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Five Key Funds Established by the Constitution of Kenya

funds established by the Constitution of Kenya

There are several funds established by the Constitution of Kenya. In this article, we explore these different funds and the purpose they serve.

According to the WHO, the public sources of funding include those which are compulsory and pre-paid, that is, paid before the need for care is identified or care is accessed. These are often taxes.

WHO explains further that “A compulsory source means the government requires some or all people to make the payment, whether they use the health service or not.” Some important distinctions of public funds as explained by WHO are as follows:

  • Direct taxes are those paid by households and companies to the government or other public agencies. This includes income tax, payroll tax (including mandatory social health insurance contributions) and corporate or profit tax.
  • Indirect taxes are paid to the government or other public agency via a third party (retailer or supplier). The tax is based on what a household or company spends and includes value-added tax, sales tax, the excise tax on alcohol and tobacco and import duties.
  • Non-tax revenues are from state-owned companies, including natural resource revenues such as oil and gas.
  • Financing from external (foreign) sources is considered ‘public’ when the funds flow through recipient governments

funds established by the Constitution of Kenya

The funds established by the Constitution of Kenya are categorized into two: those managed by the national government and those managed by the county governments.

Using these classifications, let’s discuss these public funds in Kenya.

National Public Funds

The National Treasury in Kenya manages the national public funds. These funds are the Consolidated Fund, the Equalization Fund and the Contingencies Fund.

The Consolidated Fund

Article 206 of the Constitution establishes the Consolidated Fund in Kenya. This fund acts as the main bank account for the national government. The Public Finance Management (PFM) Act expounds on the Consolidated Fund.

All money raised or received by or on behalf of the national government, should be paid to the Consolidated Fund in Kenya, except money that (Article 206(1))-

  • is reasonably excluded from the Fund by an Act of Parliament and payable into another public fund established for a specific purpose; or
  • may, under an Act of Parliament, be retained by the State organ that received it for the purpose of defraying the expenses of the State organ (e.g. Appropriations in Aid).

The National Treasury in Kenya should administer the Consolidated Fund in accordance with Article 206 of the Constitution.

For more about this fund, see the article What is the Consolidated Fund in Kenya?

The Equalization Fund

Article 204 of the Kenyan Constitution establishes the Equalization Fund which is made up of 0.5% of all the revenue collected by the national government each year. This amount is calculated based on the most recent (Auditor-General) audited accounts of revenue received, as approved by the National Assembly

The national government should use the Equalisation Fund only to provide basic services including water, roads, health facilities and electricity to marginalised areas to the extent necessary to bring the quality of those services in those areas to the level generally enjoyed by the rest of the nation, so far as possible.

For more about the Equalisation Fund in Kenya, see the article what is the Equalisation Fund in Kenya?

The Contingencies Fund

Article 208 of the Kenyan Constitution establishes the Contingencies Fund. This fund exists if the Cabinet Secretary responsible for finance is satisfied that there is an urgent and unforeseen need for expenditure for which there is no other authority.

The Contingencies Fund should consist of monies appropriated from the Consolidated Fund by an appropriation Act in any financial year. The Cabinet Secretary for Finance should be in charge of the Contingencies Fund.

For more about the contingencies fund, see the article what is the Contingencies Fund in Kenya?

County Public Funds

The County Treasury in Kenya manages the county public funds. These funds are the County Revenue Fund and the County Emergencies Fund.

The County Revenue Fund

Article 207 of the Kenyan Constitution establishes the County Revenue Fund.

The County Revenue Fund is an account at the Central Bank of Kenya also referred to as the County Exchequer Account. It receives all money raised or received on behalf of the County Government. However, this excludes any money that an Act of Parliament my exclude from being paid reasonably to the Fund.

The County Treasury is in charge of the Fund. For more about the County Revenue Fund, see the article the County Revenue Fund in Kenya.

The County Emergency Fund

Section 110 of the Public Finance Management Act establishes the County Emergency Fund in Kenya. The County Executive Committee may, with the approval of the County Assembly, establish an emergency fund for the county government.

The purpose of the County Emergency Fund in Kenya is to enable payments to be made in respect of a county when an urgent and unforeseen need for expenditure arises for which there is no specific legislative authority.

The County Executive Committee member for finance should administer the County Emergency Fund. For more about the County Emergency Fund, see the article the County Emergency Fund in Kenya.

George Githinji
About George Githinji

I love writing content that is insightful and informative. The articles I write have a common #1 goal: Keeping it as simple as possible for users to understand the content. Read More

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