by Jackson Okoth
Local authorities that fail to comply with International Public Sector Accounting Standards (IPSAS) will, from next year, receive fewer monies from the Local Authorities Transfer Fund (LATF).
"We shall use the high appetite by local authorities for these funds to make them compliant, and adopt international accounting tools and methods," said Karithi Murimi, Chairman, LATF advisory committee, Kenya Local Government Reform Programme.
He made these remarks on the sidelines of an international public sector accounting standards conference in Nairobi last week.
Merging authorities
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The event was organised by the Institute of Certified Public Accountants of Kenya (ICPAK) and Accountant General Kenya.
It attracted big accounting firms in the country, like the KPMG, PriceWaterhouseCoopers, Deloitte and Ernst& Young, and brought together account and auditor generals
Above: Nairobi City Council. Local authorities have until next year to comply with the IPSAS or risk reduced allocations from LATF. Inset: An accountant at work. Photo: courtesy |
At least 7 per cent of the total fund is shared equally among the country’s 175 local authorities; 60 per cent of the fund is disbursed according to the relative population size of the local authorities.
A move to introduce new accounting tools for local comes in the backdrop of discussions about the possibility of merging authorities that are not viable.
"We expect local authorities to begin identifying their assets and liabilities. The new format will assist councils them identify which assets to realise, in order to improve service delivery," said Murimi.
For instance, the ongoing tussle within Nairobi City Council over its liabilities, could be a thing of the past.
Confirmation of assets and liabilities has been identified as a major issue holding back certification of local authority accounts. Local authorities are already in the process of opening asset and liability balances.
In July 2008, the Local government Minister issued a gazette notice instructing local authorities to move to the new financial reporting standard.
"The Local Government Act mandates the Minister to define the system of accounting and the format of the annual accounts to be used by local authorities," said Murimi.
For decades, local authorities have been following the colonial British municipal accounting system.
Until recently, there has been a migration to the Simplified Accounting System which was developed, though not formally adopted, in 1999, giving rise to audit qualifications.
Outdated system
The Kenya Local Government Reform Programme revised the financial reporting system and the necessary templates to meet the needs, central government, local authorities and IPSAS.
The revised template has been gazetted and has been disseminated across all the Local Authorities, with the Financial Regulations. The template was first used in the preparation of the 2007/08 final accounts.
" We still expect challenges especially in rural local authorities where the number of qualified accountants is inadequate," said Murimi.
IPSAS are designed to apply to the general purpose financial statements of all public authorities as well as their component entities such as boards, departments, agencies and commissions.
Effective June 2010, all local authority accounts prepared under IPSAS will be submitted to the Controller and Auditor General, who already have the template. "We expect those authorities experiencing challenges to raise it with the Ministry," said Murimi.
But while local authorities are on IPSAS, the central Government is yet to migrate.
In February this year, Treasury issued a circular that encouraged organisations to adopt IPSAS as a way of reducing incidences of fraud and corruption.
jokoth@standardmedia.co.ke
