The Constitution of Kenya was formally promulgated into law on 27th August 2010. The new constitution introduced major changes in the country's governance framework. A key departure from the earlier system of governance is the shift from a highly centralized to a decentralized governance framework, comprising of two levels of government — the national government and 47 county governments. Previously, the Executive, through the President and the Cabinet, exercised significant political, administrative and fiscal power control over both the national and sub-national governments.

 

Article 212 of the Constitution of Kenya 2010 empowers the legislature to exercise control over sub-national governments. From experience around the world, and from the current Kenya's local government system, it is very clear that the sub-national governments have varying capacities for borrowing and servicing debt. The government should, therefore, consider setting up a sub-national borrowing framework that allows some flexibility and at the same time checks possible fiscal indiscipline. 

 In Kenya, fiscal indiscipline at the sub-national level, and related excessive borrowing and punitive penalties on debt arrears, has resulted in unsustainable debt levels at the sub-national level. Outstanding statutory debt increase accounted for 60 per cent of total local governments' outstanding debt in 2008, up from 51 per cent in 2007. 

 

 

Required

Discuss the possible approaches that can be used in the management of sub-national borrowing

In relation to public finance management in the devolved government discuss the functions of the following;

1. Auditor General                                         
2. Committee of ways and means                            
3. Public accounts committee                       
4. Controller of budgets                                          

 

Discuss the challenges of public sector audit in Kenya's newly devolved system of government and propose ways of solving the same.