There are many questions that one could ask about Kenya’s new draft County Governments Financial Management Bill, 2011 which can be found online here. The first is why this bill is even more voluminous (40 extra pages!) than the Public Financial Management Bill draft for central government. Another question is how these two bills will be made consistent, given that they are being drafted by different agencies working independently.
Fillip for Transparency
I will ask more questions after I finish reading the entire 131 pages. In the meantime, I wanted to note two very positive things about this draft. The first is an excellent transparency clause located on page 29, section 30. This clause says that the County accounting officer must place on the county website a comprehensive list of documents including:
The annual budget
All budget-related documents
All budget-related policies
The county annual report
All performance contracts
All service delivery agreements
All long-term borrowing contracts
All supply chain management contracts above a certain value
All quarterly reports tabled in the assembly
The list goes on. It is also noted that these documents must be available no later than five days after they have been tabled in the county assembly.
Funds Follow Function
The second clause that I wanted to draw attention to is on page 34, section 39. This clause states that “[c]ounty governments shall, in line with the principle of funds must match and follow functions, be allocated sufficient funds to enable their performance of the functions allocated to them.” This is followed by a spectacular provision stating that “the national government and the county governments, shall… Accurately cost the functions assigned to each level of government to determine the exact financial resources to be allocated to each level of government.” This is critical to ensure that the central government does not dump responsibilities onto county governments without sufficient resources to execute those responsibilities.
Both of these clauses—the one dealing with transparency, and the other with the relationship between fund and function—address key issues which have been flagged by budget advocacy organizations around the world working at the subnational level. It is extremely encouraging to see these provisions in the draft legislation. It is to be hoped that clauses of this type and quality will remain in the final bill, and will also influence positively the Public Financial Management Law.
Kenya’s new PFM draft is out
Kenya’s draft PFM law is now, according to the version available on the Constitutional Implementation Commission’s website, in its fifth iteration. The numerological significance of the draft editions is a bit opaque: there is a previous draft on the Ministry of Finance website, which is titled the “zero draft.” The public has not, as far as I am aware, been shown any versions in between this and Draft #5. But, there is no reason to panic: the differences between them are not large. I highlight a few areas of improvement, as well as some of continuing concern.
Improvements in this version
The new draft eliminates a suspect clause in the old version which placed limits on the public release of documents produced by the Parliamentary Budget Office. That clause read: the PBO shall ensure that “all outputs are published in a timely way on the internet unless publication is not in the public interest.” The new version states simply that all outputs will be put on the internet.
The new draft also pushes up by one month the date when the Treasury will release its circular to government agencies. The old draft required this by September 30th; the new draft requires it by August 30th. This will give government agencies more time to prepare their budgets. Unfortunately, the earlier start to the process does not translate into earlier access to information by Parliament or the public.
There are a number of minor changes which are positive on balance: the government was previously required to “publicize” any deviations from the budget within one day of making these known to the Parliament. This has been changed to give the government a week, but they are now required not only to “publicize” but to “publish” this information, meaning it must be made available in full in the newspaper or online. I am not sure a week is needed for this, but ensuring full publication is an improvement over the old language.
Areas of continued concern
Most of the lacunae I identified in the first draft of the bill persist in Draft #5. Many of these have to do with the limited attempt to spell out how the public will have opportunities to engage directly with the budget process. The public is supposed to be given an “opportunity to make representations” into the Budget Policy Statement (Kenya’s Pre-Budget Statement) before it is tabled in Parliament. No guidelines are provided for this: how will it happen? How much time will be given to the public for comment? The public will then have only one week to review the actual document after it is provided to Parliament, and before Parliament must comment (deadline: March 15).
No opportunities are explicitly provided for public input at other stages of the budget process. The constitution stipulates that the budget committee in Parliament will “seek representations from the public and the representations shall be taken into account” (221:5) when the committee considers the government’s budget estimates. However, neither the constitution nor Draft #5 mentions anything about the estimates being published, nor about the time that must be given to the public to read and respond, nor the way in which “representations” will be made. The public is also not provided any formal opportunity to comment on budget implementation or evaluation.
There are also areas where the draft continues to be vague in ways that could prove fateful. For example, there are no limits on the amount of the Contingencies Fund which can be used at any one time without the approval of Parliament, which provides too much discretion to the executive. There is no explicit mandate that the Auditor General or the executive publish a report on actions taken to deal with issues raised by the Auditor’s reports. (Reports do have to be made public of officials committed of wrong-doing and sanctioned, but not how problems identified by the Auditor are being addressed). Counties are only allowed to accumulate debt up to a “prescribed percentage” of annual revenue, but this can vary by county and it is unclear who will set this percentage to avoid political manipulation.
More to be done
Kenya’s constitution and draft PFM law move the country in a very positive direction, away from an overly dominant Treasury to a system with greater transparency and participation by both Parliament and the public. But as these comments, and those made previously suggest, there is still more work to be done. It is to be hoped that citizens will push the bill toward still greater transparency and participation before it is finally approved by the Parliament.
This month, Kenya released its first ever Citizens Budget. The Citizens Budget is a summary of the budget using non-technical language. According to international good practice, it is considered to be one of the eight key budget documents that governments should release throughout the fiscal year. Kenya’s version, Budget Highlights 2011-2012: Citizen’s Guide, is a 6-page document that is easy to read and filled with data, charts and short summaries of spending priorities.
The government is to be congratulated for taking this important step in making the budget accessible to a wider audience. The standards for what a Citizens Budget should include are evolving rapidly, and Kenya’s efforts will contribute to global debate about what a Citizens Budget is, and what it should be. In this first effort, the Kenyan government gets a number of things right. There are, however, also places where a subsequent version could be improved.
On the positive side of the ledger, the document contains useful pie charts breaking down revenue sources, a simple table on macroeconomic indicators projected through 2013-14, and an extremely helpful bubble diagram (p. 5) that provides both visual and raw numerical information about spending priorities. The document also focuses directly on some of the key concerns of citizens, and the ways in which government is trying to address these issues: food insecurity, youth unemployment, social protection, and infrastructure investment for faster economic growth.
Where could the document be strengthened? The Citizen’s Guide is full of numbers, but they are not well contextualized. For example, when confronted with a bullet point indicating that, say, “KSh 13.3 bn for social safety net” is going to be spent, we will immediately ask the following questions: how does this compare to last year, how many people is it intended to serve, and what exactly is the social safety net? But we will not find answers to these questions here, nor any direction about where to look for them. There are of course limits to what can appear in a short document, but there may be value in having fewer numbers with more context, and a few more pages of text.
It is also the case that the numbers are sometimes more confusing than revealing: according to page 4, KSh 23.1 bn is being spent on labour-intensive public works programmes targeted at youth and defined as “pro-poor spending”; but on page 1, only KSh 1.6 billion in total is going for “labour intensive public works programmes,” plus skills development and internships, with no explicit youth or pro-poor focus. How is it possible that the pro-poor, pro-youth component of 1.6 billion is equal to 23.1 billion? There may be a good explanation for this, but it is not in the document.
A Citizen’s Guide need not answer every question a citizen has about the budget; it should provide enough information to help citizens ask good questions and find what they need in the actual budget or budget-related documentation. To this end, the document could also be clearer in other ways. For example, the first page reports on spending by sectors, but these sectors are not necessarily recognizable to ordinary citizens. A person looking for health or education spending has to know to look at page 5 and follow the connecting lines in the bubble map to find out that these things fall under Human Resources Development. The document should instead invite citizens who are looking for information about health or education to easily determine in which sector they fall.
Finally, one of the hardest things for governments to do is to convey the fact that they have limited resources, and therefore have to make hard choices about what to fund this year, and what will have to wait. The Citizen’s Guide would be one place to make the case that government has deliberated these trade-offs carefully, and to present its justifications for its decisions. To this end, the next version of Kenya’s Citizen’s Guide could start with a narrative explaining the government’s key priorities –given the macroeconomic context– and highlight changes over time. This would ease the layperson into a document that currently starts with no narrative and a barrage of figures.
Much of what should be in a Citizens Budget is in Kenya’s maiden attempt. The Ministry of Finance must also be recognized for its efforts to put out more information in this transitional year, as the government struggles to adapt to a shifting budget process prescribed by the new constitution. Next year’s Citizen’s Guide will be even stronger if it contains more narrative, more context, and a better explanation of government plans to ensure full implementation of the budget.
Thomas Jefferson once opined that the constitution should be rewritten every two decades, since each generation has “a right to choose for itself the form of government it believes most promotive of its own happiness.” This radical notion was rejected by his contemporaries, of course, and no country on earth has adopted such a policy (at least not intentionally). But Jefferson was correct that the process of revising a constitution can stir profound changes in society that force outmoded patterns of government to crumble, while new, more vibrant ones take their place. Nearly two hundred years after Jefferson penned those words, Kenya’s new constitution is showing signs of living up to his greatest hopes, as citizens seize on the document to push for greater participation and accountability.
Somewhat surprisingly, the Kenyan budget process has taken center stage at this phase of tearing down the old and constructing the new. The new constitution establishes a timetable for the presentation of the executive’s budget proposal by the Ministry of Finance to parliament. According to that timetable, the proposal should be tabled at least two months before the end of the fiscal year, which in Kenya terminates on June 30. This would require the proposal to be sent to Parliament no later than the end of April. Instead, Kenya’s Finance Minister, Uhuru Kenyatta, released the budget estimates only a few days ago (end of May, instead of April). Furthermore, he is still planning to make the annual budget speech to Parliament on June 8.
If the courts allow him, that is.
Kenyan activist Mr. Ndung’u Wainaina of the International Centre for Policy and Conflict has filed a lawsuit aimed at curbing Mr. Kenyatta’s enthusiasm for upholding the quaint tradition of reading the budget, arguing that he is in violation of the new constitution. Mr. Kenyatta for his part (see his open letter here) accepts the new law of the land, but claims that it was impossible to adjust the budget schedule in the middle of this transitional year, that he requested a 30-day extension and met it, and that the budget will be delivered on time next year, in full compliance with the constitution. (He accepts, however, that there is no explicit mention of postponing implementation of this part of the constitution in the section on transitional issues, writing in his letter that “there probably should have been.”)
The exciting thing about this controversy is that, regardless of whether Kenyatta’s explanations are reasonable or not, citizens are using the constitution as a point of departure, rather than a port of arrival. Few Kenyans probably read Chapter 12, Article 221 of the document before they voted for the new legal framework last year. But they are getting a free education about the document’s contents courtesy of Mr. Wainaina. He may lose the battle, but he has already won the war: he has used the new constitution to put forward an unassailable argument about the importance of parliamentary and public participation in the budget process. And the dust this lawsuit kicks up is likely to alert a lot of Kenyans to other developments around the budget, such as the new Public Finance Management Law that the Ministry of Finance has been drafting.
When all the dust settles, the result will be a Treasury that is no longer a juggernaut in budget matters, but must defer to parliament and the public in ways that were inconceivable even a few years ago. This is the choice of a new generation. So it is written, so shall it be done.
Note: the budget estimates are still not on the Ministry of Finance website, meaning that even if Parliament has them, the public still does not. A one-page summary of expenditure is available, as are some highlights.
I recently argued in this space that the Kenyan government should bring its draft organic budget law into the light. Less than a week ago, the Ministry of Finance did publish a draft of a new Public Finance Management Law on its website. The government is to be applauded for this move, though the period for comment given to the public is quite restricted: the window closes on May 31. This is not a lot of time for citizens, completely in the dark about the bill’s contents prior to May 20, to comment on an 88-page draft. In some ways, the decision to post the law, but with limited time for comment, is a striking analogy for the law’s strengths and weaknesses: while it mandates a number of important provisions that will guarantee greater transparency in the budget process, it falls shortest in areas that would facilitate greater public engagement.
First, the good: the government has taken on board a number of important recommendations related to transparency and financial management.
The law clarifies the distinction between development and recurrent spending, such that the former now refers exclusively to capital spending, rather than mixing capital and donor funds as in the past (p. 10).
The draft explicitly mentions the need for transparency and public participation, and it lays out a timetable for the release of various documents throughout the year (p. 31). Both a Pre-Budget Statement (Budget Policy Statement) and a Mid-Year Review (Economic and Fiscal Update) are mandated by the new law (pp. 32-3). Treasury is required to receive comments from the public on the Budget Policy Statement, prior to its publication by February 28 each year. Quarterly expenditure reports must also be released within 45 days of the end of the quarter (p. 56). Reports on guarantees provided by government (such as loan guarantees) are required within two months of the end of the financial year (p. 76).
Sound budget management requires limits on the degree to which budgets can be changed after passage, and the draft law limits virement (shifts between different spending categories) to 10 percent of the initial approved amounts (pp. 47-49). It also limits the size of supplementary budgets to 10 percent, but this is already addressed in the Constitution.
While the draft bill incorporates a number of important provisions, it also neglects key areas, particularly those that would facilitate public engagement and oversight.
Although the law mandates the production of an Economic and Fiscal Update, it does not guarantee its release to the public in a timely fashion. And although comments are to be taken by Treasury on the Budget Policy Statement, no timetable is provided to ensure that the public has a reasonable opportunity to provide comment. The bill does not mention a Citizens Budget, which is considered one of the eight core good practice budget documents that should be produced and published. The draft law also does not ensure the comprehensiveness of budget documents: it does not mention reporting on tax expenditures, for example.
The draft law requires that the executive budget proposal be tabled in Parliament two months before the end of the financial year (p. 44). Best practice is to give the legislature three months to consider the proposal. Moreover, the draft law is not explicit about the need to provide the proposal to the public in a timely fashion, nor does it mention any mechanism for receiving public comment. The Constitution states that Parliament shall “seek representations from the public” on the budget estimates, but no mention of this is made in the draft law. Rather than provide more detail than the Constitution, therefore, on this important moment for engagement in the budget process, the law is silent. The draft bill does explicitly state that the enacted budget should be published and publicized (p. 44).
Both at national and county level, the descriptions of public participation throughout the budget cycle are exceedingly vague. At the national level, public comment is only made explicit around the pre-budget statement, and, as noted, no timetables or mechanisms are described (public hearings, etc.). Some level of public engagement should be required at the formulation, approval, implementation and oversight stages of the national budget process. At the county level, the draft law states that “[e]ach County Treasury shall determine the method and extent and method of participation of the public in the budget process” (p. 51). This will inevitably mean restricted participation in some counties, where county officials wish to restrain public engagement. It would be preferable if the method was allowed to vary (to encourage experimentation), but a minimum “extent” of participation (through, for example, public comment at various points) were guaranteed.
The Treasury is required to report on officials sanctioned for financial improprieties (p. 87). But the draft law does not require the publication of a report on actions taken to resolve irregularities identified by the Auditor General in the annual audit report. This makes it difficult for Parliament and the public to ensure that adequate steps are taken to deal with financial mismanagement. The draft law also mentions that the Auditor may pursue investigations pursuant to complaints by members of the public, but it could be more explicit about setting up a system for citizens to communicate complaints to the Auditor.
Although the size of virement and supplementary budgets are limited by the law, there is no such limit placed on the size of the Contingencies Fund, nor on withdrawals from it, nor is parliamentary approval required for the use of these funds (pp.47-8). This leaves extraordinary discretion to the executive branch to define and manage emergency spending.
Of necessity, a short piece like this cannot cover all of the strengths and weaknesses of a bill that is nearly 90 pages long.
Nonetheless, this brief overview should help to continue the discussion that the government, to its credit, has begun. The key challenge now is for citizens to find time to debate the legislation before the window for comment closes. Government could transmit a powerful signal of its intention to take public engagement seriously by extending the period for comment to give the public adequate time to consider the contents of the proposed legislation.