ACCA Members: Africa Conference PUBLIC SECTOR FINANCE Internationally recognised Public Sector Accounting Standards are taking the market by storm with military precision-Zimbabwe military intervention type, by 2020
Th The f future o of P Public Se c Sect ctor Fi Finance ce i in Afri Africa-2020 2020 Persp specti tive IPS IPSAS AS im implem lemen entatio ion is is lif life e or dea eath for Afri Africa Don’t be left out Go & implement now
PRESENTER CREDENTIALS Dr R Muza 143 Chiremba Rd Queensdale. Harare Director CCG Systems & Senior Partner Ralph Bomment Greenacre & Reynolds Registered Public Auditors (Zimbabwe) Phone +263-4-571988 Mobile +263-775837757 He is a Fellow of ACCA (FCCA) Chartered Public Finance Accountant (CPFA); member of CIPFA (UK) CA(L); AZiCA; Chartered Public Accountant CPA (Canada) – FCCA; CPA; RPA(Z) Registered Public Auditor (Zimbabwe) – Ø Founding Partner Grant Thornton (Zimbabwe) Ø Trained at Price Waterhouse –PwC in Zimbabwe v Versatile in South Africa Local Authorities GRAP and IPSAS Standards v Implemented IPSAS and Accrual Accounting at City of Harare 2012 to 2014 v Implemented IPSAS and Accrual accounting at Chirundu Local Board 2016 to 2017. v Presenter in Public Finance Management Act and in practical Migration to full
2020 PERSPECTIVES • The sources of public sector finances will remain the same • What might change are the volumes in the mix • Taxes, fines, and for municipalities, property rates, water bills, service charges What will change? • Skills required of you to remain relevant and influential • The World is moving to IPSAS, posing significant threat to ACCA members who do not change skills sets • Brettonwoods Institutions expect IPSAS reporting framework for public sector • Some UN organs are on IPSAS • ACCA introduced a certificate in IPSAS, to equip members, make use of that.
TE TECH CHNOL OLOG OGY CH CHANGE GES-2020 2020 • The old small phone has memory much more than that of Apollo 11.(Edwin Aldrin, Neil Armstrong and colleague • Those who thought the Apollo 11 software had reached the best, please pray for them to resurrect and see what technology is doing today • Modern software as displayed here by SAGE and CASEWARE does wonders • CCG Systems is demonstrating how the professional accountants skills beyond 2020 • Robots will prepare most of your reports • ROBOTS can prepare presentations to Board or can present at your Board Are you maintaining relevance beyond 2020? • No, take the initiative to lead in robotics • Robots can give you information about your debtors, creditors, bank balances etc • So go back and drive change in order to stay relevant
LE LEVERAGING GING ON N TECHNO HNOLOGY • Africa Governments can cut down on favouritism linked with corruption in payment cycle • New ERP select suppliers for you • ERPS queu payments in the priority fashion authorised by authorities • Reduce human involvement in decision execution • Let technology increase transparency in financial management
WH WHAT T IS COM OMING? G? • Uniform reports for public sector- IPSAS • A business approach to financial reporting in public sector • Automated preparation of reports in the format users want them • Automatic dispatch of reports to management without human involvement • Automated preparation of financial statements eg Caseware Financials • Corruption in payment of creditors can be reduced through use of ERP • Rapid financial reporting, financial information up to date at all times • Focus on analysis of reports as opposed to preparation of financial statements • Example of software doing this, SAGE EVOLUTION, just across from our booth downstairs
OBJECTI TIVE OF IPSAS WHO IN AFRICA IS NOT TALKING TRANSPARENCY TODAY? • To prescribe the manner in which general purpose financial statements should be presented to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. • Sets out overall considerations for the presentation of financial statements, guidance for their structure, and minimum requirements for the content of financial statements prepared under the accrual basis of accounting.
SC SCOPE OPE • Applied to all general purpose financial statements prepared and presented under the accrual basis of accounting in accordance with IPSASs. • Does not apply to condensed interim financial information • Applies to all public sector entities other than Government Business Enterprises (GBEs)/SOES.
TH THE E PAST T PI PITF TFALLS What is this hell, that I hear IMF says our accounts are misleading or are not transparent? Sir, you know we do not record transactions once our budget line item is exhausted and we cannot virement, per our accounting manual. Correct, so, what is the problem with that? IMF must stop this discrimination against African countries? What does ACCA say? The ACCA qualified audit partner said all obligations must be recorded and included in our financial statements so that we are not hiding anything? MINISTER He said that is what IPSAS say.
MODIFIED CASH BASIS OR FULL LL ACCRUAL? L? MODIFIED CASH BASIS Implies that estimates of obligations are brought to book at year end If your Public sector is unable to settle its obligations as they fall due don’t waste time and money trying modified cash basis FULL ACCRUAL Public sector in Africa does not have money to clear their obligations as they fall due. Accordingly, go for full accrual accounting. Under Full accrual it is like how you are maintaining the books of accounts for private sector. Introduce: creditors, provisions, debtors, fixed assets into your financial reporting. Under the current practice fixed assets were expensed in public sector thereby producing misleading financial statements. In short, you should begin to produce a balance sheet /statement of financial position for your public sector entity. Your budget will also have to take into account accrual issues into account. Brettonwoods institutions have been sceptical about misleading financial statements from many countries-lack of transparency. What is lack of transparency?
WHA WHAT T AFRIC ICA UNION ION CLAIM IMS WE WERE THE THE IM IMPACTS OF OF IP IPSAS
STRUCTURE OF STATEMENT OF FINANCIAL POSITION UNDER AN IPSAS FRAMEWORK Revenue (Local Authority) Nature Current Prior year Assertions Migration to year addressed IPSAS Procedures Revenue from exchange transactions Refer to note # Refer to note # Service charges xx xx Interest received from customers late xx xx payments Rental income xx xx Other income xx xx Interest received xx xx Total revenue from exchange transactions xx xx Revenue from non-exchange transactions Property rates xx xx Any other taxes and fines xx xx Transfer revenues Government grants and subsidies xx xx TOTAL REVENUES xx xx
STRUCTURE OF STATEMENT OF FINANCIAL POSITION UNDER AN IPSAS FRAMEWORK Expenditure (Local Authority) Nature Current year Prior year Assertions addressed Migration to IPSAS Procedures Expenses Refer to note # Refer to note # Administration xx xx Audit fees xx xx Bulk purchases xx xx Contracted services xx xx Debt impairment xx xx Depreciation and amortisation xx xx General expenses xx xx Finance costs xx xx Impairment loss xx xx Personnel costs xx xx Remuneration of councillors xx xx Repairs and maintenance xx xx Total costs xx xx Operating surplus Loss on disposal of assets xx xx Fair value adjustments xx xx Surplus for the year xx xx
SAMPLE STATEMENT OF FINANCIAL POSITION DEC 20X2 (Assets side for purposes of slide size) 20X2 20X1 ASSETS Current assets Cash and cash equivalents X X Receivables X X Inventories X X Prepayments X X Other current assets X X X X Non current assets Receivables-long term portion X X Investments in associates X X Other financial assets X X Infrastructure, plant and equipment X X Land and buildings X X Intangible assets X X Other non-financial assets X X X X Total assets X X
STATEMENT OF FINANCIAL POSITION (Cont) 20X2 20X1 LIABILITIES Current liabilities Payables X X Short term borrowings X X Current portion of long term borrowings X X Short term provisions X X Employee benefits X X X X Non current liabilities Payables X X Long term borrowings X X Long term provisions X X Employee benefits X X X X Total liabilities X X Net assets X X NET ASSETS /EQUITY Capital contributed by Other government entities X X Reserves X X Accumulated surplus/(deficit) X X
STATEMENT OF FINANCIAL PERFORMANCE –CENTRAL GOVERNMENT 20X2 20X1 Revenue Taxes X X Fees, penalties and licences X X Transfers from other Government entities X X Other revenue X X Total revenue X X Expenses General public services X X Defence X X Public order and safety X X Education X X Health X X Social protection X X Housing and community amenities X X Recreational, cultural. And religion X X Other expenses X X Finance costs X X Total expenses X X Share of surplus of associates (if any) X X Surplus /(deficit) for the period X X
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