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Implementing IPSAs in Tanzania: Challenges and way forward
ByYona Killagane
Accountants’ Annual Conference 2016: APC Bunju Conference Centre Dar-es-salaam 1st – 3rd December 2016
Outline
oLesson of Public sector AccountingoWhy IPSAS financial statementsoFactors for implementationoChallenges for implementationoImpact on IPSAS 33 – First time adopteroWay forwardoConclusion
Tanzania RejoiceoIn 2015, IMF report (September 2016):
41 governments (21 percent) have completed the transition, 16 governments account on a modified accrual basis (8 percent), 28 governments (17 percent) are on a modified cash basis, and 114 governments (57 percent) remain on pure cash accounting.
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Lessons of Importance of Quality Public sector Accounting
oFinancial crisis in Greece:Nations with good accounting systems benefit greatly.
Nations with bad accounting systems suffer a wide range of perils and ultimately fail.
oThere are no sound fiscal policies without good government finance statistics based on good public accounting.
oThe importance of the reliability of government accounts has been illustrated by some dramatic episodes of inaccurate reporting of deficits and debts . . .“ Recent case of Mozambique
oIFAC Nexus 2 study 2015: The Accountancy Profession—A Global Value AddAccountantants contribute $575 per year to economiesEconomic Development in a country is associated with
Quality of accountants
Why IPSAS?o Provide useful information for decision makingo Discharge of the stewardship role – improved accountability
Efficient, effective and economy Resources used for intended purpose
o Public accountability of Governments/LGAo Resources more than cash
Other Assets & Liabilitieso Public sector entities/Government can face financial crisis – e.g.
Greece recently Mozambiqueo Systems integration – avoid memorandum reports/records
prone to manipulation PFA 2001 demanded comprehensive reports but most reports were off
the systems.o Greater transparency
Over the use of resources and liabilitieso Greater credibility
the same accounting standards thus provides comparability.o Harmonization of reports and statements across the country and
worldwide Comparability & GFS
Operational systems & Procedures
(sustainability)
Stakeholder & UserInvolvement
Realistic Time, Budget and Quality
Communication Training
Legal Regime Review
Key Factors for successful IPSAS Implementation
IPSASAdoption
Risk Management IT
Government Commitment
Timeline of implementation
2004
PFA 2001
2008 2012/13
NBAA pronounces IPSAS for Central Government
Pure Cash based
Cash basis IPSAS adoptedPart 1 later Part2
Accrual IPSAS adopted with transitional exemptions
2015
IPSAS 33Introduced effective 1/7/2017
TSSAP IFRS Accrual basis IPSAS with transitional exemptions
LGAs
CENTRAL GOVT
Challenge 1 – Legal system
oInconsistencies between NBAA Act, Public Finance Act, Public Audit Act, Local Government Finance ActoNBAA Act 1992, amended 1995
Deals with s.4:RegistrationTraining, examinations and publications.Regulate activities of accountants/auditorsStandards formulation was introduced from the 1995
amendments; Actors for compliance with standards not mentionedQuality of FS not mentioned
Challenge 1 – Legal system 2oPublic Finance Act 2001, amended 2010 & 2015
The law continued to mention cash basis - at that time to accrue revenue and expenditure was a serious offence.
LGAs brought under PFA wef 2010WEF June 2015 accrual IPSAS were mentioned with major drawback
making reference to Generally acceptable accounting principles in addition to IPSAS and Prescribing that the parliament can make accounting standards.
Accompanying regulations not amended No mention of NBAA
oLGFA, 1992 amended 2000 and Financial Memorandum S40. (1) (b) balance sheet showing details of the income and expenditure
of the authority and all its assets and liabilities. (2) All books of accounts and records of all local government
Minister responsible for LGAs has powers to vary forms of accountsoPublic Audit Act
No mention about IPSAS or basis simply refers to according to law –which one?
No mention about NBAA S.30 on types of financial statements inconsistent with IFRS & IPSAS
Legal Inconsistences
Legal Inconsistences (cont.)
Legal Inconsistences (cont.)
Challenge 2 – Government Support
oTechnical committee was set up at ACGEN but did not involve other stakeholdersNBAA; CAG; Users of financial statements;
Oversight bodies (PAC & LAAC), asset management; debt management, pensions & training institutions.
oGovernment Implementation Committee was not set up early enough. It came too late and essentially ineffective.oNo ministerial coordination committee to date at ministers’ level.oNo sufficient & specific budget allocation for the complete task during the whole of implementation period.
Challenge3 – Systems & Procedures
oIPSAS implementation was ably driven by ACGen from scratch - intuitive.oNo systems documentation existed prior to introduction of IPSASAccounting Manuals from central Govt or LGAsNo Uniform coding structuresIPSAS Guidelines and illustrative model not
thereoSome of the IFIMS modules not yet operational – to make truly accrual basedoIFMIS systems are not intergrated with other platforms.
Challenge 4 – Stakeholder appreciation
oThe main emphasis remained and still it is –get IPSAS financial statement out not user/preparer based.
oHow IPSAS FS would be useful to stakeholders was not given emphasis.oUser of the FS are unaware how IPSAS would be of use to them:TransparencyAccountability & Decision making
oIPSAS Fs are considered as year end exercise instead of being considered as management and stakeholders tool.
Challenge 5 - ConsolidationoConsolidation has emphasized only for whole Government from Top down that is not consistent with IPSASB Guideline Study 14, Transition to the Accrual Basis
oConsolidation has involved chief Accountants of public sector moving offices and camping at ACGen offices.oConsolidation should be from bottom up and considering the concept of control.oThere has been some effort of inter-transactions elimination but not efficient, effective and complete.
oEntity concept and control levels being ignored.
Basis of consolidation
Treasury
MinistriesIndependent Departments
Parastatals Agencies Departments/others
Entity A Entity B Entity X Entity Y Entity N Entity O
Bottom upapproach
Challenge 6 - Training
oToo much centered on technical staff of the implementation teamoDecision makers training not undertaken e.g. ministers, permanent secretaries, Heads of departments, agenciesoAccounting Support staff training lackingoTraining on using IPSAS FS to facilitate decision making has not been undertaken.oTraining institutions have not yet introduced IPSAS courses in their programs.
Challenge7 – IT related
oIT systemsOther PFM programs not integrated with IPSASProcurementDebt managementBudgetingRevenue managementAssets management
IFMIS modules not invokedReceivablesPayableInventoriesFixed assets registers
Challenge 8 – Stakeholders involvement
oIPSAS FS not reviewed :by Internal audit department prior to
submission to CAGAudit Committees not involved
oAudited IPSAS FS not easily available to the publicThanks to ACGen. Whole Government FS for
30th June 2014 and 30th June 2015 published but difficulty to access.
oQuarterly IPSAS FS not produced by MDAs, LGAs, and Parastatals – for managerial assessment of utilization of resources is must.
Challenge 9 - Common weaknessesoAccounting officer/Councillors’ reports are not there or not in compliance with TFRS1oFS coverage not indicated i.e. includes statements not called for under IPSAS 1oPPEoEmployee benefitsoGovernment grants – deferred income conceptoNo segmental reporting or not in compliance to IPSAS 18oRelated party transactionsoFinancial instrumentsoConsolidation
Some commentary - ThailandoThailand Minister on IPSAS Implementation:“We need more time. It will be done on a staggered
basis. We will try to do it as soon as everyone is ready. We need perfection of systems at the ministry, agency
and department levels,” Deputy Finance Minister Datuk Johari Abdul Ghani.
oAccording to Ross Campbell, the director of public sector at the Institute of Chartered Accountants for England and Wales said:most countries that have made the transition from cash
to accrual accounting took five to eight years for full implementation to take place.
“Corporate, The Edge Malaysia Weekly, on May 30 - June 5, 2016.”
IPSAS FS to support economic development
• There is an increasing trend on revenue , expenditure, and economic growth being witnessed in the economy over the last 10 years.
• The widening gap between recurrent and development expenditure is being addressed in order to reverse it.
• The development call for effective and efficient PFM which includes quality IPSAS financial statements
Source: NBS & BOT
Effect of IPSAS 33 First Time adoption on Tanzania IPSAS FSs
oA number of countries have been maintaining compliance with accrual basis IPSASBased on transition exemptions some running up to 5 years
e.g. IPSAS17 PPEoAll transition exemptions have been pulled into IPSAS 33
– time limited to 3 years.oStandard effective from 1st January 2017oThus Tanzania 1st truly IPSAS compliant FS will be those
for 2017/2018 and fully compliance for all entities would be 2019/2020.
oAs country follow effectiveness of IPSAS 33 i.e. continue with current regime to 2016/2017.Meantime prepare for full compliance in 2019/2020.
o IPSAS 33 is the last stage of the IPSAS adoption process o IPSAS 33 applies from date of adoptionoA road map is required to reach to the three years.
Effect of IPSAS 33 First Time adoption on Tanzania IPSAS FSs (cont.)
oEarly adoption is allowedoAreas most affected
PPEAccruals of revenueEmployee benefitsAccruals and payables modulesInventories
2019/20202017/2018 20182019
First Full Accrual IPSASComparativeDate of adoption
Accounting policies
Transitional IPSAS FS Transitional IPSAS FS IPSAS complaint FS
These tasks accomplishment will require extra coordination and resources
1st July2017
Fair presentation and compliance affected Compliance with IPSASs
Way forward
1. National Steering Committee be set up made up of Permanent Secretaries; CAG; ACGEN; IAGEN; and CEO-NBAA to be chaired by Chief Secretary to ensure compliance with IPSAS – only 3 years to go.
2. Common Charts of Accounts for IPSAS preparers be introduced
3. IFMIS must be integrated with other PFM programs.
4. Require every public sector to publish FS -websites
5. Use of IPSAS checklists - NBAA to publish by March every year
Way forward (cont.)
6. NBAA to call for some IPSAS FS for review every year on a random sample basis
7. Assets management – PPE and inventories8. NBAA introduce Certificate in IPSAS for first
degree and diploma holders. This be mandatory requirement to work in public sector
9. Public sector accounting and internal audit personnel attend regular IPSAS training
10.Public sector managerial staff including decision makers must attend IPSAS for decision making
Way forward (cont.)11.Legal regime review to support IPSAS FS12.NBAA law should hold responsible those responsible for
preparation of FS namely Governing Boards and Managements not merely Accountants
13.Laws relating to accounting and auditing be harmonized – NBAA being a regulator/promotor of A&A – they should be final authority
14.Wholly Government consolidated FS should be relooked on basis of basic concepts of consolidation. Every entity must prepare its own entity consolidated IPSAS FS.
15.FS audited by NAO be subject to scrutiny by expert team to be set up jointly by NAO and NBAA.
16.NBAA under its existing law should direct accountancy training institutions to introduce programs on IPSAS
Publish your FS
PAA, 2008
Public SectorManagement
Resource flow
OversightCAGParliament
Citizen
Pay taxes
Transparency & accountability
Effe
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of
reso
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s ent
rust
ed
Sust
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bilit
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serv
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pro
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IPSAS FS Attestation
ConclusionoPublic sector Accountants should play a leading role in economic development:By producing quality IPSAS FSTimelyUnderstandableAssist users to assess for each public sector
entity:TransparencyAccountabilityEffective utilization of resources
oUsers confidence is equally importantoSignificant achievements have been made in IPSAS implementation let us build up from there.
oIn 2015, 41 governments (21 percent) have completed the transition, 16 governments account on a modified accrual basis (8 percent), 28 governments (17 percent) are on a modified cash basis, and 114 governments (57 percent) remain on pure cash accounting (Figure 1). Figure 1. Map of Countries Accounting Bases for Annual Financial Statements in 2015