Key Highlights of Workshop and Technical Assistance in Preparation and Consolidation of Financial Statements for FY 2014/ National Government Ministries Agencies and Departments (MDAs) 23 May 2016

Page 2 Introduction and Overview The Government of Kenya has prioritized enhancing public financial integrity institutions as one of its top priorities underpinned in its Public Finance Management Strategy (PFMR) 2013 – 2018 and as spelt out in the Constitution of Kenya, PFM Act 2012 and Gazette Notice 5440 in 2014 led to the adoption of IPSAS for FY 2013/14. This is the second year of implementation.

Page 3 Introduction and Overview PFM AGENDA The object of the PFM Act, 2012 is to ensure that - (a) Public finances are managed at both the national and the county levels of government in accordance with the principles set out in the Constitution; and (b) Public officers who are given responsibility for managing the finances are accountable to the public for the management of those finances through Parliament and County Assemblies.

Page 4 Introduction and Overview The objective of the technical assistance is to support MDA Accountants in the preparation of financial statements and in the management of the audit process. The assignment to be covered in the following 3 phases ► Phase I: Preparation and consolidation of financial statements ► Phase II: Audit support and quality review ► Phase III: In-year reporting, training and continued support during audit

Page 5 Workshop Topics 1. Workshop Overview/Expectations 2. Top 10 Audit Major Issues raised by OAG among MDAs in FY 2014/ Audit of MDAs – Areas of improvement and preparation of the Audit File. 4. Budget Implementation

Page 6 Workshop Topics 6. In-year and annual reporting 7. Year-end Procedures 8. Key Issues Involving IFMIS 9. Tax matters – MDAs 10. Resolution of opening and historical balances 11. FiRe Award Evaluation Criteria and Results - Areas of Improvement/Value Additions

Page 7 EXPECTATIONS 1. What were your expectations from the Technical Assistance? 2. What are your expectations from the Workshop?

Page 8 HOUSE RULES 1. Active participation 2. No phones 3. Sharing experiences 4. Keep time

Page 9 Scope of the Assignment To provide technical assistance in the Preparation of Individual and Consolidated Financial Statements for National Government Ministries, Departments and Agencies( MDAs) and Subsidiary Entities under their control including Projects, Boards, Authorities and Commissions. The core objective of our TA assignment is capacity building of national government accountants and AGD staff in-charge of financial reporting i.e. the FRU team..

Page 10 Audit Status and Results

Page 11 Audit Status and Results Total Entities in Lot 1 - FY 2014/ % 72% Total No. of Entities in Lot 1 153

Page 12 Audit Status and Results % 9% 4% 56% Total Entities in Lot 1 - FY 2014/2015 Total No. Ent’ In Lot 1 113

Page 13 Audit Status and Results – Comparison to Prior Year Total Entities in Lot 1

Page 14 Audit Status and Results 48% 52% Total No. MDAs 50 Ministries, Departments & Agencies FY 2014/2015

Page 15 Audit Status and Results Ministries, Departments & Agencies FY 2014/ % 12% 4% 38% Total No. MDAs 26

Page 16 Audit Status and Results – Comparison to Prior Year Ministries, Departments & Agencies

Page 17 Audit Status and Results Total No. MDAs 50 Consolidated Fund Services FY 2014/2015 Total No. CFSs %

Page 18 Audit Status and Results % 100% 0% Total No. CFSs 2 2 Consolidated Fund Services FY 2014/2015

Page 19 Audit Status and Results – Comparison to Prior Year Consolidated Fund Services

Page 20 Audit Status and Results Receivers of Revenue FY 2014/2015 Total No. RORs % 100%

Page 21 Audit Status and Results Receivers of Revenue FY 2014/ % 10% 30% Total No. RORs

Page 22 Audit Status and Results – Comparison to Prior Year Receivers of Revenues

Page 23 Audit Status and Results Total No. Self Reporting Projects 89 National Government Projects FY 2014/ % 84%

Page 24 Audit Status and Results % 5% 4% 67% Total No. Projects 75 National Government Projects FY 2014/

Page 25 Audit Status and Results – Comparison to Prior Year National Government Projects

Page 26 Key Issues Arising 1. Financial statement prepared outside IFMIS Financial statements for the year ended 30 June 2015 for national government MDAs were required to be based on the books of account as maintained in IFMIS. Currently only the following 6 entities have reconciled their FS to IFMIS 1. Controller of Budget 2. Ministry of Energy and Petroleum 3. National Police Service Commission 4. Director of Public Prosecution 5. Department of Commerce and Tourism 6. Independent Police Oversight Authority Greatest challenge – Performance of bank reconciliations due to missing bank statements Achievements – training and capacity building including setting up training desk at IFMIS and have trained over 30 MDAs since Feb. Practical lab session during training in Dec and in our current training.

Page 27 Key Issues Arising 2. Old/Historical Balances Historical (old) balances were included in the audited financial statements of some MDAs for the year 2013/2014 and hence they form part of the balances in 2014/2015. We have continued to compliment the efforts of the task force in working with entities in the resolution of old balances. Out of the 49 MDAs reviewed by the task force 26 MDAs have revised their financial statements and have been advised to forward the same to the auditors for review. The remaining23 MDAs are in the process of finalizing their revised financial statements. After audit review and obtaining concurrence from the auditor, the MDAs will be required to restate the fund balance brought forward in FY 2013/2014 to the revised balances carried forward in FY 2012/2013 through prior year adjustments should the two be different.

Page 28 Key Issues Arising 3. Statement of Assets and Liabilities not Balancing (Suspense) As per the consolidated financial statements for FY 2014/2015 a total of 20 entities had their financial statements not balancing resulting in a suspense amount of KShs 2 billion. Out of these 11 MDAs have resolved their suspense balance. We however, note that from the updated consolidation as at 31 March 2016, the suspense balance has increased to KShs 6.4 billion analysed as follows;

Page 29 Key Issues Arising 3. Suspense breakdown

Page 30 Key Issues Arising 4. Accounting for National Government Projects Section 81 of the Public Finance Management Act, 2012, requires that all State Organs and public entities prepare annual financial statements at the end of each financial year which they should submit by 30 th September every year. We note however, that the total number of project bank accounts per CBK reports as at 30 June 2015 stood at 321. However, from our consolidation we note that only 133 projects prepared financial statements and were included in the consolidation. Meaning that 188 project bank accounts belong to projects whose reporting is not confirmed. We have shared with the HAUs the project banks accounts belonging to projects implemented under their entities for details on how they report ie whether they are self reporting or not and to also give us details on the status of the bank accounts. The office of the DG will be writing to the entities formally requesting for this information so as to ensure all projects prepare financial statements.

Page 31 THE END THANK YOU Presentation to the National/County Governments Committee – LOT I

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