President William Ruto has signed into law the Public Finance Management (Amendment) Bill, 2025, introducing changes to how public funds are managed, accounted for, and overseen by national and county governments.
Ruto assented to the legislation at State House, Nairobi, on Tuesday, September 8, alongside three other Bills — the National Council for Population and Development Bill, the Air Passenger Service Charge (Amendment) Bill and the Trust Administration Bill.
The amended Public Finance Management (PFM) law establishes new provisions governing the transfer of functions between the national and county governments. It sets out requirements on how such functions should be costed, financed, resourced, and accounted for when responsibilities shift between the two levels of government.
The framework also covers assets and liabilities associated with transferred functions. This is intended to provide greater clarity over the financial obligations and resources that accompany the movement of government responsibilities.
One of the significant changes introduced by the amendments is the adoption of accrual accounting across public entities. Under the system, government institutions will record financial transactions when economic events occur rather than relying solely on the point at which cash is received or paid.
The change is expected to provide a more comprehensive picture of government finances by capturing obligations and resources that may not immediately involve cash transactions.
County governments have also been given a tighter deadline for approving their Finance Bills. The legislation requires county Finance Bills to be passed before the start of a new financial year, bringing county revenue measures into closer alignment with the annual budget process.
The law further addresses the handling of statutory deductions. Once taxes, pension contributions and other statutory amounts are deducted from employees or other payments, the responsible public entity will be required to remit the funds to the institutions legally entitled to receive them.
Financial reporting deadlines have also been shortened. Accounting officers must now submit financial statements to the Auditor-General within two months after the close of a financial year, compared to the previous three-month deadline.
The amendments additionally provide Parliament and county assemblies with 21 days to consider key budget documents. This represents an increase from the previous 14-day period and gives the legislative bodies additional time to scrutinise financial proposals before making decisions.
Another notable provision introduces consequences for public entities that fail to act on recommendations contained in reports by constitutional financial oversight institutions, including the Auditor-General and the Controller of Budget.
The provisions cover recommendations that have been adopted by Parliament or county assemblies, potentially increasing pressure on public institutions to implement corrective measures arising from official oversight findings.
The changes come amid continued scrutiny of public expenditure, financial reporting and the implementation of recommendations contained in audit and budget oversight reports.
The government has framed the amendments as measures aimed at strengthening accountability, improving the management of public resources and enhancing financial reporting across the two levels of government.
Commenting on the four laws signed at State House, Ruto said they “marked a major step in strengthening governance, accountability and service delivery.” He added that the Public Finance Management amendments would strengthen the prudent management of public resources.
The new provisions therefore affect several stages of public financial management, from the transfer of government functions and associated assets to accounting practices, statutory remittances, budget scrutiny and implementation of oversight recommendations.
