How managing finances separates performers from banana republics

Auditor-General Edward Ouko on June 25, 2015. The Auditor-General’s report demonstrates just how badly financial management standards have plunged. FILE PHOTO | EVANS HABIL |  NATION MEDIA GROUP

In Summary

• The report describes a litany of cases of unsupported expenditure, non-surrender of imprest, spending without parliamentary approval and lack of adequate disclosure.
• Clearly, it is neither a fully-fledged integrated system where data bases are linked in a general ledger, making regular financial reporting and disclosure  easier.
• Managing cash flow has also been a big headache. Successive reports by the Controller of Budget, Mrs Agnes Odhiambo, have been reeling out data showing how billions allocated to counties sit idle for months.

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By JAINDI KISERO
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The Auditor-General’s report demonstrates just how badly financial management standards have plunged.

Auditor-General Edward Ouko says in the report he is unable to track or establish how a massive Sh66 billion was spent — money equivalent to 34 per cent of funds allocated to devolved governments.

He highlights other cases where Sh24 billion was spent without parliamentary approval.

Mr Ouko’s report provides insights into how internal audit systems and record keeping have almost crumbled.

The report describes a litany of cases of unsupported expenditure, non-surrender of imprest, spending without parliamentary approval and lack of adequate disclosure.

The parlous state of public financial management and poor keeping of financial records also comes through.

He highlights cases where revenue reflected in records as remitted to the exchequer differs with that at the Treasury.

It could be a matter of sloppy accounting but accounts which do not reconcile are a recipe for irregular dealings.

In all, the auditor has given a qualified opinion on revenues amounting to Sh929 billion.

The auditor unearthed cases where material receipts and payments in cashbooks were not reflected in bank statements. And, of the cashbooks of ministries, balances as at June 30, 2014 had not been reconciled.

The Public Accounts Committee must now move quickly to pressure the National Treasury to explain why it is unable to reconcile its statements.

The poor state of financial records is yet another reminder the much vaunted Integrated Financial Information System (Ifmis) is not working efficiently.

Clearly, it is neither a fully-fledged integrated system where data bases are linked in a general ledger, making regular financial reporting and disclosure  easier.

Managing cash flow has also been a big headache. Successive reports by the Controller of Budget, Mrs Agnes Odhiambo, have been reeling out data showing how billions allocated to counties sit idle for months.

Yet as this money lies idle in accounts at the Central Bank, the government still goes to the domestic market to borrow.

The government has been talking about resolving poor cash flow management by adopting a “Single Treasury Account” for years.

According to recent correspondence between the government and the International Monetary Fund, the administration promised to implement the system by April this year.

This has not happened. With such a system in place, idle money would be used by other departments and the government would not have to go to the market to borrow every week.

In Africa, what separates good performers from banana republics is management of public finances. The economies of Botswana and Mauritius work because they keep high standards.