Why CFSP Is Critical In Achieving Governments Objectives
Updated on: Mar 03, 2021
Last week, the County Government of Laikipia went to the citizens seeking their input in the County Fiscal Strategy Paper also known as the CFSP . What is this document, how does it affect you and why is it important. MrJohn Kingori, the County Head of
Budget explains:
The County Fiscal Strategy Paper is a key document in the county budget process. It looks at the past (review) and the present County fiscal performance to forecast its future fiscal position.
Legal background
Section 117 of the public finance management act (2015) requires the County Treasury to.
(1) Prepare and submit to the County Executive Committee the County Fiscal Strategy Paper for approval and the County Treasury shall submit the approved Fiscal Strategy Paper to the county assembly, by the 28th February of each year.
(2) Align the County Fiscal Strategy Paper with the national objectives in the Budget Policy Statement.
CONTENTS OF THE CFSP
a) The broad strategic priorities and policy goals that will guide the County Government in preparing its budget for the coming financial year and over the medium term.
b) The financial outlook with respect to County government revenues, expenditures and borrowing for the coming financial year and over the medium term.
The contents can further be broken down into
Performance,
Priorities,
Projections,
Ceilings and
Risks to the outlook
The key components of the County Fiscal Strategy Paper are usually summarized as the three Ps and one C.
Performance
The performance section provides up-to-date information on County Government expenditure and revenue collection. It helps to determine whether the decisions made going forward on revenue collection and expenditure are realistic.
The performance is usually sector-based. For example, how much is the County spending on health in relation to agriculture? Or else, how much revenue has the county been able to collect? This information is based on budget performance of the previous financial year and the recent budget implementation reports.
Projections
The projections should indicate the overall revenue and expenditure expected for the next (or coming) budget year. Revenue projections are based on various sources which include
Equitable share allocation
Grants from national government and development partners
Own source revenue (e.g. land rates, cess, permits)
Internal or external borrowing. E.g. county bonds
Expenditure projections will mainly include
Recurrent expenditure,
Capital or development expenditure,
Debt repayment, among others.
Projections should be guided by previous performance or established fiscal trends.
Priorities
Priorities: are the key drivers to attainment of County goals for the planning period, they are usually sector based.
Priorities explain the choices made in the next financial year for the various sectors. For example, if the County government prioritizes enterprise development and manufacturing as a lead sector/program in economic growth then the allocation to the sector should be enhanced.
Ceilings
The sector ceilings represent the budget limits or the maximum amounts of money allocated to each sector which will be available to implement the priority programs, the ceilings therefore should correlate with the priority spending areas.
Risks to the outlook
Its of great importance to ensure that probable risks to the outlook are identified and possible mitigations also proposed. These may derail achievement of the set objectives. Possible risks may include
a. National Macro Economic Stability
Where the national government in collaboration with county governments can monitor the risk and take appropriate measures to safeguard macroeconomic stability.e.g through the Social economic recovery strategy 2020.
b. Seasonal Weather Patterns
Changes in weather patterns may also be a risk, both positive and negative. e.g. Harsh weather patterns may require more investments in the national grain reserves additional funds for emergency mitigations among other.
c. Geopolitics and Security
These are great contributors to economic performance. Better security and politics depict stable business environment and hence overall economic growth. Political and security mitigations must be included to manage this risk.
Budget explains:
The County Fiscal Strategy Paper is a key document in the county budget process. It looks at the past (review) and the present County fiscal performance to forecast its future fiscal position.
Legal background
Section 117 of the public finance management act (2015) requires the County Treasury to.
(1) Prepare and submit to the County Executive Committee the County Fiscal Strategy Paper for approval and the County Treasury shall submit the approved Fiscal Strategy Paper to the county assembly, by the 28th February of each year.
(2) Align the County Fiscal Strategy Paper with the national objectives in the Budget Policy Statement.
CONTENTS OF THE CFSP
a) The broad strategic priorities and policy goals that will guide the County Government in preparing its budget for the coming financial year and over the medium term.
b) The financial outlook with respect to County government revenues, expenditures and borrowing for the coming financial year and over the medium term.
The contents can further be broken down into
Performance,
Priorities,
Projections,
Ceilings and
Risks to the outlook
The key components of the County Fiscal Strategy Paper are usually summarized as the three Ps and one C.
Performance
The performance section provides up-to-date information on County Government expenditure and revenue collection. It helps to determine whether the decisions made going forward on revenue collection and expenditure are realistic.
The performance is usually sector-based. For example, how much is the County spending on health in relation to agriculture? Or else, how much revenue has the county been able to collect? This information is based on budget performance of the previous financial year and the recent budget implementation reports.
Projections
The projections should indicate the overall revenue and expenditure expected for the next (or coming) budget year. Revenue projections are based on various sources which include
Equitable share allocation
Grants from national government and development partners
Own source revenue (e.g. land rates, cess, permits)
Internal or external borrowing. E.g. county bonds
Expenditure projections will mainly include
Recurrent expenditure,
Capital or development expenditure,
Debt repayment, among others.
Projections should be guided by previous performance or established fiscal trends.
Priorities
Priorities: are the key drivers to attainment of County goals for the planning period, they are usually sector based.
Priorities explain the choices made in the next financial year for the various sectors. For example, if the County government prioritizes enterprise development and manufacturing as a lead sector/program in economic growth then the allocation to the sector should be enhanced.
Ceilings
The sector ceilings represent the budget limits or the maximum amounts of money allocated to each sector which will be available to implement the priority programs, the ceilings therefore should correlate with the priority spending areas.
Risks to the outlook
Its of great importance to ensure that probable risks to the outlook are identified and possible mitigations also proposed. These may derail achievement of the set objectives. Possible risks may include
a. National Macro Economic Stability
Where the national government in collaboration with county governments can monitor the risk and take appropriate measures to safeguard macroeconomic stability.e.g through the Social economic recovery strategy 2020.
b. Seasonal Weather Patterns
Changes in weather patterns may also be a risk, both positive and negative. e.g. Harsh weather patterns may require more investments in the national grain reserves additional funds for emergency mitigations among other.
c. Geopolitics and Security
These are great contributors to economic performance. Better security and politics depict stable business environment and hence overall economic growth. Political and security mitigations must be included to manage this risk.
