Opacity in budget making: How MPs fuel Executive's abuse of Article 223

Controller of Budget Margaret Nyakang’o. She claims she was pressured by Yatani to approve up to Sh15 billion in requests days before last year’s General Election. [Elvis Ogina, Standard]

It was baked in the 2010 constitutional dispensation as a failsafe mechanism for checking the excesses of an executive bent on abusing its powers and allocating itself more exchequer funds at the expense of other arms of government.

In the years before Article 223, the National Treasury would submit to Parliament a statement of excess alongside the supplementary budget indicating additional money spent outside the budget during the financial year.

Parliament’s only recourse at the time was to rubber-stamp these last-minute allocations that came as attachments to the supplementary budgets.

This was a crucial weak link in Kenya’s fiscal policy which prevented effective oversight by the people’s representatives regarding the expenditure of their monies and thus, Article 223, was drafted with the new constitution. 

“The National Government may spend money that has not been appropriated if the amount appropriated for any purpose under the Appropriation Act is insufficient or a need has arisen for expenditure for a purpose for which no amount has been appropriated by that Act or the money has been withdrawn from the Contingencies Fund,” explains Article 223 in part.

“The approval of Parliament for any spending under this Article shall be sought within two months after the first withdrawal of the money; if Parliament is not sitting during the time or is sitting but adjourns before the approval has been sought, the approval shall be sought within two weeks after it next sits,” explains the Article.

Parliament’s approval would then kick off the drafting of an Appropriation Bill to allow for the drawing and disbursement of said funds to ministries, state departments and agencies.

The National Government is further limited under Article 223 to spend not more than ten per cent of the sum appropriated by Parliament for that financial year.

Last week, Controller of Budget (CoB) Margaret Nyakang’o and former National Treasury Cabinet Secretary Ukur Yatani came out with damaging revelations that billions of shillings were drawn from the country’s coffers in the last financial year under Article 223.

In the first half of the 2022/2023 financial year, the National Treasury used Article 223 to authorise Sh69.4 billion in additional funding, the largest ever fund allocation recorded outside a Supplementary Budget.

Dr. Nyakang’o said she was pressured by Yatani to approve up to Sh15 billion in requests days before last year’s General Election.

Yatani, has on his part, accused the Controller of Budget of calculated malice and has threatened legal action, adding that he declined to approve Sh1 billion in cash demands by deputy President Rigathi Gachagua, who was at the time yet to be sworn into office.

The ensuing blame game has shone the spotlight on Article 223; its use over the recent years and the failure of Parliament to hold the Executive in check despite frequent abuses at the expense of taxpayers’ resources.

Former National Treasury Cabinet Secretary Ukur Yatani. [Elvis Ogina, Standard]

An analysis of past annual budgets and reports from the Offices of the Controller of Budget, Auditor General and Parliamentary Committees on Finance indicates that Article 223 has been used with more frequency in recent years to approve billions of questionable expenditures including some that have ended up in court.

In the 2018/2019 financial year, for example, the National Treasury authorized the Ministry of Education to overspend Sh1.5 billion on land compensation, an amount which exceeded the allowable threshold of Sh20 million budgeted provision for the item by Sh1.47 billion.

“Although the Principal Secretary to The National Treasury had indicated that the amount was to be ratified in the Supplementary II Budget, no evidence was provided that this was done,” said the then Auditor General Edward Ouko in his report.

Ouko said the outstanding compensation balance of Sh1.7 billion was not factored in subsequent budgets and was not disclosed in the financial statements as a pending bill raising questions about whether taxpayers’ got value for money in the expenditure.

“Various correspondences between the Chairman, National Land Commission and the Principal Secretary, State Department for Early Learning and Basic Education indicated that the Chairman, National Land Commission had disclosed the compensation amount of Sh3.3 billion for the two parcels of land, two months prior to the actual valuation,” explained Dr Ouko.

“It is not clear how the compensation amount was arrived at before the actual valuation was done.”

The High Court later declared the sale of the 13.5 acre public land in Ruaraka as illegal and a legal challenge is currently in progress at the Court of Appeal.

Further, in the 2020/2021 financial year, the Controller of Budget approved Sh46.33 billion out of more than Sh200 billion in total requests made under Article 223.

During this financial year, the State Department for Housing and Urban Development spent the highest amount in additional funding at Sh8.2 billion, followed by the National Treasury at Sh8.2 billion.

The additional funds were spent on several projects including those associated with former president Uhuru Kenyatta’s Big Four Agenda such as the Kazi Mtaani programme, a cash injection to operationalise the Kenya Mortgage Refinance Company and a bailout for national carrier Kenya Airways.

Last year, the CoB again raised concern that some government sectors fail to include already known expenditures in their budgets to fall back on Article 223 to request additional funds.

Former president Uhuru Kenyatta. [File, Standard]

“The frequent changes observed in the supplementary budgets may indicate a lack of budget discipline” stated Nyakang’o.

“The use of Article 223 of the Constitution should strictly be applied in accordance with the law,” she stated.

“Appropriate budgeting during the budget cycle should be upheld, specifically for multi-year capital projects.”

Parliament’s Budget and Appropriations Committee, BAC similarly recommended a review of Article 223 and the Public Finance Management Act, PFM 2012 to enhance transparency in how the government uses the statute.

“In the 13th Parliament, the Public Finance Management Act, 2012 and attendant Regulations should be reviewed to provide succinct guidelines on the budget items that should be funded under Article 223 of the Constitution,’ stated the BAC in its report.

“Any funds withdrawn from the Contingency Fund should be outlined on a separate schedule when supplementary estimates are tabled in the House,” stated the Committee in its report.

However, these recommendations have rung hollow in subsequent years alongside parliament’s role in curbing an increase in the country’s debt ceiling.

According to the International Budget Partnership Kenya, IBP-Kenya, violations of the Public Finance Management, Act 2012 and Article 223 have bred opacity in the budget execution and led to ballooning public debt.

“Parliament should be stricter when reviewing and approving Supplementary Budget estimates and Supplementary Budgets to avoid increasing the deficit,” stated the IBP in a report released late last year.

“There is a need for more accessible and timely information on public debt, which includes consistency, accuracy and timely provision of information on public debt,” stated the budget watchdog.

“The Supplementary Budgets should be more open and inclusive to the public views. parliament should continue opening up spaces for public input while approving supplementary budgets.”