The Select Committee on Budget and Appropriations submitted the report on the Supplementary Estimates for FY 2022/2023. In the supplementary budget, requests for reallocations and additional allocations as well as expenses covered under Article 223 of the Constitution are submitted for approval by the Parliament.
The purpose of supplemental appropriation is to cover any purpose for which the amount allotted in the appropriation act is insufficient, or there is a need for an expenditure that was unanticipated and, as a result, had not been covered by the appropriation act, or money has been taken out of the contingencies fund.
According to Section 16(2) of the Public Financial Management (PFM) Act, in the event of a change in the national government, the new administration may, with the consent of Parliament, stray from the financial goals without departing from the general principles of fiscal responsibility. This will help the next administration quickly begin carrying out its policy goals.
After consultations and responses from departmental committees, the Committee recommended that;
- That a Multi-Agency Team comprised of the BAC, National Treasury, the Controller of Budget, the Office of the Auditor-General and the Attorney-General be established to carry out a legislative review of Article 223 of the Constitution for clarity and to improve fiscal prudence with regard to expenditure under this Article, and to report to the National Assembly by June 30, 2023.
- The National Assembly must receive a report from the Auditor-General’s office by June 30, 2023, on the audit of expenditures authorised by Article 223 of the Constitution for the fiscal year 2022–2023.
- that, in accordance with the Departmental Committee on Finance and National Planning’s recommendation, the Kshs. 6.09 billion payment made by Helios Investment to sell its shares in Telcom Kenya Ltd. be rejected
- that, in accordance with the Departmental Committee on Agriculture and Livestock’s proposal, the payment of Kshs. 4 billion for a subsidy on maize flour be rejected.
- that further forward, Standing Order 243(3A) will be followed when approving expenditures made in accordance with Article 223 of the Constitution of Kenya 2010. (b). Any additional allocation that has been authorised by the National Treasury but has not yet been paid out will be appropriately reassigned.
This is the first budget under the new administration, and it aims to implement aspects of the Bottom-Up Economic Reform Plan in addition to resolving current economic issues such as drought interventions, provision of subsidised fertiliser to farmers, maize subsidy programmes, security operations, recruitment of forest rangers, transition to Junior Secondary School and recruitment of additional teachers and regularisation of fuel. The supplemental budget reduces ministerial spending by Ksh 14.72 billion and when compared to the initial approved budget, the development. The increase in recurrent expenses is mostly attributable to Article 223 expenses for food aid, flour and fertiliser subsidies, and improved security activities. The Committee expressed worries about the constantly increasing costs under this provision, which was intended for exceptional situations.
The Committee took note of the fact that the National Treasury is asking for approval of Ksh 130.14 billion in accordance with Article 223 of the Constitution which money has been spent by the national government that has not been appropriated.
Ideally, approval of Parliament for such spending should be sought within two months of the withdrawal of funds. The National Treasury has made an effort to routinely present these expenses to Parliament within the statutory time frames, however, only Ksh. 75.78 billion had been distributed out of the Ksh. 127.5 billion.
Half of the dispersed sum was completed between the 4th and 5th of August 2022 which was justified by the budget control office informing the Committee that her office was forced to approve some of the aforementioned disbursements under duress and excessive pressure.
In particular, the payment of Kshs. 6.09 billion for Helios Investment to sell its shares in Telcom Kenya Ltd. was questioned by the Committee. It was noted that there was no explanation given as to why such a payment would be made in accordance with Article 223 or why it couldn’t wait for the regular budget process.
When the Committee brought up the issue with the National Treasury and the Controller of Budget, it was observed that more research into the payment was required.
Further, The Committee rejected the expenditure that had been authorised by the National Treasury for the payment of Ksh. 4 billion for the maize flour subsidy on August 4. This is because there was a lack of disclosure regarding the quantity of maize flour delivered, the areas where the subsidized flour was distributed, and the retail establishments involved in distribution.
Additionally, Kshs. 17.1 billion for the fuel subsidy program is one of the approved expenses that has not yet been paid out. The criteria that were used to distribute the Ksh 25.6 billion that had been approved and disbursed drew criticism from the Committee.
Further, there were concerns about the ongoing abuse of Article 223 particularly, it was discovered that the Lamu-Ijara-Garissa road received Ksh 2.8 billion for all-weather road improvements. The Committee took note of the fact that the same route had received Ksh. 5 billion the year before.
Many expenses covered by Article 223 have been authorised by the new administration, which has also approved new expenditure under Article 223 to assist it to settle in and start a thorough budget review. Some of the significant payment was Ksh 3.79 billion for the fertilizer subsidy program and Ksh 10.2 billion to operationalize the National Fund for Financial Inclusion.
The Committee observed that, notwithstanding the revisions in these supplemental estimates, there has not been a significant change in government policy; yet, there are important indicators that point to the policy priorities of the incoming administration. They include measures to increase revenue collection, the transition from consumption to production subsidies, assistance for MSMEs as seen by contributions to the Hustler fund, and KRA’s empowerment.
In order to create a budgetary framework that is sustainable, the new administration has committed to a course of fiscal consolidation. This necessitates actions to increase revenue and reduce spending. Significant reductions in recurrent and development spending have been suggested in the supplementary estimates 1. The budget for road transportation was cut by Ksh. 47.1 billion, for example, and the amounts allotted for power transmission and distribution and the development of the infrastructure for water and sewage systems were cut by Ksh. 28.9 billion.
The current government’s organisational structure as outlined in Executive Order No. 1 of 2023 has budgetary implications arising from the creation of new offices, accounting procedures, and new votes and programmes required to operationalise the structure. Among other notable changes are the identification of the Inspector-General of Police as the service’s accounting officer, the detachment of the Deputy President’s Office from the President’s, and the creation of the Prime Cabinet Secretary Office.
On Reallocations and Additional Allocations, the Committee also made some non-financial recommendations requiring the expenditures totaling Ksh 55.4 billion that was requested as additional allocation to be considered during the preparation of the annual estimates for FY 2023–2024 as per the fifth schedule were made in light of the Departmental Committee proposals that could not be funded due to the limited fiscal space.
Additionally, the Office of the Controller of Budget, in cooperation with the Auditor-General and Attorney-General, will develop an enforceable framework to manage the further accumulation of pending bills and report to the National Assembly by 30 June 2023 in order to support the government’s efforts to consolidate its finances.
Further, the National Treasury is meant to prioritise the transfer of resources to the Equalisation Fund, including past-due amounts, when processing the Budget Policy Statement for FY 2023–2024. There was another recommendation for resources allocated through the public participation initiative not to be reallocated during the supplementary estimates unless through a similar public participation exercise from FY 2023/24.
Further, to ensure the best and prompt utilisation of committed development resources, National Treasury is to coordinate the development of a framework for streamlining the implementation of donor-funded projects, including grants, and reports to the National Assembly by July 2023 in accordance with the Accra Accord and finally the State Department for ICT and Digital Economy is supposed to hasten the establishment of a thorough framework for the digitisation of government services in order to ensure that the process is seamless, eliminate overlap in roles, and improve the resulting Appropriations in Aid, and it should report to the National Assembly by June 30th, 2023.