The National Treasury has announced the commencement of the transition from cash-basis accounting to the International Public Sector Accounting Standards (IPSAS) accrual basis.
In a statement, Treasury PS Dr. Chris Kiptoo said the move marks an important step in public financial management reform.
Kiptoo said the transition will affect the national government, county governments, and their respective entities, ensuring greater transparency and accountability in financial reporting.
The Cabinet approved this transition on March 7, 2024, following recommendations from the National Treasury and the PSASB, and was subsequently Gazetted on August 30, 2024.
Treasury CS appointed a steering committee to oversee the process, with the inaugural meeting chaired by the PS, held on October 3.
Kiptoo said the shift from cash to accrual accounting represents a milestone in Kenya’s efforts to align its financial reporting with global standards,” Kiptoo said.
“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,” he said.
The PS explained that accrual accounting addresses this problem by recognizing revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.
According to Kiptoo, 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.
He stated that the transition will unfold over the next three years, under the guidance of the steering committee.
The effective date for the accrual basis is set for July 1, 2024, with the first accrual-based financial statements expected for the financial year ending June 30, 2025.
Also Read: CBK Licenses 27 Additional Digital Credit Providers
Treasury Support in the Rollout Process
Kiptoo said the Treasury will support this transition by providing guidance on asset and liability valuation, enhancing the Integrated Financial Management Information System (IFMIS), and building capacity among public sector personnel.
He affirmed that the reform is essential to improving financial management and enhancing the accuracy of public sector financial reports
“It will allow 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,” Kiptoo said.
However, he acknowledged that the shift will not be without challenges since it requires a detailed review of existing financial processes, revision of the Standard Chart of Accounts (SCOA), and reengineering of the IFMIS system.
Additionally, the PS said public entities will need to develop and adopt accrual-based financial statement templates.
Also Read: Matatu Fares Hike as Gas, Sugar Prices Drop – Report
Transition Challenges
However, Kiptoo said the challenges will be navigated successfully with the support of the steering committee and other key stakeholders.
He maintained that the ministry is committed to ensuring the success of this transition, which will support sustainable economic growth and bolster public sector accountability.
Collaboration
The government will work to enhance openness and accountability in collaboration with international and domestic partners as outlined in Article 201 of the Constitution.
Kiptoo said the reform builds on a decade of progress since the 2010 Constitution introduced the Public Financial Management (PFM) Act, 2012, and the establishment of the PSASB in 2014.
Over this period, Ministries, Departments, Agencies (MDAs), and County Governments have advanced their financial accounting capabilities, making them well-positioned for this transition.
“The adoption of cash-basis accounting, initially introduced as a transitional standard, has prepared public entities for the shift to the more comprehensive accrual basis,” he said.
Follow our WhatsApp Channel for real-time news updates:
https://whatsapp.com/channel/0029VaB3k54HltYFiQ1f2i2C
