Transcript 1.click here to or View the Keynote Presentation
ICAB-CAPA INTERNATIONAL CONFERENCE
on
STRENGTHENING BANGLADESH PUBLIC SECTOR ACCOUNTING AND AUDITING - GLOBAL REFORMS AND THE WAY FORWARD
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Keynote Paper on “STRENGTHENING PUBLIC SECTOR ACCOUNTING AND AUDITING IN BANGLADESH”
ANWARUDDIN CHOWDHURY
Council member & Past President ICAB Director CAPA Board 2
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ACCOUNTABILITY ISSUES
Agencies In Democratic System:
Legislative Branch
Executive Branch Judiciary
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LEGISLATIVE BODIES
Parliament
Public Accounts Committee
Public Undertakings Committee
Parliamentary Standing Committees
Comptroller and Auditor General
All the Law Courts
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EXECUTIVES
Prime Minister Ministers Secretaries of The Ministries Executives of The Government Agencies Accounts Offices
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ACCOUNTABLE FOR WHAT?
Accountability for Stewardship of Financial Resources
Accountability For Efficiency and Economy of Operations
Accountable for Faithful Compliance Adherence to Legal Requirements & Administrative Policies
Accountability for Results of Government Activities Reflected in Accomplishments and Effectiveness
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ACCOUNTABILITY FRAMEWORK
Parliament President PA Committee SAI (CAG) Audit Reports
Pertinent issues on Accountability: Audit objections so far disposed off by the PA Committee What actions so far taken on PA Committee's recommendations?
Have there been improvements ?
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LEGAL JURISDICTION OF PUBLIC SECTOR AUDIT
Government / Public Sector Organisations
Government Ministries Departments/Divisions/Directorates
Applicable Laws
Constitution Constitution Autonomous /Semi Autonomous Bodies CAG Addl. Functions Act.
Local Authorities Relevant laws State Owned Banks and DFIs CAG Addl. Functions Act.
Government Owned Entities Nationalised Industries Foreign Aided Projects Govt. Educational institutions/ Hospitals etc.
Audit authority/by
C AG CAG CAG CA firms CAG, CA Firms CAG, CA firms CAG Addl. Func /CA ‘94 CAG, CA Firms Nationalisation Order,1972 CAG Addl Func Act-74 Donor Constitution CAG, CA Firms CAG, CA firms CAG 16
LEGAL FRAMEWORK FOR PUBLIC SECTOR AUDIT
Bangladesh Constitution (1972) C & AG’s (Additional Functions) Act (1974) MOF Executive Order -CAG Estd. (1985) Nationalization Orders (1972) Denationalization Orders (1982) Relevant Enactments/Presidential Orders Companies Act (1994) Bank Companies Act (1991)
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CAG Office
OCAG ORGANOGRAM
Bangladesh Railway Finance Department Defence Finance Department Audit Directorates DCAG (Senior) Gr. II DCAG (A&R) Gr. III DCAG (Procedure) Gr. III ADG (Finance) Bangladesh Railway (BR) Gr. II JDG (Finance), (BR) Gr. III FA & CAO (East), BR Gr. III FA & CAO (West), BR Gr. III FA & CAO (Project), BR Gr. III Addl. FA & CAO BR-3 Gr. IV A & R ADG BR CGDF DCAG DG = = FA & CAO = FC = JDG SFC = = = = = = Accounts and Reports Additional Director General Bangladesh Railway Controller General Defence Finance Deputy Comptroller and Auditor General Director General Financial Adviser & Chief Accounts Officer Finance Controller Joint Director General Senior Finance Controller CGDF Gr. II SFC (Army) Gr. III SFC (Navy) Gr. III SFC (Air Force) Gr. III SFC (Defence Works) Gr. III SFC (Defence Purchase) Gr. III Training Academy DG Commercial Audit Directorate, Gr. III DG Local and Revenue Audit Directorate, Gr. III DG Post, Telegraph & Telephone Audit Directorate, Gr. III DG Works Audit Directorate Gr. III DG Railway Audit Directorate Gr. III DG Civil Audit Directorate Gr. III DG Foreign Aided Projects Audit Directorate, Gr. III DG Defence Audit Directorate, Gr. III DG Mission Audit Directorate, Gr. III DG Performance Audit Directorate, Gr. III DG Financial Management Academy, Gr. II 18
GOVT / PUBLIC SECTOR FINANCIAL ACCOUNANTABILITY
Stakeholders Govt. Agencies Constitution SAI - C&AG BD CAG FUNCT ACT-1974 Ownership Citizens
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Stakeholders Ownership
FINANCIAL ACCOUNANTABILITY OF LOCAL GOVERNMENT AUTHORITIES
Municipal Bodies Ordinances C&AG Auditor MLGRDC Management
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PUBLIC SECTOR PURVIEW
IPSASB Framework “Public sector refers to Governments, Regional Government, Local Governments & Related Government entities including Agencies, Boards, Commissions & Enterprises”
Bangladesh Public Sector Coverage
Public Sector Covers all Arena of Public Services Provided by the Following Agencies:
Government Ministries
Divisions /Directorates / Departments Government Sub-Ordinate Offices Local Government Authorities Autonomous/Semi-Autonomous Bodies Public Sector Corporations Foreign Aided Projects (SCOPE/SPEMP B) State Owned Enterprises (SOEs) State Owned Bank (SOB) Hospitals/Educational Institutions etc.
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IMPORTANCE OF FINANCIAL REPORTING SYSTEM FOR GOVERNMENTS / PUBLIC SECTOR
Essential for Increased Accountability and Transparency in Use of Public Funds Developing Public Sector Awareness of Govt. Spending Credibility of Financial Information for Public Trust Timeliness of Financial Information for Good Governance and Decisions Increased Credibility for Attracting FDI Assurance to Development Partners Improved Sovereign Rating Awards Efficient Financial Reporting System for Economic Development and Public Welfare.
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PUBLIC SECTOR AUDITOR’S ROLE:
Determining Oversight Facilitating Foresight Increasing Insight Conducting Objective Independent Financial Audit Conducting Performance/VMA Environment and IT Audit Enhancing Economy, Efficiency and Effectiveness of Resources Utilization of Audit Entities Meet Expectations or Development Partners/Fund Provider’s Ensuring Transparency of Financial Information Assuring Accountability of Management Decisions Combating Corruption, Misuse & Wastage
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PUBLIC SECTOR AUDIT FOCUS
Emphasis on Expenditure
Availability of Budget
Authorisation By Competent Authority
Payment Acknowledged By Right Person
Government Rules And Procedures Complied
Expenditures Properly Classified
Justification Of Expenditures
Emphasis on Cash Expenditures And Cash Income Not on Accruals (Cash Basis IPSAS)
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FINANCIAL STATEMENTS UNDER CASH/ACCRUAL REPORTING SYSTEMS Cash Basis of Accounting
Cash Flow Statement Statement of Accounting Policies and Explanatory Notes Accrual-basis Accounting
Statement of Financial Position Statement of Financial Performance Cash Flow Statement Statement of Changes in Net Assets/ Equity Accounting Policies and Explanatory Notes to FS
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ALTERNATIVE BASES OF ACCOUNTING Objectives Cash Basis Yes Cash Modifications to the Cash Basis Yes Modifications to the Accrual Basis Yes Accrual Yes Accrual Basis Compliance with legally adopted budgets Compliance with legal and contractual requirements, including spending limits.
Sources, allocation and uses of financial requirements.
Financing and cash requirements.
Financial performance in terms of service costs.
Relating to cash requirement and limits.
Cash and near cash requirement s and limits.
Cash resources Cash resources Ability to finance activities and to meet liabilities and commitments.
Financial condition and changes therein.
From cash Cash position Information not reported Cash and near cash resources.
Cash and near cash resources.
From cash and near cash Cash and near cash position Information not reported Cash and financial resources requirements and limits.
Cash and financial resources.
Cash and other financial requirements.
From financial resources Financial resources.
Limited information reported.
Cash and economic resources requirements and limits.
Cash and financial resources.
Cash and other financial requirements.
From economic resources.
Financial and economic resources.
Provides information necessary to assess performance.
Source: Government Financial Reporting, Study 11, issued by IFAC Public Sector Committee.
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GOVERNMENT PUBLIC SECTOR REPORTING - CASH / ACCRUAL ACCOUNTING Cash Flows Budget Cash Flows Actuals Revenues, Expenses Budget Revenues, Expenses Actuals Assets, Liabilities Estimate Assets, Liabilities Actuals Cash Accounting (SE) Accrual Accounting (DE)
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CASH-BASIS IPSAS: TRANSITION STEP TO ACCRUAL IPSAS (OCAG BANGLADESH)
Cash-Basis IPSAS (Transition Step) Accrual Accounting IPSAS 1-32 (Accrual DE) Current policies (Cash SE ) 28
ACCRUAL AND CASH ACCOUNTING : AN INTEGRATIVE APPORACH
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ROLE OF INTERNATIONAL STANDARDS SETTING BODIES
IFAC IPSAS Board = IPSAS IAAS Board = ISA IASB = IFRS INTOSAI = ISSAI (MOSAIC - INTOSAI / IFAC ) International Public Sector Accounting Standards IPSAS 2011 (Appendix I)
Cash Basis IPSAS-Financial Reporting Under Cash Basis Accg.
Accrual Basis IPSAS-32 Standards
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ROLE OF ACCOUNTANCY PROFESSION (ICAB)
Advocacy for Awareness Development
Collaboration with CAG & Development Partners
Impart Skills Development Training for Accrual Accounting,
Preparation Double Entry Financial Statements
Implementation of IPSAS, ISSAI, IFRS, ISA
Organize Seminars/Workshops on Relevant Issues
Provide Relevant Inputs to Standards Setters
Devise Sustainable Strategies for Future Development Public Sector Financial Management.
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STATUS OF IMPLEMENTATION OF ACCRUAL-BASED ACCOUNTING IN SOUTH ASIAN COUNTRIES INDIA
Central & Provincial Government – Cash Accounting
Local bodies moving to Accrual-Based Accounting
ICAI Technical Support for Accrual-Based Accounting Government Accounting Standards Advisory Board (GASAB) Developing Accrual-Based Accounting Standards
PAKISTAN Federal & Provincial Government – Cash Accounting Local Bodies Moving to Modified Cash Accounting New Accounting Model Implemented for Accrual Accounting CGA & AG cognizant of IPSAS Contd.
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STATUS OF IMPLEMENTATION OF ACCRUAL-BASED ACCOUNTING IN SOUTH ASIAN COUNTRIES BANGLADESH Government Agencies – Cash Accounting Moving to Cash IPSAS Local Bodies - Cash Accounting ICAB Committee on Government Accounting ICAB Members Cognizant of IPSAS SRI LANKA
Central Government & Provincial Councils – Cash Accounting
Local Bodies using Accrual-Based Accounting partially.
ICASL’s Developing Accrual-Based Accounting Standards.
NEPAL
Cash-Based Government Accounting System
IPSAS are Included in the Curriculum of ICAN Plans for Accrual-Based Accounting System
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NEED FOR REFORMS
Inducing Political Will/Commitment and Mindset Changes Encouraging Parliamentary Scrutiny Strengthening Public Sector Financial Management High Quality Financial Reporting & Credible Auditing Enhancing Accountability & Transparency in Govt. Decisions Increasing Public Credibility of Govt. Performance
Meeting Donor Expectations Capacity Building & Institutional Development (Training) Implementation of Accrual Accounting.
Implementation of Accounting/ Auditing Standards OCAG Organization Reforms Technology Orientation
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CHALLENGES
Political Will /Commitment of Government.
Mindset Changes in Civil Administration OCAG Capacity Building & Institutional Development Professional Skills Development Financial Resources Availability Support of Development Partners Implementation of Accrual Accounting System.
Preparation of FS on Double Entry Principles Implementation of IPSAS - Cash and Accrual Application of Auditing Standards - ISSAI/ ISA Valuation of Govt. Assets / Determination of Liabilities Effective Implementation of TA Projects ( SCOPE,SPEMP B )
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POLICY ISSUES AND RECOMMENDATION
Composition of High Powered Task Force Legislative Changes : Audit Act Enactment Effective Parliamentary Scrutiny Process Independent and Effective SAI (CAG) Separation of Accounting & Auditing Functions Capacity Building and Institutional Development of OCAG Adequate Appropriate Application of IPSAS & ISSAI Customization of International Standards - Adaptation Conversion to Accrual Accounting – Pilot Projects Timeframe Fixation for Double Entry & Accruals IPSAS Dedicated Training Program/ IT Orientation of OCAG Strategic Partnership Between SAI(CAG) & Profession (ICAB) Proactive Role by Accountancy Profession (ICAB)
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THE WAY FORWARD
Policy Decisions at Legislative Level Enabling Environment For Cooperation Formation of Task Force Capacity Building /Strengthening Institutions Development of Action Plan Main Directions -Responsibility - Time Frame Progress Towards Accrual Accounting Develop Standards, Methods and Practices
Synergize Strategic Partnership Between CAG and ICAB
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MESSAGE
Develop Awareness for Mindset Changes
Stimulate Political Will & Commitment for Implementation of Reforms Agenda
Establish Strategic Sense of Direction
Catalyze Leadership Decisions for Strengthening Public Sector Accounting and Auditing With Global Best Practices
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APPENDIX
INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) 2011 IPSAS 1—Presentation of Financial Statements
IPSAS 2—Cash Flow Statements IPSAS 3—Accounting Policies, Changes in Accounting Estimates and Errors IPSAS 4—The Effects of Changes in Foreign Exchange Rates IPSAS 5—Borrowing Costs IPSAS 6—Consolidated and Separate Financial Statements IPSAS 7—Investments in Associates IPSAS 8—Interests in Joint Ventures IPSAS 9—Revenue from Exchange Transactions IPSAS 10—Financial Reporting in Hyperinflationary Economies IPSAS 11—Construction Contracts IPSAS 12—Inventories IPSAS 13—Leases IPSAS 14—Events after the Reporting Date IPSAS 15—Financial Instruments: Disclosure and Presentation
Contd.
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IPSAS 16—Investment Property IPSAS 17—Property, Plant, and Equipment IPSAS 18—Segment Reporting IPSAS 19—Provisions, Contingent Liabilities and Contingent Assets IPSAS 20—Related Party Disclosures IPSAS 21—Impairment of Non-Cash-Generating Assets IPSAS 22—Disclosure of Financial Information in Government Sector IPSAS 23—Revenue from Non-Exchange Transactions (Taxes and Transfers) IPSAS 24—Presentation of Budget Information in Financial Statements IPSAS 25—Employee Benefits IPSAS 26—Impairment of Cash-Generating Assets IPSAS 27—Agriculture IPSAS 28—Financial Instruments: Presentation IPSAS 29—Financial Instruments: Recognition and Measurement IPSAS 30—Financial Instruments: Disclosures IPSAS 31—Intangible Assets IPSAS 32—Service Concession Arrangements - Guarantor 40
HAPPY PUBLIC SECTOR FINANCIAL MANAGEMENT LET’S GO AHEAD
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DEVISE SUSTAINABLE STRATEGIES FOR STRENGTHENING PUBLIC SECTOR ACCOUNTING AND AUDITING IN BANGLADESH
THANK YOU VERY MUCH INDEED
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