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TOPIC 1

 INTRODUCTION TO PUBLIC FINANCIAL MANAGEMENT

QUESTION 1

April 2026 Question One A and B

(a) Outline FOUR fiscal responsibility principles applicable in management of public finances as provided under Regulation 26 of the Public Finance Management Regulations, 2015.             (4 marks)

 

(b) In a Public Finance Seminar, one of the facilitators noted that “there are certain types of information that must be included in the Budget Policy Statement (BPS) as per Section 25(4) of the Public Finance Management Act, 2012”.

With reference to the above statement, identify FOUR types of information that should be included in the BPS.                       (4 marks)

 

MASOMO MSINGI ANSWER

(a) Fiscal responsibility principles applicable in management of public finances as provided under Regulation 26 of the Public Finance Management Regulations, 2015.

Under Regulation 26 of the Public Finance Management (National Government) Regulations, 2015, the National Treasury is required to manage public finances in accordance with specific fiscal responsibility principles.

 

The following are four key principles as provided under that regulation:

1. National government’s expenditure on the compensation of employees (including benefits and allowances) shall not exceed 35% of the national government’s equitable share of the revenue raised nationally plus other revenues generated by the national government pursuant to Article 209 (4) of the Constitution
2. The compensation of employees (including benefits and allowances) shall not include revenues that accrue from extractive natural resources, including oil and coal
3. The national public debt shall not exceed 50% of Gross Domestic Product (GDP) in net present value terms
4. The annual fiscal primary balance shall be consistent with the Approved debt target for compensation of employees.
5. The National Government’s expenditure on development shall be at least 30% of the total budget over the medium term. This is a mandatory floor to ensure investment in growth rather than just consumption.
6. The National Government shall maintain a reasonable degree of predictability with respect to the level of tax rates and tax bases, ensuring a stable environment for economic planning.
7. If the national government fails to meet any of these principles (such as the 30% development threshold or tax predictability), the Cabinet Secretary must submit a statement to Parliament This statement must explain the reasons for the deviation and must also provide a clear plan and timeline to return to compliance in subsequent years.

 

(b)Types of information that should be included in the Budget Policy Statement (BPS) under Section 25(4) of the Public Finance Management Act, 2012 are:

1. An assessment of the current state of the economy and the financial outlook over the medium term, including macro-economic forecasts
2. The financial outlook with respect to Government revenues, expenditures and borrowing for the next financial year and over the medium term
3. The proposed expenditure limits for the national government, including those of Parliament and the Judiciary and indicative transfers to county governments; and
4. The fiscal responsibility principles and financial objectives over the medium term including limits on total annual debt.

QUESTION 2

December 2025 Question Two A

The National Treasury is mandated with the preparation of annual budget estimates, co-ordination and preparation of the national government budget. Towards this function, the cabinet secretary issues out a treasury circular.

In relation to the above statement, summarise FOUR contents of treasury budget circular. (4 marks)

 

MASOMO MSINGI ANSWER

Contents of treasury budget circular

1. Budget Preparation Guidelines
   The circular provides detailed instructions and guidelines on how government ministries, departments, and agencies should prepare their budget proposals. This includes timelines, formats, and specific rules on how to allocate funds for various programs.
2. Fiscal Policy and Priorities
   It outlines the government’s fiscal policy for the upcoming financial year, including revenue projections, expenditure targets, and any specific priorities such as infrastructure, health, education, or social welfare programs that the government aims to focus on.
3. Expenditure Control Measures
   The circular highlights measures for controlling public expenditure, including limits on non-priority spending, guidelines for capital projects, and other fiscal discipline strategies to ensure the budget remains balanced and sustainable.
4. Revenue Projections and Targets
   The circular includes detailed revenue targets and expectations, including forecasts for tax collection, grants, and other sources of revenue. It directs ministries to align their spending plans with these revenue projections to avoid budget deficits.
5. Guidelines on Public Participation
6. The circular provides instructions on how and when various government sectors should engage the public and other stakeholders. In line with the Constitution, it defines the requirements for involving citizens in the decision-making process for resource allocation. It ensures the budget process is transparent and constitutionally compliant.

 

QUESTION 3

August 2025 Question Two A

The county treasury is required to submit to the county assembly a statement setting out the debt management strategy of the county government on or before 28 February every year.

Required:

Highlight FOUR contents of such a statement. (4 marks)

 

MASOMO MSINGI ANSWER

Contents of debt management strategy

• The total stock of debt as at the date of the statement;
• The sources of loans made to the county government;
• The principal risks associated with those loans;
• The assumptions underlying the debt management strategy; and
• An analysis of the sustainability of the amount of debt, both actual and potential.

QUESTION 4

April 2025 Question One B

Outline EIGHT stages of the budget process for the national government in any financial year as provided under Section 35 of the Public Finance Management Act.         (8 marks)

 MASOMO MSINGI ANSWER

Stages of the budget process

According to Section 35(1) of the Public Finance Management Act the budget process for the national government in any financial year shall comprise the following stages

1. Integrated development planning process which shall include both long term and medium term planning;
2. Planning and determining financial and economic policies and priorities at the national level over the medium term;
3. Preparing overall estimates in the form of the Budget Policy Statement of national government revenues and expenditures;
4. Adoption of Budget Policy Statement by Parliament as a basis for future deliberations;
5. Preparing budget estimates for the national government;
6. Submitting those estimates to the National Assembly for approval;
7. Enacting the appropriation Bill and any other Bills required to implement the National government’s budgetary proposals;
8. Implementing the approved budget;
9. Evaluating and accounting for, the national government’s budgeted revenues and expenditures; and
10. Reviewing and reporting on those budgeted revenues and expenditures every three months.

 

QUESTION 5

April 2024 Question One B

Highlight FOUR documents that are prepared in the process of county government budget preparation clearly indicating their timelines as envisaged by the provisions of Public Financial Management Act.        (4 marks)

 Answer

Documents that are prepared in the process of county government budget preparation

1. County Fiscal Strategy Paper (CFSP): This document outlines the county’s budget priorities and resource envelope for the medium term. It is prepared by April 30th of the preceding financial year.
2. County Budget Review and Outlook Paper (CBROP): This paper reviews the county’s economic and fiscal performance and presents the county’s budget proposals for the upcoming financial year. The County Treasury prepares the CBROP by November 30th of the preceding financial year.
3. Budget Estimates (BE): These are detailed proposals for spending by each county department for the upcoming financial year. Sector Committees within the county government submit their Budget Estimates by October 31st of the preceding financial year.
4. County Assembly Budget Bill (CABB): This bill formalizes the county’s budget proposals and requires approval by the County Assembly by April 30th of the financial year.

Public Finance And Taxation Revision Kit Hard Copy (Printed and bound)

QUESTION 6

December 2023 Question One B

The Cabinet Secretary for the National Treasury or the state officer responsible for finance in your country is mandated by law to manage the national budget process. One of the task is to issue circulars for setting guidelines to be followed to all government entities.

With reference to the above statement, highlight FOUR contents of such a circular.    (4 marks)

 Answer

Contents of the circular issued by Cabinet Secretary

• A schedule for preparation of the budget indicating key dates by which various exercises are to be completed
• The procedures for the review and projection of revenues and expenditures
• Key policy areas and issues that are to be taken into consideration when preparing the budget
• Procedures setting out the manner in which members of the public shall participate in the budget process;
• The format in which budget information and documents shall be submitted; and
• Any other information that, in the opinion of the Cabinet Secretary, may assist the budget process.

 

 

SAMPLE WORK

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END 

Revision is the process by which you remind yourself of the material you have studied during your course, clarify any problem areas and bring your knowledge to a state where you can retrieve it and present it in a way that will satisfy the examiners. The paragraph herein-above captures the essence of revision. It is implicit that revision is nothing short of “fine tuning” the knowledge acquired in the course or making it more digestible for usage in an examination. Revision is an integral part of examination preparation. It is not a substitute for a sustained preparation earlier in the course. The syllabus for Public Finance and Taxation is expansive and cannot be “hastily crammed” for purposes of the examination. A deliberate attempt must be made to study and appreciate the basic principles and concepts and their application. Revision must therefore be seen as a final stage in the study of any topic. Its utility is therefore undermined if earlier stages have not been completed. As an integral part of the course revision must be commenced shortly after the commencement of the course. Initially this could take the form of a review of what has been covered in a week or two not a month as this may be inordinately long. Ideally, revision is necessary after every topic. Coverage of the topics must be incisive and indiscriminate. The main purpose of this booklet is to help candidates preparing for the Public Finance and Taxation KASNEB examination to make the best use of the last few weeks before the examination.