Four Counties Defy Shift to New Public Accounting System

Several Kenyan counties — Tana River, Trans Nzoia, Busia and Elgeyo Marakwet — have failed to implement the transition from a cash‑based to an accrual accounting system for public finances, the Auditor‑General told lawmakers, raising concerns over financial reporting and compliance. The accrual system, intended to improve transparency by recording revenues and liabilities when earned or incurred, was approved in 2024 and is being rolled out across national and county governments under International Public Sector Accounting Standards, but four devolved units did not constitute required transition committees to meet guidelines. Auditor‑General Nancy Gathungu said this failure hinders adherence to the scheduled transition, pointing to institutional gaps in organisational readiness and the capacity to produce accrual‑based financial statements, including asset and liability disclosure. The reform aims to address persistent issues such as ballooning pending bills and unrecorded public assets, but these counties lag in meeting basic requirements.

Public finance reforms require robust systems such as the Integrated Financial Management System (IFMIS), and the National Treasury plans upgrades to support the transition by enhancing modules and reducing technology risks, but county readiness remains uneven. The auditors noted risks around asset identification, classification, valuation and the lack of comprehensive fixed asset registers, which complicate efforts to align with accrual standards. County entities are expected to achieve full compliance within a three‑year window, yet the audit highlighted systemic challenges in documentation and financial statement preparation that could delay the transition. These developments underscore broader fiscal management issues as counties struggle to adopt modern accounting practices.