Treasury Ministry on Thursday made important strides in its transition towards a more transparent financial management system that will help the government to track the management of Kenya’s financial inflows and outflows.
In a statement, the Ministry announced that it had begun transitioning from cash-basis accounting to the International Public Sector Accounting Standards (IPSAS) accrual basis, marking an important step in public financial management reform.
According to Treasury Principal Secretary(PS) Chris Kiptoo, the new financial accounting system will help the country align its financial reporting system with global standards.
”This shift from cash to accrual accounting represents a milestone in Kenya’s efforts to align its financial reporting with global standards,’’ the PS stated.
A photo collage of Nairobi City and Kenya Shilling notes
Photo
Nairobi City County
The transition will mark a change from an initial system where financial transactions were only recorded when cash was involved, leaving other transaction modes unrecorded.
This subsequently led to the possibility of loss of public funds failing to be noticeable while also limiting the government’s ability to present a clear view of its financial position.
”Under cash accounting, financial transactions are recorded only when cash is exchanged, which, while straightforward, limits the government’s ability to present a comprehensive view of its financial position. As the complexity of public finances grows, these limitations become more pronounced,’’ Kiptoo added.
The government has been in the spotlight in the recent past over its failure to provide the financial position of its accounts and in particular, the debts owed to creditors.
These were among some of the issues raised during the anti-government protests with many protestors blaming the government for pilferage of the financial resources.
Under the new accounting system, the government, therefore, aims to be able to provide a clearer picture of its financial situation and key assets that are owned by the government.
”Accrual accounting addresses this by recognising revenues and expenses when they are earned or incurred, regardless of when cash is exchanged. This approach provides a clearer picture of the government’s financial health by requiring the recognition of assets, liabilities, revenues, and expenditures, delivering vital data for informed decision-making.’’ Kiptoo added.
The new accounting system allows the government to present a fuller picture of its financial position, including key obligations such as pending bills, pension liabilities, and public debt alongside its receivables, fixed assets, and natural resources.
A photo of the Central Bank of Kenya
Photo
KO Associates
