Strengthening Parliamentary Committees’ Roles in Kenya’s Appropriation Process
Category: Budget
By: Leo Kipkogei Kemboi,
Introduction
This blog post emphasizes the significance of a longer sub-appropriation process in Kenya to enhance the involvement of parliamentary committees in budget scrutiny and how a shorter process may impede stakeholder participation and reduce transparency, informed decision-making, and the effectiveness of program implementation.
Clause 39(1) of the Public Finance Management Act 2012 sets out specific timelines that the National Assembly must follow to approve the budget estimates for the Executive and the other branches of government. These estimates must be agreed upon with or without amendments and presented on time for the Appropriation Bill and other relevant bills, except for the Finance Bill. The National Assembly must deliberate and vote on the budget estimates before the President can sign into law no later than June 30th of each year.
The Kenyan government has adopted the UN Classification of the Functions of Government (COFOG) to group related functions performed by Ministries, Departments, and Agencies (MDAs) into sectors. For the Medium-Term Expenditure Framework (MTEF) budgeting, the government has identified ten sectors, including Agriculture, Rural and Urban Development (ARUD), Energy, Infrastructure and ICT, General Economic and Commercial Affairs (GECA), Health, Education, Governance, Justice, Law & Order (GJLO), Public Administration & International Relations (PAIR), National Security, Social Protection, Culture, and Recreation, Water, and Environment.
To facilitate the budgeting process, each sector has a Sector Working Group (SWG) responsible for formulating and prioritizing sector budget proposals based on specific terms of reference highlighted in a circular issued under Section 36 of the Public Finance Management Act, 2012. The circular provides guidelines on the processes and procedures for preparing the MTEF budget. This approach aims to ensure the effective allocation of resources and efficient implementation of government programs aligned with national development priorities.
The Policy Problem
Clause 39(2) outlines the conditions and procedures the National Assembly must adhere to while considering the estimates and passing the budget. The Budget and Appropriations Committee is responsible for reviewing the estimates and making recommendations to the National Assembly, considering the views of the Cabinet Secretary’s and the public on the proposed recommendations. The Committee must review the estimates before the National Assembly considers the revenue and expenditure estimates. By following these procedures and timelines, the National Assembly can ensure the efficient and effective approval of the public budget.
The processes set out under clause 39(2) provide a shorter appropriation process because only the Budget and Appropriations Committee reviews the estimates in a finalized form and makes the recommendations to the National Assembly. Conventionally, all departmental committees are expected to participate in a sub-appropriation process before the principal budget committee consolidates all deliberations of the respective sectors. This reasoning comes from the fact each Committee of the National Assembly understands the particular challenges and effective fiscal policy solutions that should be proposed.
Budget documents in Kenya are voluminous due to the strict itemization requirements, and a longer appropriation process would be beneficial in determining what resources are required in any government department or agency.
Traditionally, legislators have a significant say in respect of discretionary spending as well as oversight of previously approved mandatory spending. For example, repayment of previously incurred public debt is compulsory spending that has already been established by laws passed previously by legislators. That is why an additional layer of a longer sub-appropriation process by all other departmental committees of the National Assembly is essential to ensure that value for money and efficiency are obtained from any appropriation decision or authorization. A shorter appropriation is a risk to the houses of parliament in Kenya.
Challenges of Shortened Appropriation Processes
A shortened appropriation process is disadvantageous for a variety of reasons. For starters, it may result in a lack of thorough review and scrutiny of budget estimates, resulting in errors and inaccuracies, wasted resources, and inefficiencies. This could eventually lead to the failure of government programs to achieve their intended outcomes. Some of the errors have been perplexing.
For instance, the National Treasury removed the Quarterly Economic and Budgetary Review from its website in 2021 due to a ‘typing error’ that included a non-existent Sh8.6 billion loan payment to the United Kingdom. The non-existent loan was equivalent almost twice daily revenue collection. The Quarterly Economic and Budgetary Review (QEBR) is published following Section 83 of the Public Finance Management Act, 2012, which requires the National Treasury to submit the report to the National Assembly, as well as a copy to other independent agencies (Controller of Budget, Auditor General). i
In another study, Gitonga (2010) found a significant difference between the planned and implemented expenditures by Kenyan parastatals, primarily attributed to budgeting errors and poor planning. ii A typing error added an extra $120 million to a supplementary budget 13 years ago, equivalent to four days of revenue collection, causing a political contest in Kenya. iii
A shortened process may limit the ability of stakeholders and members of the public to provide input and feedback on the budget. This can potentially reduce transparency and accountability in the budget process, resulting in a loss of public trust in government institutions. A shortened process may also limit legislators’ ability to understand budget estimates and make informed budget allocation decisions fully. This could lead to ill-informed budget decisions that do not reflect the country’s needs and priorities.
A shortened appropriation process may limit the ability of government institutions to implement budget programs and achieve their desired outcomes effectively. This could result in waste, inefficiencies, and, ultimately, failure to achieve the government’s desired goals. It is critical to adhere to appropriate timelines and procedures to ensure that the budget process is efficient and effective. A shortened appropriation process may result in errors, reduced transparency and accountability, limited informed decision-making, and ineffective program implementation. As a result, achieving successful outcomes in government programs requires a thorough and well-planned budget process.
Value of Having Specific Appropriation Processes
Specific appropriation processes provide several advantages for evaluating and approving budget requests. Each budget component can be closely examined by breaking it down into particular appropriations to ensure alignment with overall budget goals and efficient and effective use of requested funds. This enables a more thorough evaluation of the budget as a whole.iv
Furthermore, programmatic requests can be evaluated on their own merits, allowing for in-depth analysis and approval of requests. Language-based requests can also be assessed for clarity and accuracy. Lawmakers or stakeholders request a Language-based budget to include specific language or provisions in budgetary legislation. Language based Budget requests address policy objectives or concerns about funding allocations and help shape the budget’s direction which requires negotiations, debates, and compromises are used to evaluate policy goals, feasibility, costs, and stakeholder impacts.
Furthermore, recommendations for community project funding should be subject to earmark disclosure rules. Megan (2015) defines an earmark disclosure rule as a policy or regulation requiring government officials to disclose any earmarks in legislative or appropriations bills. An earmark is a provision that allocates funds or resources to specific projects, organizations, or individuals, typically at the request of a legislator in the United States Budget. The disclosure rule promotes transparency and accountability in government spending by making earmarks more visible to the public and other lawmakers.v
The earmark disclosure rule requires legislators to publicly identify and justify their proposed earmarks, including information about the purpose, recipient, and amount of funding involved. This information is typically made available to the public through written reports or online databases. The rule clarifies how taxpayer dollars are spent and allows citizens and lawmakers to examine earmarks for potential waste, favoritism, or questionable spending. These rules help prevent the inclusion of hidden or undisclosed provisions in legislation by requiring lawmakers to disclose earmarks, promoting a more accountable and transparent government. vi Any funding requests for a specific project or initiative must be made public to increase transparency and accountability in the budgeting process. Specific appropriation processes enable a more detailed and comprehensive budget evaluation, resulting in greater accountability and transparency in the use of public funds.
Conclusion
In conclusion, while clause 39(2) outlines the procedures the National Assembly must follow when passing the budget, it falls short of providing an inclusive sub-appropriation process that includes all departmental committees. By limiting the role of other committees, the process may be shortened, but it risks missing out on valuable input and recommendations from stakeholders and members of the public. A longer sub-appropriation process that includes all committees can result in a more thorough budget evaluation and more outstanding transparency and accountability on all public funds in Kenya.
More Blogs
Tax 101: Tariffs are taxes
There is a big global debate on tariffs, their effects, and who pays for them, creating misconceptions. The broader trade strategy premised on Tariffs reflects a worldview rooted in 19th-century mercantilism, emphasizing protectionism and an aggressive use of tariffs.[1] The misconception that tariffs aren’t taxes stems from several factors. Framing plays a significant role. Tariffs […]
Law and Economics of Occupational Licensing: The Case of Law Profession
Occupational licensing is widespread in Kenya, particularly in professions such as law and medicine, and it sparks debate in law and economics. In Kenya, occupational licensing is provided for through a set of statutes. This has implications for markets of legal service provision, which we discuss in this blog. Why is occupational licensing now a […]
Mr. Trump and Kenya’s Macro
It has always been difficult to tie Mr. Trump’s statements to his subsequent policy actions. That fact qualifies any certainty in discerning his implications for Kenya’s macro now. But in three areas, the Kenyan macroeconomic authorities should be on high alert. The Kenya Shilling For much of 2024, the Central Bank of Kenya (CBK)has been […]
Is Kenya’s Tax System Efficient, Optimal, and Equitable?
In my new paper, “On Efficiency, Equity, and Optimal Taxation: Reforming Kenya’s Tax System,” I examine Kenya’s tax system through the lenses of efficiency, equity, and optimality and recommend policy recommendations. I try to look at how efficiently the system generates revenue without distorting economic activity (efficiency), how fairly the tax burden is distributed across […]
Gen Z Collective Action on Taxation and Economic Policy.
Introduction The Finance Bill 2024 in Kenya sparked a wave of collective action primarily driven by Gen Z, marking a significant moment for youth engagement in Kenyan politics. This younger generation, known for their digital fluency and facing bleak economic prospects, utilised social media platforms to voice their discontent and mobilise protests against the proposed […]
Strengthening Parliamentary Committees’ Roles in Kenya’s Appropriation Process
| Post date: Wed, May 31, 2023 |
| Category: Budget |
| By: Leo Kipkogei Kemboi, |
Introduction
This blog post emphasizes the significance of a longer sub-appropriation process in Kenya to enhance the involvement of parliamentary committees in budget scrutiny and how a shorter process may impede stakeholder participation and reduce transparency, informed decision-making, and the effectiveness of program implementation.
Clause 39(1) of the Public Finance Management Act 2012 sets out specific timelines that the National Assembly must follow to approve the budget estimates for the Executive and the other branches of government. These estimates must be agreed upon with or without amendments and presented on time for the Appropriation Bill and other relevant bills, except for the Finance Bill. The National Assembly must deliberate and vote on the budget estimates before the President can sign into law no later than June 30th of each year.
The Kenyan government has adopted the UN Classification of the Functions of Government (COFOG) to group related functions performed by Ministries, Departments, and Agencies (MDAs) into sectors. For the Medium-Term Expenditure Framework (MTEF) budgeting, the government has identified ten sectors, including Agriculture, Rural and Urban Development (ARUD), Energy, Infrastructure and ICT, General Economic and Commercial Affairs (GECA), Health, Education, Governance, Justice, Law & Order (GJLO), Public Administration & International Relations (PAIR), National Security, Social Protection, Culture, and Recreation, Water, and Environment.
To facilitate the budgeting process, each sector has a Sector Working Group (SWG) responsible for formulating and prioritizing sector budget proposals based on specific terms of reference highlighted in a circular issued under Section 36 of the Public Finance Management Act, 2012. The circular provides guidelines on the processes and procedures for preparing the MTEF budget. This approach aims to ensure the effective allocation of resources and efficient implementation of government programs aligned with national development priorities.
The Policy Problem
Clause 39(2) outlines the conditions and procedures the National Assembly must adhere to while considering the estimates and passing the budget. The Budget and Appropriations Committee is responsible for reviewing the estimates and making recommendations to the National Assembly, considering the views of the Cabinet Secretary’s and the public on the proposed recommendations. The Committee must review the estimates before the National Assembly considers the revenue and expenditure estimates. By following these procedures and timelines, the National Assembly can ensure the efficient and effective approval of the public budget.
The processes set out under clause 39(2) provide a shorter appropriation process because only the Budget and Appropriations Committee reviews the estimates in a finalized form and makes the recommendations to the National Assembly. Conventionally, all departmental committees are expected to participate in a sub-appropriation process before the principal budget committee consolidates all deliberations of the respective sectors. This reasoning comes from the fact each Committee of the National Assembly understands the particular challenges and effective fiscal policy solutions that should be proposed.
Budget documents in Kenya are voluminous due to the strict itemization requirements, and a longer appropriation process would be beneficial in determining what resources are required in any government department or agency.
Traditionally, legislators have a significant say in respect of discretionary spending as well as oversight of previously approved mandatory spending. For example, repayment of previously incurred public debt is compulsory spending that has already been established by laws passed previously by legislators. That is why an additional layer of a longer sub-appropriation process by all other departmental committees of the National Assembly is essential to ensure that value for money and efficiency are obtained from any appropriation decision or authorization. A shorter appropriation is a risk to the houses of parliament in Kenya.
Challenges of Shortened Appropriation Processes
A shortened appropriation process is disadvantageous for a variety of reasons. For starters, it may result in a lack of thorough review and scrutiny of budget estimates, resulting in errors and inaccuracies, wasted resources, and inefficiencies. This could eventually lead to the failure of government programs to achieve their intended outcomes. Some of the errors have been perplexing.
For instance, the National Treasury removed the Quarterly Economic and Budgetary Review from its website in 2021 due to a ‘typing error’ that included a non-existent Sh8.6 billion loan payment to the United Kingdom. The non-existent loan was equivalent almost twice daily revenue collection. The Quarterly Economic and Budgetary Review (QEBR) is published following Section 83 of the Public Finance Management Act, 2012, which requires the National Treasury to submit the report to the National Assembly, as well as a copy to other independent agencies (Controller of Budget, Auditor General). i
In another study, Gitonga (2010) found a significant difference between the planned and implemented expenditures by Kenyan parastatals, primarily attributed to budgeting errors and poor planning. ii A typing error added an extra $120 million to a supplementary budget 13 years ago, equivalent to four days of revenue collection, causing a political contest in Kenya. iii
A shortened process may limit the ability of stakeholders and members of the public to provide input and feedback on the budget. This can potentially reduce transparency and accountability in the budget process, resulting in a loss of public trust in government institutions. A shortened process may also limit legislators’ ability to understand budget estimates and make informed budget allocation decisions fully. This could lead to ill-informed budget decisions that do not reflect the country’s needs and priorities.
A shortened appropriation process may limit the ability of government institutions to implement budget programs and achieve their desired outcomes effectively. This could result in waste, inefficiencies, and, ultimately, failure to achieve the government’s desired goals. It is critical to adhere to appropriate timelines and procedures to ensure that the budget process is efficient and effective. A shortened appropriation process may result in errors, reduced transparency and accountability, limited informed decision-making, and ineffective program implementation. As a result, achieving successful outcomes in government programs requires a thorough and well-planned budget process.
Value of Having Specific Appropriation Processes
Specific appropriation processes provide several advantages for evaluating and approving budget requests. Each budget component can be closely examined by breaking it down into particular appropriations to ensure alignment with overall budget goals and efficient and effective use of requested funds. This enables a more thorough evaluation of the budget as a whole.iv
Furthermore, programmatic requests can be evaluated on their own merits, allowing for in-depth analysis and approval of requests. Language-based requests can also be assessed for clarity and accuracy. Lawmakers or stakeholders request a Language-based budget to include specific language or provisions in budgetary legislation. Language based Budget requests address policy objectives or concerns about funding allocations and help shape the budget’s direction which requires negotiations, debates, and compromises are used to evaluate policy goals, feasibility, costs, and stakeholder impacts.
Furthermore, recommendations for community project funding should be subject to earmark disclosure rules. Megan (2015) defines an earmark disclosure rule as a policy or regulation requiring government officials to disclose any earmarks in legislative or appropriations bills. An earmark is a provision that allocates funds or resources to specific projects, organizations, or individuals, typically at the request of a legislator in the United States Budget. The disclosure rule promotes transparency and accountability in government spending by making earmarks more visible to the public and other lawmakers.v
The earmark disclosure rule requires legislators to publicly identify and justify their proposed earmarks, including information about the purpose, recipient, and amount of funding involved. This information is typically made available to the public through written reports or online databases. The rule clarifies how taxpayer dollars are spent and allows citizens and lawmakers to examine earmarks for potential waste, favoritism, or questionable spending. These rules help prevent the inclusion of hidden or undisclosed provisions in legislation by requiring lawmakers to disclose earmarks, promoting a more accountable and transparent government. vi Any funding requests for a specific project or initiative must be made public to increase transparency and accountability in the budgeting process. Specific appropriation processes enable a more detailed and comprehensive budget evaluation, resulting in greater accountability and transparency in the use of public funds.
Conclusion
In conclusion, while clause 39(2) outlines the procedures the National Assembly must follow when passing the budget, it falls short of providing an inclusive sub-appropriation process that includes all departmental committees. By limiting the role of other committees, the process may be shortened, but it risks missing out on valuable input and recommendations from stakeholders and members of the public. A longer sub-appropriation process that includes all committees can result in a more thorough budget evaluation and more outstanding transparency and accountability on all public funds in Kenya.
More Blogs
Tax 101: Tariffs are taxes
There is a big global debate on tariffs, their effects, and who pays for them, creating misconceptions. The broader trade strategy premised on Tariffs reflects a worldview rooted in 19th-century mercantilism, emphasizing protectionism and an aggressive use of tariffs.[1] The misconception that tariffs aren’t taxes stems from several factors. Framing plays a significant role. Tariffs […]
Law and Economics of Occupational Licensing: The Case of Law Profession
Occupational licensing is widespread in Kenya, particularly in professions such as law and medicine, and it sparks debate in law and economics. In Kenya, occupational licensing is provided for through a set of statutes. This has implications for markets of legal service provision, which we discuss in this blog. Why is occupational licensing now a […]
Mr. Trump and Kenya’s Macro
It has always been difficult to tie Mr. Trump’s statements to his subsequent policy actions. That fact qualifies any certainty in discerning his implications for Kenya’s macro now. But in three areas, the Kenyan macroeconomic authorities should be on high alert. The Kenya Shilling For much of 2024, the Central Bank of Kenya (CBK)has been […]
Is Kenya’s Tax System Efficient, Optimal, and Equitable?
In my new paper, “On Efficiency, Equity, and Optimal Taxation: Reforming Kenya’s Tax System,” I examine Kenya’s tax system through the lenses of efficiency, equity, and optimality and recommend policy recommendations. I try to look at how efficiently the system generates revenue without distorting economic activity (efficiency), how fairly the tax burden is distributed across […]
Gen Z Collective Action on Taxation and Economic Policy.
Introduction The Finance Bill 2024 in Kenya sparked a wave of collective action primarily driven by Gen Z, marking a significant moment for youth engagement in Kenyan politics. This younger generation, known for their digital fluency and facing bleak economic prospects, utilised social media platforms to voice their discontent and mobilise protests against the proposed […]