Conceptual Framework and Legal Basis
Public Sector Accounting (PSA) is the systematic process of recording, analyzing, classifying, summarizing, and reporting financial transactions of government entities. Unlike private sector accounting, which focuses on maximizing wealth for owners, PSA prioritizes stewardship, accountability, and compliance with statutory authorities. The constitutional mandate forms the bedrock of PSA. Every sovereign nation specifies in its supreme law how public funds are collected, kept, and spent.
Statutory frameworks further define these powers through specific pieces of legislation. In Kenya, for example, the Public Finance Management (PFM) Act of 2012 provides the operational framework. It establishes institutions, outlines budget timelines, and assigns distinct roles to public officers.
Key Objectives of Public Sector Accounting
  • Accountability: Demonstrating to taxpayers and oversight bodies that resources were managed legally and efficiently.
  • Stewardship: Ensuring public assets are safeguarded, properly maintained, and utilized for their intended socio-economic purposes.
  • Decision-Making: Providing reliable financial data to policymakers for resource allocation and economic planning.

Users of Public Financial Reports
  • The Legislature: Parliament or congress reviews statements to hold the executive branch accountable for budget execution.
  • Oversight Bodies: Supreme Audit Institutions (SAIs) use reports to verify compliance and financial propriety.
  • Development Partners: International lenders (e.g., World Bank, IMF) analyze financial health before issuing grants or loans.
  • The Public: Citizens assess whether tax revenues match the delivery of public goods and services.

 
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