Discuss comprehensively with relevant examples Kenya’s budget making process. A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. In summary, the purpose of budgeting is to:
Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out. •
Enable the actual financial operation of the business to be measured against the forecast. •
Establish the cost constraint for a project program, or operation. The government budget is a set of procedures by which the government rations resources among claimants and control the amount each claimant spends. This is through accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). The annual budget is the central component of management accounting in public sector organization. In part this is a reflection of the environment public service organizations operate. The government budget is used as an instrument for economic policy, tool for economic management and an instrument for accountability. It an allocation mechanism that aims to maximize the contribution of public expenditure to national welfare. This can be achieved by ensuring that the budget process successfully allocates scarce resources so that the marginal unit of expenditure achieves the same marginal benefit in each category of expenditure. The government budget should reflect the development agenda of a country which will in turn influence the attainment of national goals and investment targets.
Overview of Kenya’s government budgeting process
Kenya’s financial year begins as of 1st of July and ends as of 30th June the following year. The Ministry Of Finance, headed by the minister of finance manages the government’s budget & money. 25 ministries of the Kenyan government plan for the next financial year towards the end of the year. By January – February detailed lists of all funds needs. The estimates are discussed with the officers of the treasury. By the end of April the estimates are ready from all the ministries. The civil servants at treasury compile the estimates to make a complete plan of the nations spending plan for the next financial year. (Government’s estimates of expenditure.) The minister of finance has to figure out how to raise the funds for the newly proposed budget. Another list is created to work out how much money they can raise. The list includes; expectations from taxes, custom duties and government trading.( government estimates of revenue) The estimates of revenue must match the estimates of expenditure. The minister of finance faces parliament for approval of budget. He/she explains the budget plan to the national assembly. Parliament discusses the ministers proposal, plans for each ministry are debated. Each minister has to explain what his department intends to do and how it will spend its funds. Budget is criticized and plans are changed if necessary. Once the budget is approved the government is allowed by parliament to spend the revenue. The government of Kenya differentiates between a Recurrent Budget for the ongoing expenditures and a Development Budget for the investments
Budget making process
The planning and budget system in Kenya before introduction of MTEF (medium term expenditure framework) had six main components: •
National development plans. Fixed period, medium term indicative plans. The content varies considerably but generally includes a review of performance, forecast of resource availability •
District development plans. Produced co-currently with national development plans. Provide information on natural and human resources, constraints to development. •
Development strategy and policies
. Programme review and forward budget. Annual document providing rolling estimates for 3 year periods...
References: D. Henley, Public Sector Accounting and Financial Control. 1992, London; Chapman & Hall Publishers.
Jane Kiringai , Budget Reforms & Medium Expenditure Framework In Kenya. 2002, Nairobi; Kenya Institute Of Public Policy Research & Analysis (KIPPRA)
Our government & its Money. 1982, Nairobi; East Africa Publishing House
Dickson Khainga, Review Of The Government Of Kenya 2004/2005 Budget. 2005, Nairobi; Kenya Institute Of Public Policy Research & Analysis
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