The-Accountant-Jul-Aug-2017

Financial reporting and assurance
requirements. Arguably, government
sector accounts has many concepts and
technical issues that obtaining a fair
presentation of the financial affairs is more
complex than in the private sector, hence
this important effort appears complex and
costly to effect.
A common problem that has faced
the early adopters is that government
activities focus on macroeconomic
approach and thus its management
practices and data reporting methods are
significantly different from the private
sector. Indeed accrual based financial
reporting gives broader information,
which cash accounting does not. It also
gives a wider than ordinary view of the
liabilities compared to the assets.
There are several challenge areas in
the practical implementation of IPSAS
16 and 17 on valuation of vested assets
from national government to other
government entities that may not
ordinarily be conducted at arm’s length.
Further the valuation of heritage assets
or resources that have no comparable
value like frequency spectrum. Similarly,
how would one reasonably estimate the
equity holding of a government entity?
It’s easy to assume that this is a simple
exercise but its mind blowing for the head
of finance to comply with the disclosure
of transactions that are at best, based on
massive judgment calls and perceptions of
the preparer of the financial statements.
The latest consolidated government
accounts for state corporation, semi
autonomous government agencies and
funds for the year ended 30 June 2015 were
signed off 10 months later than expected
on 31 August 2016 and incorporated
financial results of 353 government
entities (www.treasury.go.ke/financialreporting-templates/consolidated-financial
statements/category/121-consolidatedf
inancial-statements.html).This
comprehensive picture of government
financial performance and position is
refreshing and follows in the footsteps of
the developed world.
The reported public finance numbers
provide for interesting read and a tool
for effective public financial management
aimed at improving governance. Further,
it delivers an important source of future
government directions in terms of policy
making like addressing government
borrowing with internally available funds.
For instance, the annual debt repayment
in 2016 was Ksh 446.4 Billion while
tax collection was Ksh 1.2 Trillion, thus
Ksh3.7 out of every 10 shillings collected
by the revenue authority went towards
the redemption of debt principal and
interest. Incidentally, cash and fixed
deposits held with commercial banks
in the year ended 2015 was Ksh 253.1
Billion. This enhanced view of financial
reporting provides an important source
of future government direction in terms
of policy making like in this case of debt
management. We have just scratched the
surface of the benefits of consolidated
government financial reporting and the
real test is yet to come.
There are several challenge areas in the practical
implementation of IPSAS 16 and 17 on valuation of vested
assets from national government to other government
entities that may not ordinarily be conducted at arm’s length.
JULY - AUGUST 2017 5