GOVERNMENT REVENUE AND EXPENDITURE

1.Identify the main source of government revenue in Kenya.

- Taxes 1 X 1 = 1 mark
ANS 17,DIST 1

2.Identify two direct taxes which the government uses to raise revenue.
-PAYE
- Income tax
- Air port tax
- Game park tax
- Property transfer Any 2 =
2mks
ANS 16,DIST 2

3.One main category of Government expenditure

- Recurrent expenditure
- Capital expenditure
- Servicing expenditure 1 x 1 = 1mk

ANS 18,DIST 3

4. Two types of Government expenditure in Kenya

- Recurrent expenditure
- Capital expenditure/ Development expenditure
1 x 2 = 2 Marks
ANS 13,DIST 4

5. a. Sources of revenue for local authorities in Kenya

Marks
- Fee from licences
- Cess
- Grants from the government/ loans
- Rents from building / social hall / stadia
- Fines
- Donations from well wishers e.g. Mayor Christmas trees
3 Marks

b. Five measures taken by the government of Kenya to ensure proper use of

public funds
- Establishment of anti- corruption unit
- Establish of the office of the auditor and controller general
- Appointments of P.S as accounting officer
- Regular tendering and procurement systems
- Sensitizing the public of evils of corruption
- Empowering parliament to exercise country over public finance
- Approval of parliament is needed on the budget / supplementary estimates
- Giving of power to incur expenses only to certain officers
- Prosecution of those who misuse public funds
- Accounting of imprests by government officers after duty (official receipts)
6 x 2 = 12 Marks
 ANS 22,DIST 4
6.a) - Business permits
- Road maintenance levy fund
- Donations
- Licenses
- Water and sewerage fees
- Local authority property (eg. Houses)
- Rates paid by plot owners in towns
- Charges per services eg. Museums
- Fees per market
- Fines
- Loans from central government
b) - Poor agricultural performance due to poor weather
- Inadequate foreign aid
- Retrenchment
- Corrupt officials
- Lack of funds
- Unqualified personnel
- Political interference
- Tax evasion
- Poor economic performance
ANS 23,DIST 5

7.What is the Main source of government revenue in Kenya

(1mk)
- Taxes
1 x 1 = 1mk QUES 17,DIST 6

8. a) Why does the government of Kenya prepare an annual budget. ( 8 mk)

i) To enable the government to prioritize its needs.
ii) Help the government to identify sources to revenue.
iii) Enables the parliament to approve government expenditure.
iv) Enables parliament to approve government expenditure.
v) Enable the government to estimate the financial requirements
for its needs.
vi) Acts as reference for future in correcting .
vii) Smooth running of the government to identify its departments
and allocate duties appropriately thus enhancing accountability.
viii) Give useful information to those organizations and individuals
who may want to keep track of the government expenditure.
ix) Enables the government to account for funds borrowed / do-
nated for development .
x) Accomplish already started projects. ( Any 8 x 1
= 8 mks)
b) What measures does the Kenya government take to ensure the public
funds are properly used.
(7 mks)
i) The government ensures that all intended expenditure is ap-
proved by parliament before any expenditure by government.
 ii) All reports on expenditure by government ministers are pre-
sented to the public accounts committee to the public.
iii) The controller and auditor – general audit ministries and re-
ports to parliament.
iv) The PS in every ministry is charged with the responsibility of
ensuring that government funds are well spent.
v) The auditor – general of state corporations audits the expendi-
ture of all government corporations.
vi) Government contracts area advertised publicly for tendering
and awards are made on merit.
vii) Establishment of Kenya Anti corruption authority. ( KACA)
( Any 7 x 1 = 7 mks)

ANS 22,DIST 7

9.What is contained in a government Budget?

(1mk)
i) The amount of revenue expected
ii) Source of revenue
iii) Expenditure of the government
1x1 = 1mk.
ANS 17,DIST 9

10. Identify one type of government expenditure in Kenya

(1mk)
a) Capital expenditure / money set aside for new develop-
ment projects
b) Recurrent expenditure / money used to sustain and
maintain / existing facilities
Any 1x1 = 1mark
ANS 17,DIST 10
11. Kenya Revenue Authority (K.R.A)
(Note: ½ mk for use of initials)
(1x1=1mk)

ANS 17,DIST 11

12. a) i)Domestic borrowing

ii) Profit from parastatals
iii) Foreign aid
iv) Sale of Treasury bills
v) Court fines
vi) Taxes e.g. V.A.T
vii) Charges of government services
viii) Licence fees.
(5x1=5mks)
b) i) Tax evasion by some people and organizations .
ii) Many people give wrong information in their wealth declaration.
 iii) Negative attitude towards payment of taxes by many people due
to ignorance.
iv) Rich people keep their money in foreign banks denying the coun-
try interest.
v) Unscrupulous Kenyans and tax officials collude and defraud the
government of revenue.
vi) Inadequate information for local investors through treasury bills,
post office bonds and shares at the Nairobi stock exchange (NSE)
vii) Smuggling of goods out of Kenya.
viii) High rate of inflation increase public expenditure/ too many
taxes.

(5x2=10mks)
ANS 24,DIST 11

13. – Direct taxes.

- Indirect taxes.
- Grants
- Loans from banks/friendly countries
- Fines from courts.
(2x1=2mks)
ANS 15,DIST 12
14. Chief justice in Kenya 2x1=(2mrks)
i) Swear in the president and the cabinet ministers
ii) Heads the Kenya judiciary and give direction on how the ju-
diciary is to determine justice in.
iii)The arbitration of disputes
iv)Plays an advisory role in the removal of a president on
grounds of in capacity.
v) Is the chair person of judicial service commission?

ANS 21,DIST 13
15. State two types of expenditures in Kenya.
(2mks)
 Capital expenditure
 Recurrent expenditure
2 x 1 = 2 marks
ANS 15,DIST 14

16. Two types of expenditure in Kenya. (2 mks)

- recurrent
- capital
ANS 15,DIST 15

2. 17. (a) State 3 sources of government revenue. (3 mks)

– direct tax
– indirect tax
– trade licenses
– Interest from loan paid to the government.
 – Land rates from land owners
– House rent – government building.
– Court fines
– Sales of treasury bills and bonds
– Loans from donors
– Fees charged
– Grants from donor communities.

(b) Explain 6 challenges the government is facing in

raising revenue. (12 mks)
- Tax evasion – many fail to pay taxes.
- In wealth declaration people give wrong information reducing the
amount payable in taxes.
- Those who assess taxes are bribed so tat they give false informa-
tion/corruption.
- Rich people keep money in foreign accounts.
- Donor states gives conditions before donations/loans are given.
- Loans are given at very high interest rates – burden.
- Reliance on foreign and increases government debts.

ANS 22,DIST 15

16. (b) Reasons why the government of Kenya prepares the national budget
- The budget helps the government to prioritize its needs giving prominence
to the most urgent ones.
- The budget enables the government to identify sources of government rev-
enue to meet their financial obligations.
- The government identifies the development projects to finance in the com-
ing financial year.
- The budget gives MPs an opportunity to discuss the government expendi-
ture before its put into use.
- The budget helps the government to balance its revenue and expenditure
needs.
- The government determines and explains to the public the tax structure
through the budget
- The budget ensures balanced and equitable development in the country.
- The budget through supplementary expenditure enables the government to
plan for certain needs that emerges in the government to plan for certain
needs that emerge in the course of the year. E.g drought, disease outbreak
etc
- The government can assess its performance in the previous budgets and
rectify areas of weakness if any. It may provide useful information to orga-
nizations and individuals who may want to keep track of government ex-
penditure and invest in Kenya.
- It enhances the identification of government departments and their needs
in order to allocate funds appropriately to each department. This ensures
transparency and accountability in government operation
- Through the budget, the government communicates its plans and policies
to its local and foreign development partners.
 - The volume of the budget also indicates the expansion of services pro-
vided by the government. The more the service provided by the govern-
ment the bigger the budget will be. 1x10 = 10mks
ANS 24b,DIST 16

17. Name the body in charge of all forms of tax collection in Kenya.
 Kenya revenue Authority (K.R.A)
1mrk ANS 16,DIST 19

18. (a) Outline three duties of the controller and Auditor General in Kenya
(3mks)
(i) Ensures that finances approved by Parliament are used for the intended
Purpose
(ii) Ensure that any withdrawal from treasury is authorized by law
(iii) To safeguard receipt custody and proper use of government property
e.g. stamp, books etc.
(iv) To safeguard the collection of government revenue.
(v) He audits all reports on the public accounts of the government of
Kenya and reports to parliament about his findings

(b) Discuss six methods used by the Kenyan government to control public
finance (12 mks)
(i) All ministries are audited by the controller and auditor general
(ii) Through approval of public expenditure by the controller and auditor
general and give report to parliament for scrutiny
(iii) All parastals are audited by the controller-general of State Corporation
(iv) Permanent Secretaries (PS) are chief accounting officers in their min-
istries and ensure proper use of money
(v) Government contracts are advertised publicly for tendering and awards
are given on merit
(vi) Establishing of Kenya Anti-corruption Commission (KACC)
ANS 22,DIST 20