets set under 107 of the Act.
(7) The decision by the Cabinet Secretary to assume executive
functions of the county government in terms of section 99 of the Act
shall be communicated, in writing, to the relevant county governor, and
request for the cooperation of county government in the development
of a recovery plan for approval by the Joint Committee.
(8) The decision to assume county executive functions
communicated under paragraph (7) shall—
(a) make reference to Article 225 of the Constitution and section
99 of the Act;
(b) specify the steps in the directive that the county did not
comply with;
(c) announce that the national executive assumes responsibility
for those county executive obligations, where the steps in the
directives were not complied with;
(d) specify the expected date, on which the assumption of
responsibility takes effect;
(e) specify the extent to which and the expected period for
which the national government will assume responsibility;
and
(f) provide an outline of the programme for the implementation
of the assumption of responsibility, specifying designation of
persons, acting for the national government in the
assumption of the responsibility.
(9) The Cabinet Secretary shall seek approval from the Joint
Committee of the recovery plan and the release of the withheld
intergovernmental fiscal transfers for the implementation of the plan.
(10) The recovery plan approved by the Joint Committee, which
shall meet the minimum requirements in section 99(3) of the Act, shall
form the basis for releasing funds withheld during the period of
stoppage.
PART XVIII—MISCELLANEOUS
224. (1) The Cabinet Secretary shall gazette the financial, Gazettement of
financial accounting
accounting and reporting formats for use by national government and reporting
entities soon after these regulations become effective. formats
-----------------------------
EXPLANATORY MEMORANDUM TO THE PUBLIC FINANCE MANAGEMENT

(NATIONAL GOVERNMENT) REGULATIONS, 2015
1. The Purpose of Public Finance Management (National Government)
Regulations, 2015.
The purpose of these Regulations is to:

(i) to provide means of administering the powers vested in the Cabinet
Secretary for the National Treasury under the Constitution, the Act and
any other related legislation;
(ii) to harmonize and standardize their application throughout government

service in controlling and managing the finances;
(iii) to set out a standardized financial management system for use in

Government service which is capable of producing accurate and
reliable accounts free from errors, fraud and which will be useful in
management decisions and statutory reporting;
(iv) to provide for the conduct of fiscal relations between the national and
county governments;; and
(v) to ensure accountability, transparency and the effective, economic and

efficient collection and utilization of public resources.
2. The Legislative Context
The process of developing a comprehensive PFM Regulations started in 2012

after enactment of the Public Finance Management Act, 2012 which
consolidated all Public Finance Management legislations catering for both the
National and County Governments.
The development of the PFM Regulations, 2014 was guided by the following
considerations; (i) ensuring financial autonomy of National and County
Governments within a unitary system of government and guided by
provisions in the constitution such as Article 6 and the Public Finance
Management Act, 2012. As a result, functions of PFM institutions at the
national and county level were mirrored; (ii) ensuring the PFM Regulations
encapsulates best international practices; and (iii) the need to separate the
PFM Regulations for national and county governments to capture the unique
needs of each level of government
These PFM Regulations, 2015 are therefore firmly anchored in Chapter 12 of
the Constitution and gives effect to the provisions of the Public Finance
Management Act, 2012.
3. Policy Background.
Parliament enacted the Public Finance Management (PFM) Act, 2012 in August,
2012 and over the past two years Kenya has been rolling out devolution as
envisaged in the Constitution. The Act on its own, however, is not sufficient since
it does not provide guidelines on all matters relating to public finance management
at the national and county level. In order to provide further clarity on various
aspects of public finance management, it is therefore necessary to have regulations.
An efficient and effective PFM system is a necessary condition for achieving
Vision 2030 and our development objectives. Investors, both foreign and local,
require assurance that a country’s PFM system can be relied upon to maintain fiscal
discipline and in particular contain public debt both at the National and County
level. Without a credible public financial management system, our ability to borrow
or even attract donor funds will be curtailed. In addition, an effective PFM system
is very critical in supporting the mobilization of resources to be equitably shared
between the two levels of government.
In order to make the regulations user friendly and to capture the unique needs of the
two levels of government, two volumes of Regulations have been prepared — one
for the National Government and the other for the County Governments. The
provisions of Parts I to XVI in the two sets of Regulations are largely mirrored but
tailored to each level of government. Parts XVII onwards, however, include
provisions that are specific to each level of government.
Further, there is need to ensure prudent use of public resources in line with Article
201 of the Constitution by providing ceilings in both the Public Finance
Management Act, 2012 and PFM (County) Regulations, 2014 for expenditures of
County Assemblies.
It is considered that the provisions of the proposed Public Finance Management
(National and County Governments) Regulations, 2014 will provide a sufficient
level of economic, fiscal and financial detail and adequate time for the legislatures
at the National and County Governments to perform their oversight role in an
effective manner.
On the basis of the foregoing, it is considered prudent to anchor the fundamental
concepts of a modern public financial management system and its application in
Kenya in a comprehensive PFM law.
Some of the salient features of these regulations are:-
• The Regulations provide additional Fiscal responsibility principles such
as—
o compensation of national and county government employees shall not

exceed 35% of either level of government equitable revenue share;
o the approved expenditures of a county assembly shall not exceed seven

per cent of the total revenues of the county government or twice the
personnel emoluments of that county assembly, whichever is lower;
and
o national public debt shall not exceed 50% of GDP in terms of NPV
among others;
• Provides for expenditures before approval of budget estimates by national

and county assemblies under extreme circumstances.
• Provides any request for expenditures from the Contingencies Fund to
have a certificate of the relevant Cabinet Secretary confirming compliance
with PFM Act provisions.
• Provides all Government Bank Accounts for both the National and County
Governments will be held at the Central Bank of Kenya except where the
cabinet Secretary has expressly granted exemption and approved.
• Provides that the Cabinet Secretary shall provide further guidelines for
loans and advances including benefits and allowances for public officers.
• provides for lease financing transactions by accounting officers.
• Provides for equitable transfers before approval of County Allocation of

Revenue Bill.
• Provides for various thresholds for approval of losses and write-offs

including responsibility for Accounting Officers, Cabinet Secretary,
Cabinet and Parliament.
• Provides for guiding principles for national and county government

borrowing; borrowing purposes and objectives of public debt
management, the criteria for issuance of government securities both
domestic and external, sets the overall debt limit for the country at 50% of
the net present value of GDP while the debt limit for county governments
is set at 20% of the audited total annual revenue and approved by the
county assembly.
• Provides for establishment of a Sinking Fund for debt redemption both

levels of government.
• Provides for criteria for establishment of public funds, management and

winding up of a national public fund or a county government public fund.
• Provides the guiding principles for establishment of state corporations or

county corporations, criteria for establishment of a state or county
corporations as well as dissolution of state corporations; evaluation of
state or county corporation performance.
• Provides for the powers of the Cabinet Secretary to gazette financial,

accounting and reporting formats.
4. Public Consultations
The PFM Regulations have taken into account the views of key stakeholders such
as the Commission on Revenue Allocation, the Commission for the Implementation
of the Constitution, Accounting Officers, Council of Governors, County Executive
Committee Members of finance, civil society, the general public and international
and local experts on public financial management.
It is important to appreciate that one of the key recommendation from different

stakeholders was to separate the Regulations governing National and County levels
of Governments. In order to address this recommendation, the Regulations were
separated to deal each level of Government, hence the reason why we have
submitted two volumes of Public Finance Management Regulations; PFM
(National Government) Regulations, 2015 and PFM (County Government)
Regulations, 2015. This will give flexibility on the application of the Regulations to
each level of Government and ensure maximum impact of the Regulations on
public finance accountability architecture.
5. Guidance
The National Treasury will sensitize stakeholders including Parliament, accounting
officers of national and county governments and the general public, on the
provisions of the public finance management (National & County Governments)
Regulations, 2015, the accountability mechanism, the monitoring and evaluation
mechanism and the need to ensure regular reporting to both the Parliament and
relevant County Assemblies.
6. Review of the Regulations.
The National Treasury shall monitor the application of the PFM Regulations. This
will be done through quarterly reports sent by the relevant accounting officer of the
national or county government. In addition, the National Treasury will also carry
out regular monitoring and evaluation of the specific provisions of these
Regulations through interaction with the implementers of these Regulations,
studying various reports by Constitutional Commissions, Independent Offices,
Civil Society and the general public.
It is important to note that the Regulations shall apply to the level of government as
indicated in their headings from the commencement date of these Regulations. In
this respect, a review thereof will be done by the National Treasury with the
approval by Parliament in line with Section 205 of the Public Finance Management
Act, 2012.
7. National Treasury Contact Person.
The contact person at the National Treasury is the Cabinet Secretary, Mr. Henry
Rotich or the Principal Secretary, Dr. Kamau Thugge, EBS.
Dated the 20th March, 2015.
HENRY ROTICH,
Cabinet Secretary to the National Treasury.
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SPECIAL ISSUE 209

Kenya Gazette Supplement No. 32 20th March, 2015

(Legislative Supplement No. 17)

LEGAL NOTICE NO. 34

PART III—FISCAL STRATEGY AND MACROECONOMIC

PART VI—MANAGEMENT OF REVENUE AND OTHER

85—Cheques and electronic payments.

144— Purchase and capacity of official vehicles for certain

175—Duties of audit committees.

208—Management and winding up of a national public Fund.

THE PUBLIC FINANCE MANAGEMENT ACT

“Accountant-General” means the officer of the National Treasury

“Consolidated Fund Services “means a service the expense of

“effectiveness” means the extent to which a programme

“supplementary budget estimates” means additional request of

(d) to provide for the conduct of fiscal relations between the

(a) open forums, written submissions, online platform and

(2) It shall be the duty of any public officer signing any

(b) an officer designated by the Accounting Officer as secretary

Secretary or in case of Parliament, Judiciary, Independent Offices and

(a) for management of their departments public finances,

(h) comply, and ensure compliance by national government

(a) may prejudice substantial economic interests of Kenya,

(3) Before tabling a report containing recommendations on the

(viii) any other information the Cabinet Secretary

(2) The Accounting Officer is responsible, in particular for

review estimates of the entities concerned in order to ensure that these

communicated to the Accounting Officers through a notification which

(4) Pursuant to the grant of credit in paragraph (3), the National

(5) The reallocations under this regulation shall be approved by

(4) At minimum, a procurement plan shall include proper

(iii) any further known liabilities in respect of the year;

(iii) transfer to other levels of government;

(a) creation of an additional Ministry or State Department and

(d) the net budgetary provision;

(c) the receiver of revenue;

(6) An accounting officer or receiver of revenue or collector of

(2) Any exception to paragraph (1) on the expenses arising from

(a) “grant agreement” means an instrument that gives the power

(4) A national government entity is not allowed to give another

(2) The Cabinet Secretary shall make provisions in the budget

(2) The Receivers of Revenue shall promptly pay the revenue

(a) all national government bank accounts shall be opened at the

bank accounts at the Central Bank of Kenya, unless

(d) using short term borrowing only when it is necessary;

(2) The Cash Management Advisory Committee established

(b) the department responsible for matters relating to accounting

(2) The Cabinet Secretary may suspend the operations of any

(a) Temporary or Safari imprest;

money has been paid, and a declaration by the Cabinet Secretary

(3) National government deposits or exchequer releases to

(3) Every entry in the accounts shall be supported by a voucher

(2) An Accounting Officer shall take all reasonable precautions

106. Unless otherwise exempted by an Act of Parliament, any Deposit accounts.

(b) processes of safeguarding completed application forms;

PART X—EXPENDITURE MANAGEMENT AND CONTROL

S/No Type of document Preservation period

Expenditure in relation to Human Resources

management in consultation with the Public Service Commission and