An Explainer: The Draft Public Finance Management (Transfer of Functions) Bill, 2023

March 3, 2023 - Reading Time: 3 minutes - By Brian Otieno

Background

With the promulgation of the Constitution of Kenya, 2010, the country took up a system of governance which embodies devolution and decentralization. The country has two levels of government i.e., the national and county governments. While these two levels of government are separate and distinct, they are not independent of each other. They are greatly interdependent on each other.

To govern the relations between the two levels of government, Parliament enacted the Intergovernmental Relations Act (IGRA), 2012 whose object and purpose is to establish a framework for consultation and co-operation between the national and county governments and amongst county governments; to establish mechanisms for the resolution of intergovernmental disputes pursuant to Articles 6 and 189 of the Constitution, and for such related purposes.

At the core of the relations between the two levels of government is the issue of transfer of functions. Building on Articles 187 and 189 of the Constitution, the Act vide Sections 25 and 28 highlight the principles and criteria of transfer or delegation of powers, respectively. This current legal structure outlines the why, the where and the who but does not give so much outline as to the how, towards the performance of this function. This gap was largely witnessed during the transfer of functions from the Nairobi City County back to the National Government in 2020.

It is against this backdrop that the Draft  Public Finance Management (Transfer of Functions) Bill, 2023 comes with a raft of proposals to help streamline the whole function of transfer of functions.

Salient among the features are: –

(a)  Clear and Expansive Roles for the Joint Authority/Committee

The Intergovernmental Relations Act, 2012, under Section 23 establishes a Joint Committee to help oversee the role of transfer of functions. Such a committee or Authority will also entrench cooperation and consultation between the national government and county governments, as well as among county government.

While both the Intergovernmental Relations Act, 2012 and the Public Finance Management Act (PFMA), 2012 do not give a detailed structure of the Joint Authority or Committee, the Draft Bill outlines the structural architect including its financing and roles.

(b)  Financial Management Upon Transfer of Functions

Under the current terrain, the transfer of functions from one level of government to the other embodies a financing structure where the receiving government takes up both the function and the financing of the function as well. The proposal under the Draft Bill is that the transferring government continues to finance the function, and the same shall be subjected to a Transitional Clause to be put in the deed of transfer. Where necessary, the signing of a deed of transfer of functions, may occasion the preparation of a supplementary budget.

(c)  Joint Cash-Flow Projections

Upon transfer of functions, the national government and the respective County government regarding the transferred function. This joint cash flow shall be shared with the National Treasury, the Controller of Budget and the Commission on Revenue Allocation and shall be the basis for requisition for funding.

(d)  Prescribed Format of Cooperation Agreements

The Draft Bill also, in its Schedule, sets out a sample or prescribed format of a cooperation agreement between national and county governments. The Draft Bill also provides a sample agreement for cooperation between county governments. These are prescribed formats that are in place to guide, if and when the levels of government intend to engage in cooperative arrangements.

Conclusion

This is a timely bill considering the unclear terrain on transfer of functions alongside the nature of cooperation and consultation between the national and county governments, and among county governments. The transfer of functions between Nairobi County and The National Government in 2020 was indeed an eye-opener, and this bill aligns all if not all structures around the transfer of functions.

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