Govt committed to new public sector accounting system

HARARE - Government has reaffirmed its commitment to the new accounting system for the public sector, the accrual based International Public Sector Accounting Standard (IPSAS), to enhance transparency and accountability.

Finance and Economic Planning deputy minister Terrence Mukupe, this week told more than 200 delegates at the ongoing stakeholders’ round table in the capital on Zimbabwe’s migration to accruals accounting system that the adoption of accruals accounting system from cash-based system puts government on the “same footing and platform as the private sector in terms of how assets are valued and accounted for and what exposures the government has in terms of liabilities to taxpayers”.

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 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.

“The new administration has committed to servant leadership to its people whereby we acknowledge that citizens have invested a great deal of their funds and resources in government in the form of taxes,” Mukupe said.

“It, therefore, follows that citizens have a right to know the cost and the value of services provided and true position and performance of national revenues and expenditures.

“There are a number of disadvantages of the current cash basis of accounting. The cash basis accounting system is based on inputs and outputs as against what was budgeted for by government. For instance, items such as liabilities, accrued interest or pension obligations, remain unaccounted for,” said Mukupe, adding that current assets and non-current assets are not being accounted for and not tracked.

“Tax revenues collected in one period could be followed by a high incidence of refunds in the following years. In light of this, neither the true financial position and performance of the government is transparent nor is the full cost of government services known.

“Against this background, as government, we are committed to the transition to accrual based accounting. Furthermore, accruals accounting will assist in full disclosure of liabilities and improve the overall management and planning as a result of more precise estimates of income and expenditure.

“Migration to accruals accounting will also enable us to make comparisons with other nations with regards to public sector financial statements as it will ensure uniformity in reporting. As a nation, our credibility and credit worthiness will be considered and assed on a higher platform,” said Mukupe.

President Emmerson Mnangagwa’s administration has already promulgated public finance management reforms which lays a foundation for the successful migration to accruals accounting.

Government has also realigned the pieces of legislation such as the Public Finance Management Act, the Public Debt Management Act, the Public Procurement and Disposal of Public Assets Act and relevant and enabling regulations in place as well as the New Charter of Account.

The Public Accountants and Auditors Board (PAAB), which regulates the accountancy profession in the country, is government’s implementing agent on the migration to accrual based accounting system.

PAAB 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 come up with regulations prescribing the application of reporting standards in the public sector.

PAAB chairman, Brian Njikizana said: “This is a journey that needs to be collaborated as government seeks to improve efficiency, transparency and accountability.

“As we go the route of IPSAS, we are not going to reinvent the wheel but we are going to learn from those who have successfully implemented the accruals based accounting system so that we chart a uniquely Zimbabwean journey.

“Accruals accounting system ensures effective and efficient management of government assets and liabilities.”

— The Financial Gazette

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.