The government aims to introduce crucial reforms in accordance to the 2025 Budget Policy Statement (BPS) draft. Central to these reforms are the establishment of the Treasury Single Account (TSA) and the transition to accrual accounting, which are to streamline financial operations, optimize resource allocation, and provide a clearer picture of the government’s financial health.
Through the TSA initiative, the government seeks to consolidate its bank accounts, enabling more effective management of public funds. The implementation, that is in line with the Public Finance Management Act of 2012, is set to unfold over three years.
The rollout will occur in three distinct phases. The first phase, starting in the current fiscal year (FY2024/25), will involve the migration of all state organs, including constitutional institutions and independent offices classified as Schedule I National Government entities. This foundational step is crucial for creating a unified financial management system.
The second phase, scheduled for the fiscal year 2025/26, will focus on integrating County Governments into the TSA framework. This transition will be executed in close partnership with the Inter-governmental Budget and Economic Council, ensuring local governments receive the necessary support throughout the process.
The final phase, set for the fiscal year 2026/27, will encompass the migration of all remaining national government entities categorized under Schedules 3, 4, and 5.
In tandem with the TSA implementation, the government is also shifting from a cash basis to an accrual basis of accounting. In this form of accounting, revenues and expenses are recorded when they are earned or incurred, regardless of when cash is received or paid.
Basically, revenue is recognized when a service is provided or a product is delivered, while expenses are recorded when they are incurred, not when they are paid.
This change aims to enhance the management of public resources and improve financial and fiscal reporting. By adopting accrual accounting, the government will account for all assets and liabilities, providing a more accurate representation of its financial status.
The transition will comply with the International Public Sector Accounting Standards (IPSAS 33) and will follow a structured Road Map approved by the Implementation Steering Committee.
The transition period for this new accounting standard is set for three years as well. During the period, all government assets and liabilities will be recognized on the balance sheet.
In the first year, financial assets, including bank accounts, will be acknowledged, followed by the recognition of other assets, such as natural resources, in subsequent years. This will allow for a gradual adaptation to the new accounting standards, ensuring effective management of financial reporting and resource allocation.
The government has called on the public to share their comments and views on the draft of the 2025 Budget Policy Statement, the third of its kind under the current administration, with the National Treasury by 21st, January 2025.
