As far as I know, there was no significant debate over the regulations for Kenya’s Public Finance Management (PFM) Act 2012.

These regulations should have been subject to vigorous discussion in parliament. Instead, it appears that they came into effect last year by default, as section 205 of the PFM Act states that regulations will be deemed approved if they are not debated within 15 days of submission.

Aside from the fact that there is little knowledge of the process by which these regulations were effected, and the fact that many county budget officials seem not to have them (many have asked me for copies, which presumably should have been made available by the national government?), there is also a question of the legitimacy of their contents.

The provision in the regulations that has generated the most excitement at county level is section 37 (1). This section appears to limit the amendment powers of the assembly, something that has been of considerable concern to executives who feel that their budgets have been “mutilated” by the legislature.

The section restricts amendments to the budget estimates at the vote level (generally meaning at the ministry or department level) to one per cent of the vote ceiling.

How consequential is this provision? The PFM Act already introduced two ways of managing the budget process to put some limits on amendment powers. First, there is a provision that the changes made by assemblies (both national and county) cannot increase the deficit — any increase must be balanced by a decrease somewhere else.

Second, the budget process uses the County Fiscal Strategy Paper (CFSP; Budget Policy Statement at national level) to get an earlier agreement on the ceilings prior to the tabling of the estimates in April. So, in February/March, when the CFSP is debated, the assembly agrees to a set of ceilings for each sector or vote.

It is already implied by the PFM Act that when the budget estimates come, these ceilings have been fixed and assembly amendments are limited to changes within each vote or sector.

If the regulations restrict changes to the CFSP ceilings by one per cent (“any increase or reduction in expenditure of a Vote, shall not exceed one per cent of the Vote’s ceilings”), they are technically more permissive than the PFM Act itself, which implies that there should be no changes to these ceilings.

Thinking about the process, it is logical that there should not be any changes to ceilings in May, as they were just agreed to by the assembly in March. My reading of section 37 is that this is the sum total of its import. Assemblies are still free to make significant changes to each vote’s budget, as long as those changes have a negligible impact on the total ceiling.

An alternative reading of this section, however, is that the changes within the vote cannot exceed one per cent of the total vote. So, for example, if a vote for say, agriculture, is Ksh100 million, then any increases or decreases within the vote cannot sum to more than Ksh1 million.

This interpretation of “expenditure of a vote” would render it unconstitutional, as it would effectively nullify the role of the assembly in the budget-making process. This perspective cannot stand.

What is the proper interpretation of this section? Sloppy regulation writing is inevitable when key provisions are not properly deliberated upon. Undoubtedly, some county executives are preparing to wield the second, unconstitutional interpretation of this clause during this budget season.

Whether they succeed may depend more on politics than a strict interpretation of the regulations, but this section must be revisited. Budget powers removed from the executive by the Constitution cannot be returned via regulation. Similar questions may be raised about the ceiling on assembly expenditure of seven per cent of county revenue; this may be sensible but cannot be achieved by regulatory fiat.

Not everything in the new regulations is regressive, however. There is quite a bit of progress on transparency. For example, the disclosure requirements for the CFSP and the supplementary budgets have been enhanced.

Approved CFSPs must be posted online (last year, in the absence of regulation, only 19 counties posted them online) and must contain both economic and functional classifications of expenditure; supplementary budgets must explain “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.” These provisions encourage greater public deliberation.

Other provisions require further debate. While the CFSP ceilings have always been understood as binding for a single year, section 26(6) says that ceilings for development and personnel shall be binding for two years.

Aside from the fact that ceilings are not required for personnel, what is the logic of extending ceilings to two years?

Jason Lakin is Kenya country director for the International Budget Partnership. E-mail: [email protected]