2 weeks Ago
The government is gearing up for an important financial shift in a couple of months.By June 2027, the Kenyan National Treasury plans to transition from cash-based to accrual accounting. This change, championed by the Cabinet in 2024, aims to address fiscal challenges like pending bills in the public sector.
The plan is laid out in detailed guidelines for accounting officers across government entities, including ministries and county executives.This transition is no small feat. It’s structured in three phases, each carefully designed to introduce accrual accounting practices systematically.
Stephen Obok, from the Institute of Certified Public Accountants of Kenya (ICPAK), explains that accrual accounting offers a clearer picture of financial transactions as they happen, rather than only when cash changes hands.This approach is set to enhance accountability within the public sector.Think of it this way: when planning next year’s budget, you start by acknowledging any unpaid bills or obligations.
If you have Ksh.3 billion in pending obligations and need an additional Ksh.2 billion for new expenses, your budget should be Ksh.
5 billion. This method ensures you account for both existing obligations and future spending.To steer this transition, accounting officers are required to form a transition committee and appoint an entity manager.
During the 2024/25 fiscal year, these entities will inventory their financial assets and liabilities and prepare initial financial statements.While the costs of implementing this new system might be high, the long-term benefits are promising. Enhanced scrutiny and performance evaluation for leaders of state institutions are expected outcomes.
As Obok puts it, leaders will face increased scrutiny and must demonstrate improvement to extend their contracts.The phased implementation kicks off with the submission of audited cash-based financial statements in 2023/2024. By the end of the second year, all financial assets and liabilities, including inventories, should be documented.
The final phase in 2026/2027 requires full compliance with accrual accounting standards, providing a comprehensive financial overview for all entities.The post Kenyan Government to Shift to Accrual Accounting by 2027: A Strategic Financial Overhaul appeared first on Nairobi Wire..
