We need to maintain high standards in our public financial management

The planned visit to Kenya by President Barack Obama got me thinking about what the USA can do for us.

My hunch is that collaboration on regional security will dominate discussions, but what can America do for us on the economic front?

I would not hold out the begging bowl and ask President Obama for dollars. After all, the mantra today is trade, not aid. If I were the one to negotiate with President Obama, I would strive to negotiate an urgent technical assistance deal in the area of public financial management.

The USA is the home of most accounting standards. Indeed, one could argue that the reporting and disclosure standards in the USA are the world standards.

When we adopted the new Constitution, we, like the Americans, went the way of a presidential system of government, where most economic decisions and financial management is the responsibility of the executive office of the president.

BIGGEST ALBATROSS

In the early stages of the administration of President Uhuru Kenyatta, there was muted talk about creation of the office of the management of the budget at State House. Somewhere along the way, the idea was dropped.

The upshot is that we have ended up with a presidential system running largely on the public financial management infrastructure of a parliamentary system of government.

Although we have a Public Financial Management Act managed and executed by the National Treasury, the political power and clout of governors and county assemblies have rendered its implementation weak, especially at the county level.

In my view, the poor state of public financial management — especially following the advent of county governments — remains the biggest albatross around our necks.

Indeed, our public financial management standards have collapsed. At both the county and national levels, public procurement laws and regulations are neither expected nor followed.

Internal audit systems, especially at the county government level, are in a shambles. Yes, we have the National Treasury-based Directorate of Internal Audit, but is the system working at the county level?

Just the other day, we went to the rooftops to declare how most of the counties were now covered under the Integrated Financial Information System (Ifmis).

However, the truth of the matter is that Ifmis is not a fully-fledged integrated system where data bases are linked in a general ledger. It is the reason regular financial reporting and disclosure remains a big challenge.

How I wish that one day we will have systems where consolidated financial statements of ministries and county government will be available on demand.

What do you say about a public financial management regime where governors arrogantly defy and dismiss audited reports by the Auditor General at press conferences, political rallies, and funeral gatherings?

SIT IDLE

Managing cash flow has also been a big headache. Successive reports by the Controller of Budget have been reeling out data showing how billions allocated to counties sit idle at the Central Bank for months on end.

County governments are also finding it difficult to absorb funds allocated for development.

Yet even when this money is lying idle in accounts at the Central Bank, the government still goes out every week to borrow from the domestic market.

The government has, for years, talked about resolving poor cash flow management by adopting what is known as a “single treasury account”.

According to recent correspondence between the government and the International Monetary Fund, the administration promised to implement the single treasury account system by April this year. This has not happened.

If we had such a system, the money that sits idle in accounts would be used by other government departments that are ready to absorb it. Therefore, the government would not have to borrow all the time.

We often forget that in Africa, what separates good performers from banana republics are standards of management of public finances. The economies of countries such as Botswana and Mauritius work because they keep high standards.

In future, we will pay dearly for refusing to restructure our economy away from consumption — for not focusing on expenditure that supports actual production of goods and services.

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