A snapshot of the budget making process

12 May, 2020 1 comments
Mukami Mbogo Mukami Mbogo

The budget-making process at the County level is a subset of a grander Public Finance Management (PFM) process. Public finance management (PFM) in Kenya is anchored in Chapter 12 of the Constitution of Kenya and the Public Finance Management Act 2012 (PFMA). The PFMA was developed with the recognition that a good PFM system is key for the success or failure of a decentralized system of government. 

The PFM process encompasses four broad areas: i) collection of revenues; ii) allocation of funds through the budgetary process; iii) utilization of public revenues, for instance through procurement of goods and services; and iv) internal and external auditing of public spending and performance of state institutions.  As such, the budget process is part of the collective effort towards ensuring public finances are prudently managed at both levels of government. 

To facilitate long term planning, budgeting is further formulated under what is known as a Medium-Term Expenditure Framework (MTEF). The MTEF is a three-year budget projection that is revised annually to incorporate policy changes. In essence it is a rolling 3-year framework. Why 3 years? The reason is that majority of decisions related to budget revenues and expenditures, have fiscal implications beyond one year and three years allows for a medium-term perspective. 

The budget can be segmented into six interrelated processes. These are generally the processes of preparing, approving, implementing and accounting for the resources in the budget. These six phased processes are as follows:

  • Policy review and formulation
  • Strategic and operational planning
  • Budget formulation, approval, and adoption
  • Budget execution
  • Accounting and reporting
  • Audit and evaluation

The PFMA moves cyclically around these six processes at the National and County Government. Each of the above-mentioned stages are further broken down at both levels of government. 

The diagram below illustrates the budget process broken down in a county context 

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  1. John Otieno

    A splendid snapshot of County PEM cycle. Two more things to note: 1. County governments go about 03 and 04 with boisterousness, but are not always willing to fully implement 05 and 6, and 2. Citizen engagement should be done all through, so that citizens can hold duty bearers to account.