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

Public Finance And Taxation Revision Kit Hard Copy (Printed and bound) is available in hard copy at Ksh 600

CALL / TEXT / WHATSAPP 0728 776 317 TO ORDER

TOPIC 2

 RELATIONSHIP BETWEEN NATIONAL AND COUNTY GOVERNMENT ON BUDGET AND ECONOMIC MATTERS

 

QUESTION 1

December 2024 Question One A

i) The Equalisation Fund

The Equalisation Fund in Kenya is a financial mechanism established under Article 204 of the Constitution of Kenya, 2010. Its primary aim is to provide funds to marginalised areas in order to bring them to at least the same level of access to basic services, such as water, education, and health, as the rest of the country. The fund is intended to address historical disparities and promote equitable development across regions. A percentage of the national revenue is allocated to this fund, which targets priority projects in marginalized counties.

ii) Appropriation Act

Means an act of parliament or of county assembly that provides for the provision of money to pay the supply of services. The Appropriation Act is legislation that authorizes government expenditure. In Kenya, it is passed annually by Parliament and allows the government to utilize funds allocated in the national budget for various departments and services. The Act specifies the amount of money that can be spent on specific programs and projects, and it ensures that public spending aligns with the approved budget estimates. The Appropriation Act plays a crucial role in ensuring accountability and transparency in public finance management.

QUESTION 2

August 2024 Question One A

i) Consolidated Fund Services

“Consolidated Fund Services “means a service the expense of which is charged directly against and payable from the Consolidated Fund under or by virtue of the Constitution or any Act of Parliament other than an Appropriations Act;

 ii) The Division of Revenue Bill is a bill introduced in parliament to provide for the equitable division of revenue raised nationally between the national and county governments in the relevant financial year, and for connected purpose.

 QUESTION 3

August 2024 Question Two A

Criteria that should be taken into account in determining the equitable shares as provided under Article 203 of the Constitution

  1. National interest
  2. Public debt
  3. Needs of the national government
  4. Need to ensure county governments can perform tasks required of them
  5. Fiscal capacity of county governments
  6. Developmental needs of the counties
  7. Economic disparities in the counties
  8. Affirmative action in respect of disadvantaged areas and people
  9. Stability and predictability in allocation of revenue
  10. Flexibility in responding to emergencies

QUESTION 4

December 2023 Question One C

Contents of information included in the financial statements in respect to contingencies fund

  1. The date and amount of each payment made
  2. The person for which payment was made
  3. The person to whom the payment was made
  4. A statement showing how the money was spent for intended purpose

QUESTION 5

August 2023 Question One A and D

c) Explanation the following terms as used in public finance management

(i) Equitable share:

The equitable share is the money parliament shares vertically between the national and the county governments. The money comes from the ordinary tax revenue the national government collects at the national level.

(ii) Conditional grants:

These are additional allocations given to the county governments on top of the equitable share of revenue given by the national government. The national government imposes restrictions on how county governments will spend them. The county governments spends them on specific items in the budget.

(iii) Own source revenue:

Own source revenue refers to the funds generated by sub-national governments, such as county governments in Kenya, through taxes, charges, and fees imposed on residents and businesses within their jurisdiction. In the case of Kenya, county governments have the authority, as provided by Article 209(3) of the Constitution, to levy certain types of taxes and charges. These may include property rates, entertainment taxes, charges for services provided, and various permits and fees related to business activities and use of public resources. Own source revenue provides county governments with a degree of financial

(d) Parameters used by the Commission on Revenue Allocation in sharing revenue among county governments or their equivalent in Kenya

  • Population: Meant to enable counties to meet the direct costs of providing assigned functions to their citizens and is determined by their respective official population statistics.
  • Equal Share: Meant to provide minimum funding for general functions such as administrative costs of setting up and running county governments.
  • Poverty: This parameter is intended to provide an allocation of revenue to counties according to the level of poverty of a county.
  • Land Area: This parameter is used to enable counties meet their costs of delivering services in accordance to their land sizes and geographical features.
  • Personnel Emolument Factor has been introduced.
  • Development Factor meant to provide funds for service provision in education, health, water and infrastructure to citizens of various counties. This is in relation to their respective levels of development.

QUESTION 6

April 2023 Question One A

(i) Vertical sharing refers to the process of sharing revenue raised nationally (equitable share) between the national and the county governments.

(ii) Horizontal sharing refers to the process of sharing among the county governments (horizontal share) to enable them provide services and perform their functions.

QUESTION 7

December 2022 Question One A

Explanation of the following types of funds

(i) The contingency fund

This is a fund set out by Article 208 of the Kenyan Constitution with the purpose of catering for urgent and unforeseen expenditure for which there is no other legislative authority. i.e. its set up by governments to provide emergency funding for unforeseen events or expenses that may arise during the course of a fiscal year. It is typically used to cover expenses that were not included in the government’s annual budget or for unexpected expenses that exceed the budgeted amount. The contingency fund is usually kept in a separate account and is only accessed in cases of emergency or unforeseen events. The fund is replenished annually to ensure that it is adequately funded for future contingencies.

(ii) The equalisation fund

This is a type of fund used in some countries to promote fiscal equalization between regions or states. The purpose of this fund is to provide financial assistance to regions or states that are economically disadvantaged, typically due to lower tax revenues. The funds are collected by the central government and distributed to the disadvantaged regions or states based on a pre-determined formula that takes into account their relative economic conditions. The aim is to provide a level playing field for all regions or states, enabling them to provide comparable levels of public services and infrastructure despite differences in their fiscal capacities. The equalization fund is typically financed by a portion of national taxes, and the allocation of funds is governed by legislation or administrative guidelines.

QUESTION 8

August 2022 Question One A

Functions of the Commission on Revenue Allocation (CRA)

  1. The major function of the Commission is to make recommendations concerning the basis for the equitable sharing of revenue raised by the national government between the national and county governments; and among the county governments.
  2. To recommend on matters concerning the financing of both the national government and county governments.
  3. To recommend on matters concerning the financial management of both national and county governments.
  4. Define and enhance revenue sources of the national government.
  5. Define and enhance revenue sources of county governments.
  6. Encourage fiscal responsibility by the national government.
  7. Parliament should consult CRA and consider CRA’s recommendations before passing any Bill appropriating money out of the Equalization Fund.
  8. To encourage fiscal responsibility by county governments.
  9. To advice Parliament on any Bill that includes provisions dealing with sharing of revenue.
  10. Advice on any Bill that includes provisions dealing with any financial matter concerning county governments.
  11. To publish and review the policy that sets out criteria for identifying marginalized areas in the actualization of the Equalization Fund
  12. To be consulted and its’ recommendations considered by Parliament for all laws being enacted relating to devolved government.
  13. To make recommendations to the Senate when determining the basis for allocating among the counties the share of national revenue that is annually allocated to the county level of government

QUESTION 9

April 2022 Question One A

Explanation of the term “consolidated fund” as used in public finance management

This is a fund set out by Article 208 of the Kenyan Constitution with the purpose of catering for urgent and unforeseen expenditure for which there is no other legislative authority.

 QUESTION 10

December 2021 Question One C

Roles played by the Council of Governors or its equivalent in county financial management

  1. Consultation among county governments;
  2. Sharing of information on the performance of the counties in the execution of their functions with the objective of learning and promotion of best practice and where necessary, initiating preventive or corrective action;
  3. Considering matters of common interest to county governments;
  4. Dispute resolution between counties within the framework provided under the intergovernmental relations act;
  5. Facilitating capacity building for governors;
  6. Receiving reports and monitoring the implementation of inter-county agreements on inter-county projects;
  7. Consideration of matters referred to the council by a member of the public;
  8. Consideration of reports from other intergovernmental forums on matters affecting national and county interests or relating to the performance of counties; and
  9. Performing any other function that the intergovernmental relations act may confer to it or any other legislation or that it may consider necessary or appropriate.

 QUESTION 11

December 2021 Pilot Paper Question Two D

Sources of revenue for country governments

  • Aid and grants: This are given by the national government, and other bilateral donors and international financial institution like world bank
  • Fees paid by citizen for services rendered like garbage collection and parking fees.
  • Revenue from natural resources like game parks, game reserves and national parks.
  • Fines and penalties for offender and violates of county government by laws.
  • Borrowing from national government and externally from organization such as IMF and World Bank.

 QUESTION 12

September 2021 Question One A

(i)  Types of funds managed by the national government

  1. The Consolidated Fund
  2. The Contingency fund
  3. The Equalisation fund

(ii) Types of funds managed by the county government

  1. County Revenue Fund
  2. County Government Emergency Funds

QUESTION 13

May 2021 Question One C

Users of the consolidated Fund Report and their needs

The Consolidated Fund reports are typically used by various stakeholders who are interested in the financial activities of the government. Some of the users of these reports include:

  1. Members of Parliament: Members of Parliament are responsible for overseeing the government’s financial activities. They use the Consolidated Fund reports to monitor the government’s spending and ensure that it is in line with the budget approved by Parliament.
  2. Government officials: Government officials such as the Minister of Finance, the Accountant General, and the Auditor General use the Consolidated Fund reports to monitor the government’s financial performance and ensure that the government is operating within its means.
  3. Financial analysts: Financial analysts use the Consolidated Fund reports to evaluate the government’s financial health, including its revenue sources, expenses, and debt levels. They also use these reports to assess the government’s ability to meet its financial obligations.
  4. Investors: Investors who are interested in government bonds or other government securities use the Consolidated Fund reports to assess the government’s financial stability and creditworthiness.

  

QUESTION 14

November 2020 Question One B

Responsibilities of the National Treasury in the administration of the consolidated Fund

  1. The National Treasury administers the Consolidated Fund in accordance with Article 206 of the Constitution.
  2. The National Treasury maintains the Consolidated Fund in an account known as the National Exchequer Account, kept at the Central Bank of Kenya and:
    • Facilitates payment into that account all money raised or received by or on behalf of the national government; and
    • Pays from that National Exchequer Account without undue delay all amounts payable for public services.
  3. The National Treasury ensures that the National Exchequer Account is not overdrawn at any time.
  4. Where a withdrawal from the Consolidated Fund is authorised under the Constitution or an Act of Parliament for the appropriation of money, the National Treasury makes a requisition for the withdrawal and submits it to the Controller of Budget for approval.
  5. The approval of a withdrawal from the Consolidated Fund by the Controller of Budget, together with written instructions from the National Treasury requesting for the withdrawal, shall be sufficient authority for the Central Bank of Kenya to pay amounts from the National Exchequer Account in accordance with the approval and instructions provided.
  6. The National Treasury, at the beginning of every quarter, and in any event not later than the fifteenth day from the commencement of the quarter, disburses monies to county governments.
  7. The disbursement referred to above is done in accordance with a schedule prepared by the National Treasury in consultation with the Intergovernmental Budget and Economic Council, with the approval of the Senate, and published in the Gazette, as approved, not later than the 30th May in every year.

 

QUESTION 15

November 2019 Question One B

Sources of revenue for country governments

  1. Aid and grants: This are given by the national government, and other bilateral donors and international financial institution like world bank
  2. Fees paid by citizen for services rendered like garbage collection and parking fees.
  3. Revenue from natural resources like game parks, game reserves and national parks.
  4. Fines and penalties for offender and violates of county government by laws.
  5. Borrowing from national government and externally from organization such as IMF and World Bank.

QUESTION 16

May 2019 Question One B

Purposes of public finance management equalization fund regulations 2015

Equalization fund is meant to provide basic services like water, roads, health and electricity in marginalized areas and raise them to levels enjoyed by the rest of the country. The Purpose of the public finance management equalization fund regulations 2015 is to:

  1. Specify the sources, object and purpose of the fund
  2. To provide guideline on the administration and management of the fund
  3. To establish an equalization fund board to advise the cabinet secretary on the performance of the fund
  4. To provide for the withdrawals from the fund
  5. To provide for the winding up of the fund

 

QUESTION 17

May 2019 Question Two A

Contents of information that the national treasury should include in financial statement in respect to contingencies fund submitted to the Auditor –General

  • The date and amount of each payment made
  • The person for which payment was made
  • The person to whom the payment was made
  • A statement showing how the money was spent for intended purpose

 

QUESTION 18

November 2018 Question One A

Ways of authorizing payments out of the consolidated fund

  • In accordance to an appropriation by an act of parliament (Appropriation Act)
  • In accordance with Article 222 i.e. Authorization before appropriation Act is passed (supplementary Appropriation).
  • Authorization by the constitution as a charge against the fund.

 

QUESTION 19

November 2018 Question Two B

Reasons for underperformance in revenue collection by counties or similar devolved units in any country

  • Unrealistic targets: lack of capacity to prepare credible revenue projections. Since revenue projections form part of Counties’ expected resources, failure to realize the projections implies budget deficits
  • Leakage of revenue collected: Operating multiple revenue collection accounts is a major cause of leakage, including collections being spent at source. This leads to low revenues
  • Lack of effective internal controls and audit mechanisms by County Governments
    contributes to loss of revenue
  • Revenue collectors being paid in cash on a daily basis, a situation which presents obvious risks in terms of accountability

 

QUESTION 20

May 2018 Question Two A and B

a) Factors considered by the commission of revenue allocation when selecting marginalized countries.

  • Health
  • Education
  • Infrastructure
  • Poverty Levels

 b) Functions of the council of governor

  • Consultation among county governments;
  • Sharing of information on the performance of the counties in the execution of their functions with the objective of learning and promotion of best practice and where necessary, initiating preventive or corrective action;
  • Considering matters of common interest to county governments;
  • Dispute resolution between counties within the framework provided under the intergovernmental relations act;
  • Facilitating capacity building for governors;
  • Receiving reports and monitoring the implementation of inter-county agreements on inter-county projects;
  • Consideration of matters referred to the council by a member of the public;
  • Consideration of reports from other intergovernmental forums on matters affecting national and county interests or relating to the performance of counties; and
  • Performing any other function that the intergovernmental relations act may confer to it or any other legislation or that it may consider necessary or appropriate.

Public Finance And Taxation Revision Kit Hard Copy (Printed and bound) is available in hard copy at Ksh 600

CALL / TEXT / WHATSAPP 0728 776 317 TO ORDER

 

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