An Act of Parliament to amend the Public Finance Management Act, 2012 and for connected purposes.
| CLAUSE NO. | CONTENTS OF THE CLAUSE | OUR COMMENTS |
|---|---|---|
| Clause 2 Amendment of section 23 of No. 18 of 2012 | The Public Finance Management Act (“the principal Act”) is amended in section 23 by deleting the words “three months” appearing in sub-section (1) and substituting therefor the words “one month”. | This amendment seeks to reduce the timeframe for the National Treasury to prepare and submit financial statements for the Contingencies Fund to the Auditor-General from three months to one month. By shortening this period, financial oversight and accountability are improved, allowing for faster review and intervention where necessary. However, this may place additional pressure on officials responsible for compiling the reports, potentially impacting on the accuracy of financial disclosures. |
| Clause 3 Amendment of section 24 of No. 18 of 2012. | The principal Act is amended in section 24 (10) by deleting the words “three months” appearing in paragraph (b) and substituting therefor the words “one month”. | This proposal reduces the statutory period for the administrator of a national public fund to prepare and submit financial statements from three months to one month. This amendment enhances financial accountability and ensures timely submission of reports to key oversight bodies, including the Auditor-General, National Treasury, Commission on Revenue Allocation, and the Controller of Budget. However, administrators may face challenges in compiling accurate and comprehensive reports within the reduced timeframe. |
| Clause 4 Amendment of section 68 of No. 18 of 2012. | The principal Act is amended in section 68 – | |
| (a) in sub-section (2) by deleting the words “three months” appearing in paragraph (k) and substituting therefor the words “one month”; | The amendment seeks to reduce the reporting period for annual financial statements from three months to one month. This change aims to enhance the timeliness of financial reporting but may pose challenges in ensuring accuracy and completeness. | |
| (b) in sub-section (4) by inserting the words “Auditor General” immediately after the word “national Treasury”; and | By explicitly including the Auditor-General as a recipient of reports, the amendment reinforces independent oversight and transparency. | |
| (c) by inserting the following sub-section immediately after sub-section (4) – | Imposing liability on accounting officers for failing to implement audit recommendations strengthens accountability mechanisms within public finance management. | |
| “(4A) An accounting officer who dees not implement the recommendations made under sub-section (4) shall be liable to the penalty provided for under section 199.” | ||
| Generally, the proposed amendments to Section 68 seek to enhance financial accountability and oversight by expediting reporting timelines and strengthening enforcement mechanisms across national government entities. | ||
| Clause 5 Amendment of section 80 of No. 18 of 2012. | The principal Act is amended in section 80 by deleting the words “four months” appearing in sub-section (4) and substituting therefor the words “two months”. | The proposed reduction in the timeframe for submitting consolidated annual financial statements from four months to two months is designed to improve the timeliness of financial oversight. While this change enhances accountability, it may create operational challenges for the Treasury and national government entities by limiting the time available for accurate compilation and verification of financial statements. |
| Clause 6 Amendment of section 81 of No. 18 of 2012. | The principal Act is amended in section 81 by deleting the words ‘three months” appearing in subsection (4) and substituting the words “one month”. | This amendment seeks to enhance financial accountability by reducing the timeframe for accounting officers of National Government entities to submit financial statements from three months to one month. While this change ensures more timely oversight, it may also present challenges in guaranteeing the accuracy and comprehensiveness of financial statements within a compressed timeline. |
| Clause 7 Amendment of section 82 of No. 18 of 2012. | The principal Act is amended in section 82— (a) by deleting the words “three months” appearing in sub-section (3) and substituting therefor the words “one month”; and (b) by deleting the words “three months” appearing in sub-section (4) and substituting the words “one month”. | The proposed amendment to reduce the timeframe for the submission of financial accounts and reports on waivers and variations of taxes, fees, or charges from three months to one month aims to enhance financial accountability and transparency by ensuring timelier reporting. However, it may also pose practical challenges, as receivers of revenue will have significantly less time to compile, verify, and publish accurate financial statements, potentially impacting the quality of reporting. |
| Clause 8 Amendment of section 84 of No. 18 of 2012. | The principal Act is amended in section 84 by deleting the words “three months” appearing in sub-section (3) and substituting therefor the words “one month”. | The proposed reduction in the timeframe for administrators of national public funds to submit financial statements to the Auditor-General—from three months to one month after the end of each financial year—aims to improve financial oversight and accountability by ensuring more timely reporting. However, the significantly shortened timeline may present challenges for administrators, who require sufficient time to accurately compile and verify financial data. |
| Clause 9 Amendment of section 115 of No. 18 of 2012. | The principal Act is amended in section 115 by deleting the words “three months” appearing in sub-section (1) and substituting therefor the words “one month”. | The proposal to reduce the County Treasury’s timeframe for preparing and submitting financial statements on the Emergency Fund to the Auditor-General from three months to one month aims to strengthen financial accountability and improve the timeliness of emergency expenditure oversight. However, administrators might find it challenging to maintain accuracy due to the compressed timeframe for data compilation and verification. |
| Clause 10 Amendment of section 116 of No. 18 of 2012. | The principal Act is amended in section 116 (7) by deleting the words “three months” appearing in paragraph (b) and substituting therefor the words “one month”. | The proposal to decrease the statutory period for the administrator of a county public fund to submit financial statements to the Auditor-General from three months to one month is intended to enhance financial accountability and oversight by ensuring more timely reporting. However, it may also place additional pressure on fund administrators to compile accurate financial statements within a shorter period, potentially affecting the quality and thoroughness of financial reporting. |
| Clause 11 Amendment of section 149 of No. 18 of 2012. | The principal Act is amended in section 149 (2) by deleting the words “three months” appearing in paragraph (k) and substituting therefor the words “one month”. | The proposed amendment seeks to reduce the timeframe for accounting officers to prepare and submit annual financial statements from three months to one month after the end of the financial year. The intent behind the reduced reporting deadlines is to strengthen financial oversight and improve efficiency in submitting financial statements at both county and national levels. However, it may also place increased pressure on county government entities to compile and verify financial data within a significantly shorter period, potentially affecting the accuracy and quality of reporting. |
| Clause 12 Amendment of section 163 of No. 18 of 2012. | The principal Act is amended in section 163 by deleting the words “four months” appearing in sub-section (4) and substituting therefor the words “two months”. | This proposal seeks to reduce the timeframe for the County Treasury to submit annual financial statements to the Auditor-General, National Treasury, Controller of Budget, and Commission on Revenue Allocation from four months to two months. Streamlining financial reporting deadlines is a step toward greater accountability and faster submission of financial statements at the county level. However, it may also exert pressure on county treasuries, potentially impacting the precision and comprehensiveness of financial reporting. |
| Clause 13 Amendment of section 164 of No. 18 of 2012. | The principal Act is amended in section 164 by deleting the words “three months” appearing in sub-section (4) and substituting therefor the words “one month”. | This amendment seeks to reduce the period for accounting officers of county government entities to submit financial statements to the Auditor-General from three months to one month. This change is intended to enhance the timeliness of financial reporting and oversight, promoting greater accountability. Nonetheless, county entities may encounter difficulties due to the reduced time available to accurately prepare and validate financial data. |
| Clause 14 Amendment of section 165 of No. 18 of 2012. | The principal Act is amended in section 165 by deleting the words “three months” appearing in sub-section (3) and substituting therefor the words “one month”. | By reducing the period within which a county government's receiver of revenue ought to submit financial accounts to the Auditor-General from three months to one, the Bill seeks to strengthen financial governance. While this change will enhance financial oversight and promote greater accountability, it may also create difficulties in compiling well-structured and reliable financial reports within the shorter reporting window. |
| Clause 15 Amendment of section 167 of No. 18 of 2012. | The principal Act is amended in section 167 by deleting the words “three months” appearing in sub-section (3) and substituting therefor the words “one month”. | The proposed amendment to Section 167(3) of the principal Act reduces the period for administrators of county public funds to submit financial statements to the Auditor-General from three months to one. This change is intended to enhance the timeliness of financial oversight and accountability. However, it may also create challenges in ensuring the accuracy and completeness of financial reporting, particularly for counties with limited administrative capacity. |
| Clause 16 Amendment of section 192 of No. 18 of 2012. | The principal Act is amended by deleting section 192 and substituting therefor the following new section— | |
| 192. (1) There is established a board to be known as the Public Sector Accounting Standards Board. | ||
| (2) The Board shall be a body corporate with perpetual succession and a common seal, and shall in its corporate name, be capable of— (a) suing and being sued; (b) taking, purchasing or otherwise acquiring, borrowing, holding, charging or disposing of movable and immovable property; and (c) doing or performing all such other things or acts necessary for the proper performance of its functions which may lawfully be done by a body corporate. | The amendment expands the legal status of the Public Sector Accounting Standards Board by transforming it into a body corporate with perpetual succession and the ability to own property, enter contracts, and sue or be sued. This change is expected to enhance the Board’s operational autonomy, enabling it to manage resources more effectively and fulfill its mandate with greater independence. |
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| 3) The Board shall be a successor of the Accounting Standards Board which existed immediately before the commencement of this Act. | Designating the Board as the successor to the previous Accounting Standards Board would ensure continuity in standard-setting and oversight functions. | |
| Clause 17 Amendment of section 193 of No. 18 of 2012. | The principal Act is amended in section 193 by deleting sub-section (5). | The removal of the National Treasury’s role in providing secretariat services to the Public Sector Accounting Standards Board could work to reduce government influence over the Board. We, however, recommend that the Board necessitate alternative administrative support structures to ensure its efficiency. |
| Clause 18 Amendment of section 194 of No. 18 of 2012. | Section 194 of the principal Act is amended — (a) in subsection (1) by inserting the following new paragraph immediately after paragraph (g)- (h) prescribe a framework for implementation of accrual accounting in Government; and (i) prescribe a risk management framework. | The proposed amendment expands the mandate of the Accounting Standards Board by introducing requirements for an accrual accounting implementation framework and a risk management framework. These additions aim to enhance financial reporting accuracy and strengthen risk oversight in public sector financial management. |
| (b) by inserting the following new sub-section immediately after sub-section (5)- (6) Without prejudice to the generality of sub-section(1) (h), the framework for implementation of accrual accounting shall provide for a three-year transition period from the date of commencement of this Act. | The prescribed three-year transition period for accrual accounting is expected to provide government entities with sufficient time to adapt, ensuring a structured and effective shift from cash-based accounting. | |
| Clause 19 Insertion of new section in No. 18 of 2012. | The principal Act is amended by inserting the following new sections immediately after section 195- | The proposed insertion of Sections 195A to 195G into the principal Act introduces a comprehensive governance framework for the Public Sector Accounting Standards Board. These provisions establish key aspects of the Board’s structure, leadership, staffing, financial management, and accountability. |
| 195 A. (1) The Public Sector Accounting Standards Board shall appoint a chief executive officer through a competitive process and, on such terms and conditions as it may determine. | The Establishment of the Chief Executive Officer under will ensure that the Board has a designated leader responsible for executing its mandate. The introduction of a competitive process for appointing the CEO ensures transparency and fairness in leadership selection. This is essential for upholding the integrity of the Public Sector Accounting Standards Board |
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| (2) A person shall be qualified for appointment as a chief executive officer, if the person— (a) has a degree in accounting or finance; (b) is a certified member in good standing with the Institute; (c) has at least five years experience in management; and (d) meets the requirements of chapter six of the Constitution. | By outlining the qualifications of the CEO, the Bill aims to ensure that the position is filled by a highly skilled and experienced individual. This provision further emphasises the need for expertise in accounting/finance, management, and alignment with constitutional requirements, which will strengthen the credibility and effectiveness of the Board. | |
| (3) The chief executive shall hold office for a period of four years but shall be eligible for reappointment for a further term of four years. | A fixed four-year term with the possibility of reappointment ensures both stability and accountability. Limiting the term prevents indefinite tenure and promotes fresh leadership after a reasonable period. | |
| (4) The chief executive shall, subject to the general direction and control of the Board, be charged with the direction of the affairs and transactions of the Board, the exercise, discharge and performance of its objectives, functions and duties, and the administration and control of the staff of the Board. | This provision clearly defines the CEO's role in overseeing the Board's activities, aligning with good governance practices by ensuring clear lines of responsibility and accountability. | |
| 195 B. (1) The Public Sector Accounting Standards Board may recruit such number of staff, through a competitive process, as may be necessary for the proper and efficient performance of the functions of the Board. | Allowing the Board to recruit staff through a competitive process enhances operational efficiency and professionalism. This ensures that the Board has the necessary expertise to perform its functions effectively. | |
| (2) The Public Service Commission may, on the request of the Board, second to the board such number of public officers as may be necessary for the performance of the functions of the Board. | The provision for secondment of public officers introduces flexibility, ensuring that the Board can access specialised skills from the public sector while maintaining a stable and knowledgeable workforce. | |
| 195 C. (1) The common seal of the Board shall be kept in such custody as the Board shall direct and shall not be used except on the order of the Board. (2) The affixing of the common seal shall be authenticated by the chairperson or any other person authorized in that behalf by a resolution of the Board. (3) The common seal of the Board when affixed to a document and duly authenticated shall be judicially and officially noticed and unless the contrary is proved, any necessary order or authorization of the Board under this section shall be presumed to have been duly given. | The formalisation of the Board’s common seal seeks to strengthen its legal identity and authority. | |
| Sections 195D - 195G provide for the Board’s financial autonomy and accountability. | ||
| 195 D. The funds of the Board shall consist of- (a) such monies as may be appropriated by the National Assembly; (b) such moneys as may be imposed by the Board in the performance of its functions; or (c) such grants, donations or endowment received by the Board. | Establishing diverse sources of funding—including government appropriations, self-imposed charges, and grants—enhances financial sustainability and independence. |
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| 195 E. The financial year of the Board shall be the period of twelve months ending on the thirtieth of June in each year. | ||
| 195 F. (1) Before the commencement of each financial year, the Board shall cause to be prepared estimates of the revenue and expenditure of the Board for that year. | Requiring the Board to prepare and approve its revenue and expenditure estimates prior to the financial year ensures foresight and financial discipline, aligning with best budgeting practices. | |
| (2) The annual estimates shall make provision for all the estimated expenditure of the Board for the financial year concerned, and in particular, shall provide for the— (a) payment of the salaries, allowances and other charges in respect of the staff of the Board; (b) payment of pensions, gratuities and other charges and in respect of benefits which are payable out of the funds of the Board; (c) maintenance of the buildings and grounds of the Board; (d) creation of such funds to meet future or contingent liabilities in respect of benefits, insurance or replacement of buildings or installations, equipment and in respect of such other matters as the Board may think fit. | This breakdown of expenditure seeks to ensure transparency and accountability in how the Board allocates its resources. | |
| (3) The annual estimates shall be approved by the Board before the commencement of the financial year to which they relate and shall be submitted to the Cabinet Secretary for tabling in the National Assembly. | This provision would ensure that the Board's financial estimates are both internally approved and subject to external oversight by the Cabinet Secretary and the National Assembly. | |
| (4) No expenditure shall be incurred for the purposes of the Board except in accordance with the annual estimates approved under sub-section (3). | This provision emphasizes financial control by ensuring that expenditure is only incurred based on pre-approved budgets, safeguarding against misuse of funds. | |
| 195G. (1) The Board shall cause to be kept all proper books and records of accounts of the income, expenditure, assets and liabilities of the Board. | Proper record-keeping is fundamental for financial transparency and accountability, ensuring that the Board’s financial operations are well-documented. | |
| (2) Within a period of three months after the end of each financial year, the Board shall submit to the Auditor-General the accounts of the Board in respect of that year together with a— (a) statement of the income and expenditure of the Board during that year; and (b) statement of the assets and liabilities of the Board on the last day of that financial year. | This provision would ensure that the Board’s financial performance is regularly audited, which is a key component of financial governance and accountability. | |
| (3) The annual accounts of the Board shall be prepared, audited and reported upon in accordance with the provisions of Articles 226 and 229 of the Constitution and the Public Audit Act. | This requirement reinforces the Board’s adherence to constitutional and public audit standards, ensuring that its financial activities are subject to independent scrutiny and aligned with public sector financial regulations. | |
| Clause 20 Amendment of the Second Schedule to No. 18 of 2012. | The Second Schedule to the principal Act is amended by inserting the following paragraphs immediately after paragraph 12— 13.All the rights, duties, obligations, assets and liabilities of the Public Sector Accounting Standards Board existing at the commencement of this Act shall be automatically and fully transferred to the Board. 14. The administrative directions made by the former Public Sector Accounting Standards Board or by the Cabinet Secretary which were in force immediately before the commencement of this Act shall, have force as if they were directions made by the Board or the Cabinet Secretary under this Act. | The proposed amendment expands the Second Schedule by incorporating provisions that ensure a seamless transition of responsibilities, assets, and liabilities from the former Public Sector Accounting Standards Board to the newly established Board. Additionally, it upholds the validity of administrative directions issued by the former Board or the Cabinet Secretary before the Act’s commencement. This change enhances legal clarity, ensuring continuity in financial governance and minimising disruptions in public sector accounting standards. |
| General Comments | We support the objective of the Bill in improving financial accountability and ensuring more efficient financial oversight. However, we propose that Parliament consider implementing a phased approach to the reduction of reporting timelines. This would allow for capacity building among government officers to ensure they can meet the revised deadlines without compromising the accuracy and integrity of financial statements. |