5.1 International Public Sector Accounting Standards Board (IPSASB)

Organization: Independent standard-setting board under International Federation of Accountants (IFAC)

Established: Late 1990s

Mission: Strengthen public financial management globally through high-quality accounting standards

Key Functions:

1. Developing IPSAS

• Issues accrual-based IPSAS (currently 50+ standards)
• Issues Cash Basis IPSAS
• Regular updates for new issues

2. Standard-Setting Process:

• Research and consultation
• Publish Exposure Drafts
• Public comment period (global input, including from Kenya’s PSASB)
• Finalize and issue standard

3. Adapting IFRS for Public Sector

• Takes relevant IFRS standards
• Modifies for public sector specifics
• Adds unique public sector standards

Example:

• IFRS 15 (Revenue from Contracts) → IPSAS 47 (Revenue)
• Covers taxes, grants, donations – concepts absent in private sector

4. Advocacy and Support

• Promotes IPSAS adoption worldwide
• Publishes implementation guidance
• Research on public sector financial management

Impact on Kenya:

• PSASB uses IPSAS as primary reference
• Kenya participates in IPSASB consultations
• IPSASB standards form basis of Kenya’s public sector accounting

Example of Engagement: In 2018, PSASB Kenya submitted comments on IPSASB’s proposed standards for leases and social benefits, ensuring Kenyan context was considered.

5.2 Public Sector Accounting Standards Board (PSASB) – Kenya

Legal Basis: Section 192-194, PFM Act 2012

Established: 2014 (Gazette Notice)

Composition:

• Chair: Nominated by National Treasury
• Members from: Auditor-General’s office, Controller of Budget, ICPAK, County governments, and financial experts

Legal Mandate (Section 194):

1. Set accounting and financial reporting standards
2. Prescribe formats for financial statements
3. Prescribe minimum standards for books of account
4. Consider international best practices
5. Promote transparency and constitutional values

Key Functions:

1. Standards Adoption

• Adopts IPSAS for Kenya
• Issues local implementation guidance
• Sets effective dates

Example: PSASB adopted Cash Basis IPSAS for FY 2014/15 onward for national and county governments.

2. Template Development

• Creates standardized financial statement templates
• Separate templates for:
  • National government ministries
  • County governments
  • State corporations
  • SAGAs (Semi-Autonomous Government Agencies)

3. Capacity Building

• Trains accounting officers
• Conducts workshops on new standards
• Issues circulars and guidance notes

Example Training: PSASB conducted nationwide training in 2024 on IPSAS 33 (First-Time Adoption of Accrual) in preparation for transition.

4. Monitoring Compliance

• Reviews financial statements
• Works with Auditor-General on compliance issues
• Recommends improvements

5. Localization and Flexibility

• Can allow different standards for different entity categories
• Example: Counties given simpler templates than national ministries
• Considers capacity constraints

Recent Achievements:

1. Accrual Transition Roadmap: Published detailed plan for 2024-2027 transition
2. Asset Recognition Guidelines: Issued guidance on valuing public infrastructure
3. Pending Bills Framework: Developed disclosure requirements
4. First-Time Adoption Guidance: IPSAS 33 implementation manual for Kenyan entities

Relationship with Other Bodies:

• National Treasury: Coordinates on implementation timelines
• Controller of Budget: Aligns budget reporting requirements
• Auditor-General: Ensures standards support audit requirements
• ICPAK: Collaborates on training
• IPSASB: Provides feedback on international standards

5.3 Institute of Certified Public Accountants of Kenya (ICPAK)

Legal Basis: Accountants Act (Cap 531 of the Laws of Kenya)

Established: 1978

Mandate: Develop and regulate the accountancy profession in Kenya

Key Roles in Public Sector Accounting:

1. Professional Regulation

• Registers and licenses CPAs
• Enforces Code of Ethics
• Disciplinary procedures for misconduct

Example: If a county accountant (ICPAK member) fraudulently prepares financial statements, ICPAK can:

• Investigate
• Suspend membership
• Recommend prosecution
• Impose fines

2. Participation in Standard-Setting

• ICPAK nominates member to PSASB
• Provides technical input on standards
• Reviews exposure drafts
• Represents practitioners’ views

3. Capacity Building

• Continuing Professional Development (CPD)
• Seminars on IPSAS updates
• Workshops on public sector reporting
• Online courses and resources

Example CPD: “IPSAS 39 – Employee Benefits: Implementation for County Governments” – 2-day workshop covering pension accounting

4. Advisory Role

• Advises Cabinet Secretary for National Treasury (statutory function)
• Comments on public finance policies
• Advocates for better accountability

Example: ICPAK has publicly supported accrual transition and recommended adequate budget allocation for implementation.

5. Ethics Enforcement

• Code of Ethics based on IFAC standards
• Covers integrity, objectivity, professional competence
• Critical for preventing financial misreporting

Relevant Ethical Principles:

• Integrity: Be straightforward and honest
• Objectivity: Don’t let bias compromise judgment
• Professional Competence: Maintain knowledge and skill
• Confidentiality: Respect confidential information
• Professional behavior: Comply with laws and regulations

Example: An accounting officer preparing financial statements must not:

• Hide pending bills to make performance look better (integrity violation)
• Inflate revenue figures under political pressure (objectivity violation)
• Submit statements without proper supporting documents (competence violation)

ICPAK can discipline members for such violations.

Impact on Public Sector:

• Most government accountants hold CPA (K) qualification
• ICPAK training ensures competent financial reporting
• Ethics framework reduces corruption risk
• Professional network facilitates knowledge sharing

5.4 Other Influential Bodies

1. International Federation of Accountants (IFAC)

• Global organization for accountancy profession
• ICPAK is a member
• Sets international standards for auditing, ethics
• Hosts IPSASB

2. Eastern and Southern Africa Association of Accountants-General (ESAAG)

• Regional body for government accountants
• Facilitates knowledge exchange
• Kenya actively participates

3. African Organization of Supreme Audit Institutions (AFROSAI)

• Regional body for audit offices
• Kenya’s Auditor-General is member
• Promotes audit standards

4. Office of the Auditor-General

• While not a standard-setter, influences reporting quality
• Audit findings drive improvements
• Works closely with PSASB

5.5 How These Bodies Work Together

Scenario: Introduction of New IPSAS Standard

Step 1: IPSASB develops new standard (e.g., IPSAS 50 – Natural resource)

Step 2: IPSASB publishes Exposure Draft for global comment

Step 3: PSASB Kenya reviews draft, consults ICPAK and practitioners

Step 4: ICPAK gathers input from members working in government

Step 5: PSASB submits Kenya’s comments to IPSASB

Step 6: IPSASB finalizes standard considering global feedback

Step 7: PSASB adopts standard for Kenya, sets effective date

Step 8: ICPAK develops training program on new standard

Step 9: PSASB and ICPAK jointly train government accountants

Step 10: Entities implement standard in financial statements

Step 11: Auditor-General audits compliance during annual audits

Step 12: PSASB monitors implementation and issues additional guidance if needed