Can government’s new digital accounting system end the plunder of public coffers?

BY EMMANUEL WERE

KENYA: Keith*, 26, has worked in the finance department of two government ministries over the last three years.

And in this time, he has learnt where the loopholes in the government’s accounting systems are, and could easily take advantage of them to make a quick fortune.

One of the easier ways to do so is duplicate local purchase order books, something clerical officers have learnt to do rather well. They use the duplicates to claim huge amounts of money against goods that have not even been delivered.

“That explains the lifestyle of some of these clerical officers on salaries of Sh30,000 who have many cars and have built palatial homes,” Keith said.

“They have learnt how to hide them (cars, houses and other assets) and you cannot trace their property back to them.”

Questionable payments

It is not a secret that there have been questionable payments made in the government.

“You do not see any document supporting an invoice presented by the supplier ,but when you look at the bank statement, the cash has been withdrawn to make the payment,” Keith said.

As the national government seeks to open up about the state of its finances to the public and devolution gathers momentum, the budgeting, accounting and financial reporting systems are being laid bare.

Last week, Controller of Budget Agnes Odhiambo said 22 county governments might not be allocated Sh3.9 billion in total because their budgets did not balance. Most of these counties had expenses that surpassed their revenue.

And a month ago, Auditor General Edward Ouko said one in every three shillings of the Sh920 billion spent by the government in the financial year ended June 2012 could not be properly explained.

This sparked a public outcry, with the National Treasury coming out to calm tempers and explain that the cash was not lost. In a press statement, it said the money had simply not been properly accounted for.

The government, alive to the loopholes in its procurement and financial management, has been keen to roll out the Integrated Financial Management Information System (IFMIS).

This system is supposed to ensure that all the processes in accounting and procurement move from the manual process — such as the need for hard copy local purchase orders and paying by cash — to an automated platform where suppliers’ payments are wired to their bank accounts directly.

It is hoped that all the proper accounting procedures will be in place by next year, when IFMIS is to be fully adopted. 

Major concern

Keith has been involved in most workshops to train accountants in the national and the county governments on the new system.

He says it will dramatically seal most loopholes where cash in government is siphoned out.

But he has a major concern.

“Most of the accountants and financial offices being trained are the ones nearing retirement age. They have been in the government for very long, but won’t be here in the coming years,” he said.

Analysts say that the country is entering into a new phase of financial reporting, a phase where the Auditor General and Controller of Budget will become the new watchdogs on the management of public accounts.

“All is not lost in the Kenya’s public finance management system. I would call it a new dawn in public financial management,” said Laban Gathungu, a partner with Ernst and Young’s advisory services.

The Constitution has given more power to the Auditor General’s Office, and allows it to present its report to Parliament.

The holder of the office also has a role to play in ensuring that even counties develop a more robust system of accounting.

The Auditor General is supposed to consolidated all the accounts from the ministries and other government departments, and present the report within six months after the close of the government’s financial year.

Since the fiscal year ends in June, this report should be tabled by December.

Previously, the minister of Finance was the one tasked with this role.

But even though the government has made progress in enhancing the IFMIS system, adopting the Public Finance Management Act and giving the Auditor General and Controller of Budget more autonomy, there is more to be done.

First, the National Treasury has yet to establish the Public Sector Accounting Standards Board — an oversight body that will ensure proper standards are met in all government entities and in the counties.

Second, Kenya lags behind its regional neighbours in adopting the International Public Sector Accounting Standards (IPSAS) reporting format.

Simply put, adopting IPSAS would be the equivalent of what publicly listed companies at the Nairobi Securities Exchange have done in adopting the International Financial Reporting Standards (IFRS).

“If you are a local or international investor and go through the accounts of a company reporting using IFRS, you can understand the financial statement,” said Gathungu. “If Kenya adopted IPSAS, we would have the citizens and development partners coming in and saying they understand the government’s financial statements.”

Available online

Rwanda is the frontrunner in developing the IPSAS way of reporting, and the government accounts are now available online for the general public and the world to review.

Although, Rwanda has not fully adopted the system, it is still ahead of the East African region.

Gathungu also says adopting technology, like what Kenya is currently doing with IFMIS, will provide a big boost towards enhancing financial reporting by the national and county governments.

Also, there is a need to enhance the skills of accountants and financial officers in the public sector, something countries like Rwanda do by engaging the services of the private sector.

As the interview with Keith winds up, the question put to him is if — being among the crop of new accountants in the government who are also tech-savvy —  he plans on staying in the public sector for long.

“I cannot stand routine,” is his ambiguous answer.

Technology may seal the loopholes in the government’s finance systems, but if those equipped to use the system leave, the manual platform may slowly creep back. And with it, a return to the old way of doing things.

(* Keith spoke on condition that his name be changed to protect his identity.)

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