Source: Government rolls out new accounting system | The Financial Gazette January 11, 2018
President Emmerson Mnangagwa
PRESIDENT Emmerson Mnangagwa’s administration has begun implementing the accrual-based International Public Sector Accounting Standards (IPSAS) on a phased basis, as it seeks to improve efficiency, transparency and accountability.
Zimbabwe’s central government, urban and rural local authorities and government entities have been using the traditional cash accounting since 1923 when the country was declared the Republic of Southern Rhodesia under Premier Charles Coghlan.
The cash-basis accounting system recognises transactions between government, local authorities and their clients only when the money is paid.
But the shift to the accrual-based IPSAS, which will recognise those transactions within the time period that they occur, is part of a wider public finance management (PFM) reform in the public sector.
The new accounting system is expected to contribute to better use of public funds. It will also allow better public service performance.
Speaking to The Financial Gazette last week, Admire Ndurunduru, the secretary of the Public Accountants and Auditors Board (PAAB), disclosed that a steering committee will be appointed before the end of this month to monitor the implementation of new accounting system by government.
PAAB, which regulates the accountancy profession in the country, reports to the Ministry of Finance and Economic Planning.
Section 44 (2) (a) of the revised Public Accountants and Auditors Act Chapter 27:12 gives PAAB a statutory mandate to prescribe accounting and auditing standards for use in Zimbabwe and coming up with regulations prescribing the application of reporting standards in the public sector.
Ndurunduru told The Financial Gazette that the steering committee will be chaired by one of the deputy chief secretaries in the Office of the President and Cabinet.
“It’s a journey. The process started at the beginning of this month. We will establish a country implementation taskforce or steering committee before the end of this month to monitor the implementation of the accrual-based accounting system. This committee will be chaired by one of the deputy chief secretaries in the Office of the President and Cabinet,” Ndurunduru said.
Zimbabwe is rolling out accrual-based IPSAS in public institutions to ensure effective and efficient management of government assets and liabilities.
The momentum for IPSAS is a global trend, with more countries around the world adopting accruals accounting practices, which is a critical platform for accountability and transparency in the utilisation of government resources.
Adopting a high-quality accrual-based accounting system is also expected to result in development of better management information systems, which should in turn contribute to better decision making and better use of public money.
Under the accruals accounting systems, a comprehensive view of government’s assets and liabilities and of its financial performance and cash flows for a given period is achieved.
It also reflects the long-term economic impact of political decisions in the financial statements. Cash accounting systems do not allow for this.
Continued use of the cash basis accounting system made it difficult for government to accurately assess performance and to detect deviation from agreed strategic plans.
This resulted in government failing to take early corrective action.
Adopting IPSAS will enable government to provide information that delivers real insight into public financial management and will enhance decision making.
The public sector plays a major role in society.
In most jurisdictions, including Zimbabwe, public expenditure is critical in spurring demand for goods and services in an economy, and public sector entities are substantial employers and major capital market participants.
“The adoption and implementation of the new regulation regarding public financial accounting and reporting by government and other public sector entities improves transparency and helps strengthen PFM and accountability in the public interest and is, therefore, a crucial foundation under the wider reforms in Zimbabwe,” Ndurunduru said.
“IPSAS, issued by the International Public Sector Accounting Standards Board (IPSASB), provides the most complete suite of accrual based international financial reporting standards developed specifically for the public sector.
“A strong system of PFM is essential for the implementation of public sector policies and achievement of intended outcomes, as it will enforce financial discipline, strategic allocation of resources, efficient service delivery and accountability.”
Ndurunduru added: “Strong PFM ensures that public money is safeguarded at all times and used appropriately, economically, efficiently and effectively. It (PFM) underpins sustainable decision making, delivery of services and achievement of outcomes in public sector entities, as all decisions and activities have direct or indirect financial consequences. A strong PFM system, in turn, is powered by the provision of high quality public financial information, which makes the public sector planning and control cycle tick.
“There has been (here in Zimbabwe) use of predominantly cash accounting with little or no grip on actual costs and revenues, nor on public assets and liabilities. There is no specific accounting framework or standard, let alone internationally accepted or specifically focussed on the public sector.”
Ndurunduru, however, admitted there were challenges in the implementation of the new accounting framework.
“Successful implementation depends on meeting certain pre-conditions such as the development of sufficient public sector accountancy capacity. The current project strengthening the capacity of public sector accountancy professionals in Zimbabwe is well underway to effectively build this capacity with the development and implementation of the capacity building roadmap,” said Ndurunduru.
Ndurunduru also indicated that the development will require harmonisation and review of existing legislation to ensure a legal basis for preparing accrual accounts.
He said: “The other critical precondition is formal adoption of IPSAS in the legal framework not yet incorporated into the existing Zimbabwe legal framework.”
COMMENTS