Uses and Control of Government Finances

  

Date Posted: 2/10/2013 3:58:29 AM

Posted By: Chadeshady  Membership Level: Gold  Total Points: 1697

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This is certainly not a new discovery as it is normally a topic of conversation a day-to-day basis in our learning institutions, places of work, streets, social sceneries (pubs, cinemas. parks) and even our homes. But be-as-it-may, not most of us know or are conversant with how the government uses and accounts for its finances.

I believe the Kenyan Government has been on the receiving end this current financial year especially after a long season that was occasioned by constant strikes and go slows from a number of public sectors and public servants on the grounds of insufficient salaries and wages. And so, onto the moment of truth and the million dollar question of this decade: how does the government use and control its finances?

In order to answer this question, it’s paramount that one knows the various types of funds that exist within the umbrella of the government. Knowledge of these funds will enable one to understand their usage and when they are provided for.

The major types of government funds include:
1. The Consolidated Fund
2. The Appropriation Bill
3. The Supplementary Bill

Other forms of government funds are:
1. The Contingencies Fund
2. The Local Authority Transfer Fund (LATF)
3. The Constituency Development Fund (CDF)
4. The Local Authority Service Delivery Action Plan (LASDAP)
5. The Road Maintenance Levy Fund (RMLF)
6. The Rural Electrification Programme Levy Fund
7. The HIV/AIDS Fund
8. The Free Primary Education Fund (FPEF)

The Consolidated Fund
This comprises all revenues/moneys raised or received for the purposes of the Government of Kenya. Usually, no money is withdrawn from this fund except as may be authorized by the Constitution, an Act of Parliament or a Vote on account by the National Assembly. Where money is charged by this constitution or any Act of Parliament upon the Consolidated Fund, they shall be paid out of that fund by the Government of Kenya to the person/authority to whom payment is due.

Expenses

charged to the Consolidated Fund include:
1. All debt charges;
• interest,
• sinking fund charges,
• debt repayment/amortization,
• expenditures to which Consolidated Fund is security,
• service and debt redemption liable to the Government of Kenya

2. Salaries and any allowances payable to holders of the offices of Government of Kenya:
• Attorney General
• High Court Judge
• Court of Appeal Judge
• Controller and Auditor General
• Member of the Electoral Commission
• Member of the Public Service Commission

The Appropriation Bill
This comprises of approved estimates of expenditure by the National Assembly providing for the issue from the Consolidated Fund of sums necessary to meet that expenditure and the appropriation of those sums to the purposes specified therein.

Instances the National Assembly may authorize the withdrawal from the Consolidated Fund include;
If in any financial year it is found that:
• The amount appropriated to any purpose is insufficient
• A need has arisen for expenditure to a purpose which no amount of money has been appropriated
• Any moneys have been expended for a purpose in excess of the amount appropriated to that purpose by the Appropriation Act
• Any moneys have been expended for a purpose to which no amount has been appropriated by that Act
• An Appropriation Act for a financial year has not come into operation by the beginning of that financial year

The Supplementary Bill
This is a statement of excess showing the sums required/spent and is approved by the National Assembly to provide for the issue of those sums from the Consolidated Fund and appropriating them to the purposes specified therein.

The Contingencies Fund
It is a provision made by the Minister of Finance at a time when an urgent and unforeseen need for expenditure arises for which no other provision exists to make advances from that fund to meet that particular need.

Local Authority Transfer Fund (LATF)
It is established as a grant from Kenya’s Central Government to the local authorities for enabling them to extend and improve services to their residents; it is supposed to be 5% of the annual income tax revenue.

Objectives of LATF
? Enable local authorities to improve service delivery to the public
? To improve financial management, revenue mobilization and accountability in local authorities
? To eliminate all outstanding debts owed by local authorities within 5 years

Components of LATF
a) Service Delivery (60%)
This amount is meant for service delivery projects identified within a given local council area.

b) Performance (40%)
This is aimed at catering for administrative costs that help the respective local authority enhance its capacity in financial management, revenue collection and minimizing, & eliminating the perennial debts owed by councils.

c) Transitional
This is only available to a few councils and is meant for boosting councils that receive less income from LATF than from the new established local authority service charge.

Constituency Development Fund (CDF)
Funds under this program are utilized by local authorities to provide Kenyans at the grassroots the opportunity to make expenditure decisions that maximize their value consistent with the theoretical predictions of decentralization.

Increasingly, however, concerns about the utilization of funds under this program are emerging more-so issues to do with allocative efficiency. The CDF was instigated to ensure that a specific portion of the government annual ordinary revenue is devoted to the constituencies for development purposes.

Its allocation is facilitated by the National Management Committee which ensures that the disbursement of funds to all constituencies and that the prospective benefits are available to a widespread cross-section of the inhabitants of a given area.

The main layers through which the funds are channeled include:
- The District Project Committees
- The Constituencies Fund Committee
- The National Management Committee
- The Constituencies Development Committees

The Constituency Development Committee is made up of members of the constituency who are literate and constitutes:
- The area MP
- 2 councilors from the constituency
- 2 persons representing Religious Organizations
- 2 men & women from the Constituency
- 1 youth representative
- 1 person nominated from the NGO sector
- 3 other members

Local Authority Service Delivery Action Plan (LASDAP)
This improves service delivery to the public and financial management within the Local Authorities. The main problems in local authorities that triggered its formulation were:
1. Lack of adequate management capacity of local authorities
2. Lack of financial and operational autonomy of local authorities
3. Poor leadership and economic governance in local authorities

Road Maintenance Levy Fund (RMLF)
It is administered by the Kenya Roads Board and made up from a fuel levy on petroleum products and transit toll collections. It caters for the maintenance of public roads under the control of the Ministry of Roads and Public Works, Kenya Wildlife Service and District Roads Maintenance Committee.

Rural Electrification Programme Levy Fund (REPLF)
This fund is aimed at financing electrification of rural and other undeserved areas and is used in programs relating to the design, construction, equipping and operation and maintenance rural electrification projects identified by communities.

HIV/AIDs Fund
It is administered by the National Aids Control Council targeting individuals infected and affected by the scourge with the focus being long-term care and support.

Free Primary Education Fund (FPEF)
This addresses challenges facing financing and quality of primary education and it targets all children attending formal and non-formal education institutions in Kenya. It comprises of an allocation per child per annum with the amount disbursed to a constituency/district based on the number of pupils enrolled in the schools within the particular area.
- 1st Allocation: purchase of teaching and learning materials
- 2nd Allocation: general purpose
- 3rd Allocation: general operating activities, maintenance and administration

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