Over the past decade, special audits undertaken by the Office of the Auditor General have raised concerns about the growing reliance on supplementary expenditure under Article 223 of the Constitution. While supplementary budgets provide an important mechanism for responding to urgent and unforeseen expenditure, the OAG found that its increasing use has weakened important elements of Kenya’s budget process, such as adherence to approved spending priorities, public participation, and executive and parliamentary scrutiny. Strengthening the governance of supplementary expenditure by establishing criteria for what constitutes urgent and unforeseen expenditure would help restore confidence in the budget as a credible statement of government priorities.
Supplementary budgets permit the national government to incur expenditure before parliamentary approval in cases where there is an urgent and unavoidable need for spending, but recently they have been used as a routine financing mechanism. The Auditor General noted that between FY 2014/15 and FY 2022/23, expenditure from supplementary budgets had grown by 13,299 percent. OAG analysis further shows that this expenditure is concentrated on subsidies and recurrent interventions rather than genuine unforeseen emergencies.[i] This rapid growth in expenditure incurred through supplementary budgets and their increasing use to finance expenditures that could reasonably have been anticipated during the normal budget process are matters of concern. These concerns are further exacerbated by the fact that such expenditure does not undergo the same level of effective scrutiny and public participation as the annual budget process.
Evidence of these concerns is revealed in various transactions. For example, between FY2020/21 and FY2022/23, the fuel subsidy programme received KSh.139.1 billion from the supplementary budget. Yet fuel stabilization was not a sudden one-off emergency but rather operated continuously over several years and should have been incorporated into the normal budgeting process. Similarly, pending bills amounting to KSh.2.5 billion and KSh. 551 million for the National Optic Fibre Backbone Infrastructure project which commenced in 2007 were financed through supplementary budgets. Given that the project commenced in 2007, these pending bills were foreseen and do not qualify for inclusion in the supplementary budget. These examples illustrate the OAG’s concern that supplementary expenditure has increasingly been used to finance policy and operational activities that are more appropriately planned through the annual budget.
The annual budget process is designed to ensure that spending priorities are subjected to public participation and effective scrutiny before resources are committed. The OAG observes that the supplementary budget process does not provide room for public participation, and as such expenditure introduced through supplementary budgets does not undergo the same level of ex ante scrutiny and public participation that accompanies the annual budget. Additionally, the OAG identifies weaknesses in the governance arrangements surrounding supplementary budgets. There are no guidelines detailing what expenditure qualifies for funding through supplementary budgets, so National Treasury approvals are based largely on justifications submitted by MDAs, and are not subject to serious scrutiny to determine whether they satisfy the constitutional threshold of being urgent, unforeseen and unavoidable.i If these issues persist, supplementary budgets will continue to alter government spending priorities after the original budget has already been approved, reducing the effectiveness of the annual budget process as the principal mechanism for setting and scrutinizing national spending priorities.
While the constitution provides supplementary expenditure as an essential tool for enabling government to respond to genuine emergencies, it should remain the exception rather than the norm. Expenditure introduced through supplementary budgets does not undergo the same level of ex ante scrutiny and public participation that accompanies the annual budget. Establishing clearer criteria for what constitutes urgent and unforeseen expenditure, and strengthening scrutiny by the National Treasury, the Controller of Budget and Parliament, while safeguarding opportunities for public participation, would restore confidence in the approved budget as the government’s primary statement of spending priorities.
This blog has been authored by Charles Gichu, Research Assistant at the Institute of Public Finance
[i] Special Audit Report of the Auditor General on Article 223 link
