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Ministries, departments and agencies that support service delivery in Kenya have been declared weak links in transitioning accounting systems from cash-based operations.

The Public Sector Accounting Standards Board (PSASB) the weakness in cash deals must be addressed by shifting ministries into the new system that records revenues when earned, and expenses when incurred, rather than when payments are made.

Despite most of the public sector already reporting using the accrual approach, PSASB says some government arms are still operating cash-based accounting, which forces accountants to reconcile financial statements into a consolidated one.

Weaker systems

Cash-based operations are said to be weak and have in the past been fingered as loopholes to siphon money by clever accountants.

“The sector of government that we are having conversations about is the general government that focuses on providing services to Kenyans, we are already engaging with agencies that offer services to Mwananchi and looking to transition them,” said Fredrick Riaga, PSASB Chief Executive Officer (CEO) at an accounting forum.

Riaga said the 260-plus State corporations are already reporting on accrual accounting.

Adopting accrual accounting will enhance better public service delivery, leading to improved performance to ensure value for money, experts say.

The Director of General Accounting Services and Quality Assurance at the National Treasury Bernard Ndung’u the adoption of the International Accounting Standards in 2014 deepened transparency and accountability in the public sector.

“Transitioning to accrual accounting of the entities that are still reporting under the cash basis of accounting becomes the next key pronouncement that the board and the National Treasury is keen on making,” said Ndung’u.

However, Ndung’u stated that standardisation of financial reporting will be gradual as some of the countries that have successfully transitioned from cash to accrual-based accounting have done so over a period of time, for some it has been over 10 years.

The board resolved to undertake a phased approach which would entail transitioning the 14 Constitutional Commissions and Independent Offices currently on IPSAS Cash to IPSAS Accrual, with the effective date as 1st July 2023.

“The global project of transition requires that IFMIS, the Government Accounting System, is re-configured to enable an accrual reporting environment. This process has been assessed to take not less than 18 months. With a new government in place only a few weeks back, and considering the process of procuring these services, the earlier anticipated transition date of 1st July 2023 for all National and County Government Entities may not be feasible,” Ndungu said.