Understanding the Public Finance Management Act (PFMA): The Engine for Devolution

 Introduction

Public money is at the heart of devolution. Every road built, every health facility built and equipped, and every water project launched depends on how Counties plan, budget, and account for resources. But how do we ensure that these resources are managed responsibly and transparently? That’s where the Public Finance Management Act (PFMA), CAP 412A comes in.

The PFMA is more than a financial law, it is the backbone of Kenya’s devolved governance. It defines how public funds are raised, shared between the national and County governments, allocated to priorities, and reported back to citizens and other oversight authorities such as the County Assemblies and Parliament.

This is the second blog in our “Devolution Laws Explained” series by the Maarifa Centre, Council of Governors. In this piece, we simplify the Public Finance Management Act (PFMA), a key law that answers one of the most crucial questions in service delivery: How is public money managed?

What is PFMA?

In simple terms, PFMA is the law that guides how government money is collected, spent, and accounted for.

Think of it as a household budget. Families decide how to use their income, whether it goes to food, school fees, or savings. In the same way, PFMA sets the rules for government spending: from planning development projects to paying salaries, and finally to reporting back on whether the money was used well.

PFMA and Devolution: How the process works

The Public Finance Management Act is not just a law. It is a step-by-step guide that shows how Counties plan, spend, report and account for public money. Here is how it works in practice:

1. Planning - Setting priorities

• Counties begin with a County Integrated Development Plan (CIDP), a five-year roadmap that captures community priorities, County’s broad development agenda and how resources will be distributed equitably within the County.
• Annual plans and budgets must align with this roadmap.

2. Budgeting - Turning plans into numbers

• County Treasuries prepare the budget, guided by PFMA timelines.
• Citizens are invited to give input before it is tabled at the County Assembly.

3. Approval - Getting the green light

• The County Assembly debates, adjusts, and approves the budget.
• Once approved, it becomes the official spending plan for the year.

4. Implementation - Delivering services

• Funds are released in tranches, and County departments implement programmes like health services, agricultural extension services, and projects such as construction of classrooms, roads, and water supply.
• Spending must follow PFMA rules on procurement, ceilings, and financial discipline.

5. Reporting - Tracking progress

• Counties must publish financial reports and audit findings.
• Lessons learned feed into the next cycle, creating continuous improvement in managing public funds.

6. Oversight - Keeping watch

• The Controller of Budget ensures withdrawals are lawful.
• The Auditor General checks if money was used for the intended purposes.
• The County Assemblies and the Senate hold the County Executive to account for public resources based on the Controller of Budget and Auditor General Reports.
• Citizens also play a key role through public participation and community project/programmes monitoring.

Why PFMA Matters for You

For Citizens

The PFMA guarantees public participation in County planning and budgeting. This means that communities are not just passive recipients of services, they are active contributors in deciding which projects matter most, whether that’s a dispensary, a market, or a feeder road. Beyond participation, PFMA also embeds transparency mechanisms, allowing citizens to access County budgets and audit reports, track how money is spent, and hold leaders accountable. In short, it gives every Kenyan a voice and a watchdog role in how public money is used.

For County Officials

For County leaders and technical officers, the PFMA provides a clear roadmap for managing public finances. From planning to budgeting, implementation, and reporting, it sets the standards that guide Counties to stay within the law. By following PFMA’s provisions, officials can avoid audit queries, strengthen financial discipline, and build public trust. Most importantly, it equips Counties to translate plans into real services, smooth roads, functional health facilities, and other development priorities, delivered effectively and on time.

Challenges and Opportunities

Like any system, implementing the PFMA has not been without hurdles. Some of the recurring challenges include:

• Late disbursements from the National Treasury – Funds meant for Counties are in most times released later than the timelines provided in law. This slows down projects, disrupts service delivery, and can even leave incomplete projects on the ground.
• Budget reductions at disbursement – Counties occasionally receive less than what was originally allocated, especially on conditional and unconditional grants. These cuts, often due to national cash flow pressures, force Counties to revise budgets mid-year, stall planned projects, or delay paying suppliers.
• Low absorption rates – In some cases, Counties fail to spend all their allocated funds within the financial year. This may be due to delayed disbursement, procurement, capacity gaps, or lengthy approval processes, meaning money sits idle instead of improving lives.
• Audit concerns – Reports by the Auditor General often reveal weaknesses in record-keeping, procurement, and compliance. These issues, if unaddressed, undermine public confidence and can result in wastage or misuse of resources.

But within these challenges lie important opportunities for improvement:

• Leveraging technology – Tools such as the Integrated Financial Management Information System (IFMIS), e-procurement, automated revenue management systems and County public finance dashboards are transforming how financial data is tracked and shared. These innovations promote transparency and enable real-time monitoring.
• Stronger legal and policy reforms – Amendments to the PFMA continue to refine accountability measures, clarify debt management rules, and strengthen reporting timelines, ensuring Counties operate within a more predictable framework.
• Capacity building and awareness – Training programs for County staff, community leaders, and citizen groups are bridging knowledge gaps. As more people understand PFMA, oversight improves and both officials and citizens are better equipped to safeguard public resources.
• Transfer of all pending devolved functions and attendant resources to the Counties and equitable allocation of resources.

Conclusion: Making PFMA Work for Devolution

The PFMA is not just about numbers; it is about trust. When Counties manage money well, citizens experience real change in their daily lives, including better health services, more classrooms, reliable water, and improved roads.

PFMA is a reminder that effective service delivery starts with sound financial management, and that citizens have both the right and the responsibility to take part in the process.

So, the next time you hear about your County’s budget, pause and ask yourself: How is PFMA shaping the services I receive?

 

 

By: Mercy Gatabi & Stephen Momanyi