Integrating Sound Financial Management in Schools: A Case of IPSAS Implementation

Integrating Sound Financial Management in Schools: A Case of IPSAS Implementation

Reforms in financial management systems and processes in public primary and secondary school are becoming critical in response to increasing demands for greater transparency and accountability in the management of how they utilize public finances. Poor budgeting has made it difficult for head teachers to effectively run schools as some were overspending on some vote heads and under-spending on some leading them into other problems
such as misappropriation and mismanagement of school funds. We spoke to the team at the Ministry of Education, Directorate of Schools Audit, to learn more on the reforms initiatives being implemented to improve accountability in financial management and strengthen good governance.

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Reforming Public Debt Governance in Kenya

Reforming Public Debt Governance in Kenya

Good public financial management practice prescribes that public borrowing and the level
of public debt have to be consistent with the overall fiscal framework to ensure macro-economic stability We had a one on one chat with National Treasury Public Debt Management Office (PDMO) Deputy Director, Livingstone Bumbe, to find out more about the reforms being implemented by the directorate, find out the progress and milestones achieved through these reforms.

https://www.pfmr.go.ke/wp-content/uploads/2024/01/Reforming-Public-Debt-Governance-in-Kenya.pdf

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Cost of Own Source Revenue Study Tour of Kwale County

Cost of Own Source Revenue Study Tour of Kwale County

Enhancement of County own source revenue is a critical Public Financial Management reform area under Devolution. Under the Kenyan 2010 Constitution, Decentralization involves the political, administrative and fiscal autonomy of the 47 Counties from the National Government.

While many scholars and pundits may debate or even question the practicality of this philosophy, the acceptable school of thought is counties need to be able to sustainably generate more of their own revenues to finance their development and operational needs, without entirely relying on the National Exchequer.

2010 Constitutional foundation of Own Source Revenue

To better understand why own source revenue mobilization remains a n important area of PFM Focus, let us begin by understanding the basis of this from the 2010 Constitution. Own Source Revenue (OSR) is governed by national legislations; 2010 Constitution, the 2012 Public Finance Management Act, the County Government Act of 2012 and the 2011 Urban Areas and Cities Act 2011.

The Constitution defines County Governments’ funding sources to include:

a) Equitable share of at least 15 percent of most-recently audited revenue raised   nationally (Article 202(1) and 203(2));
b) Additional conditional and unconditional grants from the National Government’s share of revenue (Article 202(2));
c) Equalization Fund based on half of one percent of revenue raised nationally (Article 204);
d) Local revenues in form of taxes, charges and fees; and,
e) Loans and grants.

The 2020 Constitution allows Counties to impose:

a) Property rates;
b) Entertainment taxes;
c) Charges for services they provide; and,
d) Any other tax or licensing fee authorized by an Act of Parliament.

From the above, one can be able to understand the specifics revenue streams available for counties to generate revenues. In recent times, a number of studies have been carried out to determine optimal revenues that the 47 counties can collect.

One of this report, which informed this blog, is the Comprehensive Own Source Revenue (OSR) Potential and Tax Gap Study developed by the Commission on revenue Allocation. The assessment determined the maximum possible own source revenue that each county government can collect from the most important revenue streams when they apply the best practices in revenue administration.

PFM Reforms 2018-2023 CRA Activity work-plan

As part of implementing its activities , as outlined in the PFM Reforms strategy 2018-2023 , The PFMR Secretariat supported the commission on Revenue allocation to conduct a cost of Own Source Revenue Study targeting 5 pilot counties namely Laikipia , Embu Kakamega , Marsabit and Kwale.

The primary focus was to gather data on the costs associated with Own Source Revenue (OSR) collection within the County.

This article will however restrict its focus to the validation study conducted on Kwale County Government. A team of officers from the Commission on Revenue Allocation and PFM Reforms Secretariat, led by the CRA Director of Fiscal, CPA Roble Said Nuno led an assessment of Kwale County Revenue Administration and Enforcement Framework. Interviews and discussions were held with the County senior revenue officials, collectors, and enforcement officers in various locations within and outside Kwale County.

Meetings with officers from Kwale County Government

The first engagement involved an introduction meeting with the Kwale County Government team led by the Director of Revenue CPA Samira Swaleh. The two teams had a chance to go through a presentation done by CRA, detailing the information and data on Kwale County, its Revenue targets, and identify gaps between maximum potential revenues and actual collections.

Key Highlights from the report.

          

From the presentations done by CRA, it is estimated that Kwale County has the potential to collect 3.2Billion shillings from the current.

Notable issues brought forward by officers from Kwale County Government.

During the discussions, the team from Kwale County Government raised concerns over the actual Data utilized as reference points in the Commission on Revenue Comprehensive Own Source Revenue (OSR) Potential and Tax Gap Study, pointing to a lack of validation by both parties. To remedy this, the commission, through the Director of Fiscal affairs, agreed to convene a follow up meeting aimed at ironing out the emerging issues.

The officers later conducted a number of field visits at revenue collection points in the county aimed at familiarizing themselves with the ‘actual’ situation ‘kwa ground’ as well as ascertaining the actual Data. A number of areas we visited included the Shimoni and Lunga Lunga Border points, the team visited a number of markets such as Kombani,Matuga,Lunga lunga and Kinango markets.

          

Identified Gaps from the field visit

1. Lack of proper accountability of daily cash collected. A number of revenue collection sites employed cash collection with manual receipt production.
2. Lack of minimum required tools at the revenue collection and enforcement work place by officers.
3. Lack of minimum basic amenities at revenue collection point such as work shelters for officers.
4. Lack of transport for staff manning the Cess collection points.

About the Cost of OSR collection Study

The CRA study is driven by the need to solve one of the pressing challenges in revenue administration and management, identified in the National Policy to Support Enhancement of County Own Source Revenue – weak understanding of county revenue administration costs. The cost of revenue administration at the county level is not well understood and research data is lacking.

CRA opted to conduct the Cost of OSR Collection study in five pilot counties, three of which have Revenue Boards and two have revenue departments. After concluding the data collection, the data will be analyzed then presented in a report, to be validated by County Revenue Boards and Directors of Revenue in the piloted counties.

 

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Public Investment Management

 

 

Over the past two decades, the country has witnessed a rapid increase in the level of domestic and externally funded projects. These capital intensive projects are aimed at supporting the country’s economic activities and improving service delivery. Nonetheless, Questions have abound regarding the quality, effectiveness, sustainability of these investments.

We made the short trip to the National Treasury to speak with Patrick Mugo, Director, and The National Treasury, Public Investment management unit, to find out the reforms being carried out to make public investment more predictable, credible, and productive.

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Professional Development for Supply Chain Professionals: How KISM is making this a reality.

Professional Development for Supply Chain Professionals: How KISM is making this a reality.

The Kenya institute of Supplies Management has embarked on developing professional standards of practice for procurement professionals in the public sector. The Standards of practice aims to support and guide Public Procurement professionals on how to conduct themselves as they undertake their daily professional duties and assignments.

Speaking during his opening remarks, KISM CEO Nicholas Wafula emphasized on the need to ensure a clear, efficient and effective professional standards of practice developed according to the needs of the practicing professionals.

“As we start this workshop, I hope that what we have set as goals can be achieved and we will be able to establish and develop a professional standard of practice that will be of assistance in procurement sectors. These guidelines will serve as a compass, steering professionals towards ethical decision-making and socially responsible practices.”

“For us to professionalize the public procurement field, Ethical considerations must lie at the core of these professional standards.” Added Wafula.

According to Wafula , supply chain professionals play a ‘strategic and important’ role in handling resources, finances, and information, ethical guidelines governing transparency, integrity, and responsible practices should be an integral component of the standards to be developed. The Standards have been developed to be agile with much emphasis on continuous evolution and adaptability.

“The field of supply chain management is dynamic, influenced by technological disruptions, geopolitical changes, and shifting consumer preferences. As such, the standards that we craft through this workshop will be aimed at remaining agile, accommodating changes and advancements while upholding their foundational principles.”

KISM is a national body for professionals in the practice of procurement and supply chain management in Kenya. Supply Chain Management encompasses procurement, sourcing, logistics, inventory management, and supplier relationships.

These professional standards of practice will assist in guiding the practices of professional practitioners and harmonize pieces of various legislations aimed at serving professionals in the public and private sectors.

“The complexities found in supply chains are not unique and affect all professionals in the private and public sector. The standards will not only elevate the level of professionalism within the field but also contribute to the recognition of supply chain management as a strategic function critical to organizational success.”

“We purpose to subject this draft for public participation where we expects comments from members of the Institute and stakeholders.” Wafula added.

The workshop brought together representatives from the Kenya Institute of Supplies Examination Board, Kenya Accountants and Secretaries National Examinations Board (KASNEB), The Institute of Certified Secretaries of Kenya (ICS) and the National Treasury.

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PFM Reforms: Improving Governance in State Corporations

GIPE on behalf of the Cabinet Secretary National Treasury and Planning exercises oversight and ownership functions in State Corporations and other Government Investments. In performing this role, The National Treasury issues various directives/circulars and receives numerous requests and reports to/from state corporations ranging from strategic plans; proposal for capital projects and other investments; annual budgets; financing proposals including request for borrowings; human capital; and quarterly and annual statutory reports, among others for review, analysis, appraisal and to make appropriate recommendations for approval or otherwise.

To effectively execute the mandate, the National Treasury Government Investment and Public Enterprises Department decided to develop an end-to-end automated platform for preparation, submission, analysis and approval of State Corporations (SC) budgets, among other functionalities, now referred to as the Government Investment Management Information System (GIMIS).

 

 

Improving Governance in State Corporations

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Enhancing Budget Transparency

Budget Transparency (BT) is defined as the full disclosure of all relevant fiscal information in a timely and systematic manner. Budget Transparency is a precondition for public participation in budget processes.

To achieve this, The National Treasury has embarked on developing an easily accessible Budget Portal, aptly named Bajeti Yetu. The Portal is aimed at facilitating the public to access official Government budget documents and the interactive data that is contained in them.We sat down with team from Budget Department to understand the unique features of the portal,its impact and how it would empower ‘wanjiku’ to understand the budget making process.

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Strengthening Information Security for PFM ICT Systems

Strengthening Information Security for PFM ICT Systems

In the Information Age, technology shapes every aspect of modern life, revolutionizing how institutions, societies, and nations operate. While the benefits are evident, the challenges, especially in terms of security and privacy, are equally pronounced. Public Financial Management (PFM) ICT systems, the foundation of financial governance, face a myriad of threats, from intentional attacks to accidental breaches, endangering sensitive data through fraud, data breaches, and cyberattacks. To bolster the resilience of PFM ICT systems, a comprehensive Information Security Policy (ISP) has been devised, covering nine key areas.

The ISP’s core is Information Security Governance, which sets the rules, responsibilities, and organizational structures for guiding PFM ICT security. It emphasizes accountability and shared roles, essential for a secure digital environment. In our increasingly interconnected world, safeguarding PFM ICT systems from cyber threats is paramount. Cybersecurity Management addresses unauthorized access, data breaches, and cyberattacks through cutting-edge security practices, while Systems and Applications Security protects the core components of PFM ICT systems, ensuring data and processes remain uncompromised via access controls, encryption, and security testing.

In our digital landscape, secure data transmission is vital, and Communication Security ensures data remains confidential and intact during transit. Information Security Risk Management provides a structured approach to identify, assess, and mitigate risks, proactively shielding critical assets. To mitigate human error, Human Resources Security addresses risks associated with staff and contractors with system access, employing background checks, security training, and access rights management. Operational Security guarantees secure day-to-day activities through procedures for system maintenance, data handling, and vigilant monitoring. Recognizing the importance of securing equipment and infrastructure, Physical and Environmental Security covers data center protection, hardware disposal, and ideal environmental conditions for PFM ICT systems.

Despite preventive measures, incidents can occur. Incident Response Management outlines the process for identifying, responding to, and mitigating the impact of security incidents, reducing disruptions and ensuring swift recovery. Beyond the policy’s implementation, planned sensitization for PFM ICT system managers remains pivotal, involving ongoing training and awareness programs to keep managers informed and prepared for the evolving digital threat landscape.

The ISP for PFM ICT Systems is a strategic approach to safeguarding financial data and ensuring the continuity of PFM ICT operations. By addressing these nine thematic areas and ensuring that managers stay informed and vigilant by reinforcing their digital capabilities while upholding the principles of confidentiality, integrity, and availability in crucial financial operations.

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CRA Embarks On Refining the Draft Model Tariffs and Pricing Policy

CRA Embarks On Refining the Draft Model Tariffs and Pricing Policy

The Commission on Revenue Allocation (CRA) held a week-long stakeholder validation workshop aimed at refining the Draft Model Tariffs and Pricing Policy and Guide. The objective of the Tariffs and Pricing Policy is to provide a rationale for levying fees and charges, as well as a basis for setting fee/charge levels. Additionally, it will enable county residents to interpret the tariffs, fees and charges they pay and the services that they will expect from the county government in return.

Section 120 of the County Governments Act requires each county to develop a Tariffs and Pricing Policy, which essentially forms a basis of levying fees and charges for the services that they provide. Such a Policy has to be aligned with existing national government laws and policies.

The Fourth Schedule of the Constitution “distributes” functions between the National Government and County Governments. By law, there are 14 functions specifically assigned to Counties.

Participants in this workshop were drawn from the State Departments of Public Works, and Housing and Urban Development; County Governments of Machakos, Kiambu and Nairobi; the National Treasury; Kenya Institute for Public Policy Research Analysis (KIPPRA) and Kenya Investment Authority (KenInvest).

The purpose of the retreat was to edit and refine the draft Policy and its Guide. This entailed forming a work plan which included going through the background, policy objectives, policy and legislative frameworks, the general principles that guide the determination of Tariffs, situational analysis, tariff determination and policy implementation framework.

Speaking during the meeting, CRA Chairperson Mary Chebukati stressed on the importance of public participation and capacity building during the policy implementation.

“We need to adequately involve all stakeholders and the public throughout this process of developing the policy. Public participation has to be properly done to ensure we adhere to the constitutional principle of openness and accountability. “Said Mrs. Chebukati.

She added that the principles of affordability, equity, financial sustainability, destitution, transparency, promotion of local economic development and environmental sustainability should be followed, as they provide a useful guide in the determination of Tariffs.

A follow-up meeting was scheduled for 27th October 2023 for validation of the Model. Upon validation, a final draft model will be presented to the National Treasury.

The Commission on Revenue Allocation is an independent Commission established under the 2010 Constitution of Kenya. Its primary mandate is to recommend the basis for equitable sharing of revenue raised nationally between the National and County Governments, alongside sharing of revenues among County Governments.

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KISM Embarks on Professionalization of Public Procurement Officers in Public Sector

KISM Embarks on Professionalization of Public Procurement Officers in Public Sector

The Kenya Institute of Supplies Management (KISM) in collaboration with the National Treasury & Economic Planning and Public Procurement Regulatory Authority (PPRA) commissioned a survey to establish and document the capacity of supply chain practitioners in the public sector.

The survey was aimed at assessing the professionalization of the supply chain management function in the public sector, identify gaps, and make policy recommendations to improve performance.

Speaking during the workshop to develop the survey report. KISM Ag. CEO Serah Esendi Okumu says the survey findings will provide critical data to guide the Institute’s capacity building plans among its members;

“Through this survey, we were able to assess the capacity, compliance, technical knowledge, and competence levels of supply chain practitioners.”

“The findings from this report will inform policy direction, define capacity development strategy options, and optimize existing capacities.” Said Serah

Over four months in the making, the survey report highlights competency gaps identified at individual, profile and organization level. The gaps identified are in the areas of procurement strategy alignment with agency key result areas, governance and organization of the procurement function, use of technology processes and tools, knowledge and performance management- among others.

The survey targeted supply chain management practitioners from Ministries, Counties, agencies and departments.

“Having a comprehensive picture of skills requirements and responses from officers in different sectors in the public service is essential to effective skills systems” said the CEO.
KISM is a national body for professionals in the practice of procurement and supply chain management in Kenya. The Institute draws its mandate from the “Supplies Practitioners Management Act No.17 of 2007.”

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