John Mbadi, the newly appointed Treasury Cabinet Secretary, has appointed a Steering Committee to oversee the transition from cash-based to accrual-based accounting across both National and County Governments.....CLICK HERE TO READ THE FULL ARTICLE>>>
The announcement, through a gazette notice on Friday, August 30, is expected to have far-reaching consequences for Kenya’s financial management system, particularly in how the government handles public debt and pending bills.
This shift is seen as a long-overdue move towards aligning Kenya with international accounting standards. The decision to move to accrual accounting was approved by the Cabinet on 7th March 2024, with an implementation timeline set for 1st July 2024.
The Steering Committee, which will be in place for three years, has been tasked with providing overall direction and coordination during this transitional period.
Why it matters:
The current cash-based accounting system, which records transactions only when money is paid out or received, has long been criticised for its limitations. It does not allow for the comprehensive recording of pending bills, a major issue that has plagued both national and county governments.
Contractors and service providers have become increasingly wary of offering services to the government, particularly at the county level, due to the unpredictability of payment timelines. This has led to a significant backlog of pending bills, which not only stifles business growth but also hampers service delivery.
Dig deeper:
Accrual accounting, on the other hand, recognises income and expenditures in the period they are earned or incurred, regardless of when the cash is exchanged. This method allows for a clearer picture of an entity’s financial position, as it includes all liabilities and assets in the balance sheet.
By adopting this system, Kenya aims to streamline its financial operations, improve transparency, and enhance the credibility of its financial statements.
The Commitee’s mandate:
The Steering Committee, chaired by the Principal Secretary of the National Treasury, includes key figures such as the Chairperson of the Public Sector Accounting Standards Board, the Director-General of Accounting Services, and representatives from various government departments and agencies.
The Committee’s role is to ensure that the transition is smooth and that all stakeholders are on board. This includes adopting a roadmap for the transition, appointing a technical committee to handle the day-to-day implementation, and promoting policy dialogue at senior leadership levels to secure the necessary support.
One of the critical challenges the Committee will face is changing the mindset within government entities that have been accustomed to the cash-based system for decades. The transition to accrual accounting will require significant capacity building and change management efforts.
The Committee has been tasked with developing and overseeing the implementation of a communication strategy to ensure that all government employees understand the new system and its benefits.
Moreover, the transition is expected to have a substantial impact on how the government manages its public debt. Under the current cash-based system, there is little incentive to keep accurate records of liabilities, leading to discrepancies and disputes over pending bills.
Accrual accounting will provide a standard definition and recognition criteria for liabilities, making it easier to manage and pay off public debt in a timely manner.
The move also comes at a time when Kenya is grappling with a growing public debt burden and increasing pressure from international financial institutions to improve its fiscal discipline.
By adopting accrual accounting, the government hopes to enhance its financial management practices, thus boosting investor confidence and securing better terms for future borrowing….CLICK HERE TO READ MORE ARTICLE>>>
All Smokers, Do The Following Things To Detox All The Nicotine In Your Body
