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The Public Sector Accounting Standards Board (PSASB) has set up plans to phase out cash-based accounting to enhance transparency, fiscal credibility and tame corruption.

This will see an adjustment of the Integrated Financial Management System (IFMIS) under the National Treasury which has previously been accused of being prone to error, fraud and non-disclosure of revenue.

“When you look at cash accounting that the general government owns, we do not have a clear reporting on assets and liabilities.

Discussions that we had in terms of establishing credible assets and liabilities that the government owns would be a critical factor for us to deal with as we then move to accrual accounting,” said Fredrick Riaga, CEO PSASB.

Liability management

“IFMIS will need a reconfiguration to anticipate or project accrual reporting and accounting. Those are the steps we are running through,” he added.

The transition to accrual accounting is expected to commence in July 2023 as PSASB works closely work the national assets and liability management unit.

Once commenced, PSAB will be conducting regular reviews which will cost the exchequer about Sh3.3 billion annually. Unlike cash basis accounting which only considers receipts and payments, accrual accounting includes non-financial items such as assets and liabilities.

Kenya currently operates cash-based accounting which reconciles financial statements into a consolidated one since not all state institutions are using the accrual method.

The method creates a loophole where State institutions especially at county levels spend recklessly from the last month to the end of the financial year.

The latest report by the controller of budget on county governments’ budget implementation shows that suppliers were owed Sh47.4 billion in the nine months ending May 2022.