CPA Intermediate Level
Public Finance and Taxation cheat sheet
Every chapter's key points, formulas and definitions on one page, for the last week before the exam. Each heading links to the chapter that explains it.
Introduction to public financial management
- Public financial management covers how the state raises revenue, decides what to spend it on, spends it, borrows what it cannot raise and accounts publicly for all of it.
- Article 201 of the Constitution sets the principles: openness, accountability and public participation; equitable sharing of the tax burden and the benefits of spending; prudent and responsible use of public money; and clear fiscal reporting.
- The Public Finance Management Act, 2012 applies one framework to the national government and all forty-seven county governments, with county institutions mirroring the national ones.
- The budget cycle runs from the Budget Review and Outlook Paper (to Cabinet by 30 September) and the Budget Policy Statement (to Parliament by 15 February) through sector estimates to an Appropriation Act before the financial year begins on 1 July.
- The National Treasury manages national public finance and houses the Public Debt Management Office; a County Treasury does the equivalent within its own county.
Key terms
- Tax revenue
- Income tax, value added tax, customs and excise duties, and the miscellaneous fees and levies the tax chapters of this guide cover in detail; ordinarily the largest single source for the national government.
- Non-tax revenue
- Fees and charges for specific services, fines and penalties, dividends and surpluses from state corporations, and licence fees, collected by both levels of government alongside tax revenue.
- Grants and donor funding
- Concessional or non-concessional support from development partners and foreign governments, usually tied to specific programmes or projects, and accounted for separately from general tax revenue.
- Public borrowing
- Domestic borrowing (Treasury bills and bonds issued in the local market) and external borrowing (loans from other governments, multilateral lenders such as the World Bank or the International Monetary Fund, and international bond markets), covered in full in the chapter on public debt.
- Revenue shared from the national government
- For county governments specifically, the equitable share of nationally raised revenue that the next chapter covers, which supplements county governments' own more limited local revenue sources.
- Development plan preparation
- Medium-term plans (linked to Kenya's long-term development blueprint) set the strategic priorities that annual budgets then translate into funded programmes; a budget without a plan behind it risks funding activity that does not serve any coherent strategic direction.
- Treasury circulars
- Guidance the National Treasury issues each budget cycle to national government entities (and, in equivalent form, County Treasuries issue to county entities), setting out the calendar, the templates and the specific requirements every entity must follow in preparing its budget submission.
- Cash flow projections
- Forecasts of when revenue will actually be received and when planned spending will actually fall due within the year, distinct from the annual budget total itself; a budget can be fully funded on paper for the year while still facing a cash shortfall in a specific month if projections are not built in and monitored.
- Budget estimates and revenue raising measures
- The detailed, line-by-line spending proposals each entity submits, matched against the revenue expected to fund them, including any new or adjusted revenue measures (a new fee, a tax rate change) needed to close a gap between planned spending and revenue otherwise available.
The rest of the sheet covers
- Intergovernmental fiscal relations
- Oversight in public financial management
- Procurement in public entities
- Public private partnerships
- Public debt management
- Introduction to taxation
- Taxation of employment income
- Taxation of business, rental and farming income
- Investment income, capital gains and withholding tax
- Investment allowances and deductions
- Tax administration and procedures
- Value added tax
- Customs and excise duties
- Miscellaneous fees and levies
- Worked examples
- Exam technique and revision
- Glossary