The National Treasury RESOLUTION OF OLD AND HISTORICAL BALANCES

Page 2 RESOLUTION OF OLD AND HISTORICAL BALANCES  Ministries, Departments and Agencies’ (MDAs) financial statements for financial years 2012/2013 and prior years have carried forward unsupported balances that have continued to attract audit queries.  Consequently, the Public Accounts Committee (PAC) in their various sittings recommended that this issue be addressed by The National Treasury. This prompted the Principal Secretary, National Treasury to constitute a taskforce to address these issues and make recommendations. Resolution of opening and historical balances

Page 3 RESOLUTION OF OLD AND HISTORICAL BALANCES Resolution of opening and historical balances  The main cause of these balances is the non-clearance of the main three accounts that constitute the statement of assets and liabilities which are;  General Account of Vote  Exchequer Account  Paymaster General Account  The non-clearance including mispostings caused accumulation of other balances in the below the line accounts such as General Suspense, District Suspense and other Below the Line (Suspense) accounts.

Page 4 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Role of the Taskforce The terms of reference of the task force in relation to the resolution of old balances were as follows:  Analyzing statement of assets and liabilities items, balances brought forward;  Analyzing revenue statement balances carried forward;  Reconfirming credit and debit entries for the outstanding items;  Reviewing ledger entries where necessary;  Analyzing recurrent, development and deposit bank account reconciliation as well as the reconciling items carried forward;

Page 5 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Role of the Taskforce (Continued)  Recommend the way forward to have these long outstanding balances cleared from the books of accounts ► The task force has been meeting in Treasury Building from October, 2014 with various heads of accounting units and their staff in a weekly series of meetings to review their financial statements and supporting documentation with a view of clearing the balances.

Page 6 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Key Tasks in Each Individual MDA The work involved for each MDA was unique depending on the complexity and magnitude of the transactions especially taking into account the splits and mergers of MDAs. The time spent per entity varied according to the extent of:  The number of line items analyzed in the financial statements.  The materiality of the balances reviewed.  The period the balances being reviewed dated back to.

Page 7 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Key Tasks in Each Individual MDA (Continued)  The effort needed to validate these balances including field visits.  The non-availability and retrieval of documents to support the balances being analyzed.  The human capacity (staff shortage, loss of institutional memory and staff transfers)  Changes in the accounting system i.e. from RGAS (legacy) system to IFMIS.

Page 8 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Key Tasks in Each Individual MDA (Continued) In carrying out the assignment, the taskforce in consultation with the MDAs undertook the following activities:-  Compared the FY 2012/2013 old balance presented by the MDAs to those in the audited financial statements for the same year and found them to be in agreement. The old balances in most of the departments related to exchequer provisions, cash and bank balance, advances, imprests, district and general suspense, general account on vote and clearance accounts.

Page 9 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Key Tasks in Each Individual MDA (Continued) ► Established the validity of the revised balances to agree with the source documents and supporting schedules. ► Advised MDAs to post the necessary adjustments through journals entries that would effectively revise their financial statements. The MDAs were therefore required to re- submit the revised financial statements to the auditor for audit review.

Page 10 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Current Status  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 remaining 23 MDAs are in the process of finalizing their revised financial statements.

Page 11 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Recommendations  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.  The MDAs will be required to ensure that the revised accounts reflect proper classification of assets and liabilities.  The MDAs will be required to submit the revised financial statements to the Auditor General for audit review.

Page 12 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Recommendations (Continued)  Accounting units to ensure proper keeping and maintenance of accounting records  All National Sub County Treasuries to be connected and use IFMIS such that their expenditure is automatically uploaded into the MDA’s ledger.  Capacity building i.e. continuous training of accounting staff and facilitation for proper archiving of documents for easier retrieval.  Computerization of archival of accounting records.  Continuous inspection of the MDAs by the Accountant General’s departments.

Page 13 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Recommendations (Continued)  The National Treasury should consider issuing guidelines on clearance of any outstanding balances in the financial statements.  The task force analyzed the recurrent and development votes, and therefore recommends that the MDAs undertake the task of analyzing the deposits, revenues and fund accounts.  The 23 MDAs which have not finalized the revision of their financial statements to do so and submit the same to the Taskforce secretariat and the Principal Secretary-National Treasury to consider reconstituting the taskforce to review these statements before submission for audit review.

Practical Presentation State Department of Tourism

Page 15 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances State Department of Tourism

Page 16 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances State Department of Tourism

Page 17 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Tasks Achieved ► The following constitutes the make-up of the revised accounts and the task accomplished : ► Recurrent Vote  The PMG account balance of KShs 9,144,547 was adjusted by KShs 6,660,000 from the GAV account to KShs 2,484,547 that was reviewed and agreed to the Board of Survey Report and Cash Book Extract that had been reconciled to the bank certificate balance.  The Exchequer account balance of KShs 90,725 was cleared against the GAV balance. ►

Page 18 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Tasks Achieved  The Salary Advance account balance of KShs 151,886 remained the same and was supported by a Payroll IPPD By-Product schedule. The same was to be recovered from the respective officers.  Temporary imprest account balance of KShs 1,953,310 remained the same and was supported by a schedule. The same was to be recovered from the respective officers.  The General suspense account balance of KShs 6,660,000 was cleared against the PMG account.

Page 19 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Tasks Achieved  The GAV balance amounting to KShs 4,680,468 was adjusted by KShs 90,725 from the Exchequer account to KShs 4,589,743.  These are the balances to be carried forward to FY 2013/2014.

Page 20 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Tasks Achieved ► Development Vote  The PMG account balance of KShs. 32,215,473 remained the same and was reviewed and agreed to the Board of Survey Report and Cash Book Extract that had been reconciled to the bank certificate balance.  The Exchequer balance of KShs 63,749,058 was cleared against the GAV account.

Page 21 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Tasks Achieved  The GAV account balance of KShs 95,964,531 was adjusted by KShs 63,749,058 from the Exchequer account to KShs 32,215,473.  These are the balances to be carried forward to FY 2013/2014.  The MDA has shared the revised financial statements with the auditors for audit purposes, and even obtained concurrence by the auditor.

Page 22 RESOLUTION OF OPENING AND HISTORICAL BALANCES Resolution of opening and historical balances Recommendation requiring the Accounting Officer’s attention.  The MDA 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.  The MDA will be required to ensure that the revised accounts reflect proper classification of assets and liabilities.