This document provides an overview of public finance as defined in Chapter 12 of the Kenyan Constitution. It discusses key terms and principles of public finance from both a lay and legal perspective. The principles of public finance outlined in the Constitution are that it should be democratic, equitable, and promote sustainable development. The document also outlines the various funds established by the Constitution to manage public finances, the roles of national and county governments, oversight institutions, and requirements for transparency and accountability.

1. CHAPTER 12 OF
THE
CONSTITUTION OF
KENYA
By: Laila Abdul Latif, RACHIER & AMOLLO
ADVOCATES

2. WHAT IS PUBLIC FINANCE
• Key terms: Public and Finance
• Finance: Individual and Government perspective
• Definition: Lay person and legal

3. Definitions; what does Public Finance
mean? The Lay person perspective
• Taxing and spending
• Raising money for infrastructure and capital
projects
• Revenue management

4. Definitions; what does Public Finance
mean? The legal perspective
• Refers to legislation and regulations relating to
the financial activities of government or public
sector organizations.
• Governs the funding and administration of specific
governmental activities including the sale and
purchase of various types of bonds.

5. Key Features in Public Finance
• Article 201: Principles
• These principles are:
▫ Democratic - Art. 201 (a), (d) and (e)
▫ Equitable - Art. 201 (b), Art. 202, Art. 203, Art. 217,
Art. 219
▫ Sustainable development - Art. 201 (c)

6. Principle 1: Democratic
• Art. 201 (a)
▫ Openness
▫ Accountability
▫ Public Participation in financial matters
▫ Prudence and responsibility (d)
▫ Responsibility and Clarity (e)

7. Principle 2: Equitable
• Art. 201 (b),
▫ Equitable society
▫ How??
▫ See Art. 201 (b) (i): Taxes
▫ Art. 201 (b) (ii) and further supported by Art. 202
▫ Art. 201 (b) (iii)
• What is the criteria for determining equitable
sharing? Art. 203
• Who is to make the decision? Art. 217
• Additional allocations. Art. 202 (2)

8. Principle 3: Sustainable Development
• Art. 201 (c)
• Supported by Art. 10 (2)

9. Funds Necessary to Implement
Administration and Management of Public
Finance
• Equalisation Fund - Art. 204
• Consolidated Fund - Art. 206
• Revenue Funds - Art. 207
• Contingencies Fund - Art. 208

10. Equalisation Fund - Art. 204
▫ How much: One half per cent
▫ For what: provision of basic services (water, roads,
health facilities, etc)
▫ Procedure for use: Approved via Appropriation Act;
Conditional grants to counties where marginalised
communities exist
▫ Commission on Revenue Allocation must be
consulted and its recommendations considered

11. Consolidated Fund - Art. 206
• All monies raised/received by or on behalf of
national government
• Withdrawal only in accordance with an
Appropriation Act

12. Revenue Fund - Art. 207
• In each county
• All monies raised/received by or on behalf of
county paid therein
• Withdrawal as authorised Appropriation
legislation of the county or as a charge

13. Contingencies Fund - Art. 208
• For emergencies.
• For urgent and unforeseen events for which there
is no legislation in place.

14. What makes up Public Finance
• Taxes - Art. 209
• Borrowing - Art. 211
• Charge – Art. 214

15. National and County Government Roles in
Public Finance
• National Government :
▫ Imposing taxes - Art. 209 (1),
▫ Imposing service charges - Art. 209 (4),
▫ Unconditional Borrowing - Art. 211
• County Government:
▫ Imposing specific taxes - Art. 209 (3),
▫ Imposing service charges - Art. 209 (4),
▫ Conditional Borrowing - Art. 212

16. Public Finance Watchdogs!
• Commission on Revenue Allocation - Art. 215, 216
• Salaries and Remuneration Commission - Art. 230
• Central Bank of Kenya - Art. 231

17. Institutions Created for Public Finance and
its Spending
• Institutions:
▫ Controller of Budget - Art. 228
▫ Auditor General - Art. 229
▫ Salaries and Remuneration Commission - Art. 230
• Budget - Art. 220
• Appropriation Bills – Art. 221-224

18. Financial Transparency in Public Finance
• To maintain control on expenses and to have transparency
in finance matters:
▫ Stop transfer of funds to a State organ or public entity where
there is a serious material breach upon presentation of report
made by Controller of Budget or on recommendation made by
the relevant parliamentary committee
• National Treasury - Art. 225
▫ An Act of Parliament to establish the national treasury,
provide for its functions and responsibilities
• Accounts - Art. 226 (financial records accountability to
National Assembly and County Assembly)
• Audit - Art. 226 (all accounts to be audited by Auditor
General)

19. What can the Government do with its
Public Finance
• Procurement of Public Goods and Services - Art.
227
▫ Government contract for: goods, services and works
▫ Public Procurement and Disposals Act:
▫ Approach: fair, equitable, transparent, competitive
and cost effective
• Budget and Appropriation Act in line with the
Fourth Schedule of the Constitution

20. THE END 