Public Sector Governance and Accountability Series: Budgeting and ...

494 Alta Fölscher
against priorities captured in the BSP, and an assessment of the likely financial
implications on the ministry’s published budget. Ministries are required
to indicate how they intend to fund the new proposals from within their
existing ceilings, and all submissions to the cabinet are now required to have
Treasury signoff.
Using information technology better
Kenya initiated an IFMIS in 2003. In principle, this reform should be a cornerstone
of a working financial management platform for fiscal discipline,
spending effectiveness, and efficiency. Despite the original deadline of 2006,
as yet the system is not being used in any ministry. One reason for the delay
has been the introduction of the new Government Finance Statistics Manual
2001–compliant classification system (IMF 2001), which had to be integrated
into a new chart of accounts and loaded into the IFMIS system. However,
although the general-ledger, accounts payable, and purchase-order modules
of the system were installed in the Ministry of Finance and the Ministry
of Planning and National Development for the 2005/06 budget year, the
ministries’ staffs have not used the system fully but prefer to use the legacy
systems. Although hardware, software, and training have been provided to
an additional 21 ministries, the same pattern is repeated elsewhere. Having
a working and used IFMIS is critical for improving implementation discipline:
the envisaged system provides significant functionality to manage Kenya’s
particular public finance setup. For example:
District and ministry spending can be reconciled, providing ministries
with better up-to-date management information on implementation of
activities and remaining resources.
A separate classification code is provided to identify district spending,
allowing transactions at this level to be distinguished from central
transactions.
Although the new cash management system reduces liquidity in the system,
it does not provide robust commitment controls, which are required
at an earlier point in the budget execution cycle. In principle, ministries
can still issue authority to incur expenditure without the necessary funds
being available in the required budget category. This problem is addressed
in a functioning IFMIS that would not allow purchase orders to be issued.
Expenditure control can be exercised on annual votebook data. However,
given that the cash release system reconfirms authority to spend, the system
can control on the basis of periodic cash releases. This function will
assist in reducing arrears.