Public Sector Accounting & Reporting Conference (ASIAN) 2015 in Malaysia (14 th September 2015)

Transcription

1 Public Sector Accounting & Reporting Conference (ASIAN) 2015 in Malaysia (14 th September 2015) Anula Harasgama Director General of State Accounts Sri Lanka

2 Transform to Accrual Accounting Key economic indicators Background of the Project Project timeline and current status Challenges faced/are facing Lessons Learned What could have done differently

3 Sri Lanka... Towards a upper Middle Income Economy

4 Population: 20.7 mn (2014)

5

6 Per Capita GDP: US$ 3,625 (2014)

7 GDP growth (2014): 7.4%

8 Inflation Annual Average (2014) 3.3%

9 Sectorial Composition in GDP by Industrial Origin 2014 Agriculture Industry Services 10.1 % 32.3 % 57.6 %

10 Background of the Project Benefits expected from Implementing Accrual Accounting - Summary Transparency and comparability Harmonization and fiscal surveillance Long term fiscal view Accountability Better decision making and improvement of assets and liabilities management Cost accounting and performance measurement Audit and internal control enhancement Reduction of administrative cost and burden Better recognition of risks, opportunities, cost awareness and efficiency Improved government finance statistical information

11 Financial Statements of the Government of Democratic Socialist Republic of Sri Lanka Government Organizations (820) Entities considered to the Financial Statements of Democratic Socialist Republic of Sri Lanka (199) Ministries (59) Depart ments (93) Special Spending Units (22) Entities not considered to the Financial Statements of Democratic Socialist Republic of Sri Lanka (621) District Secretariats (25) Public Enterprises (61) Statutory Boards (216) Provincial Councils (9) Local Authorities (335)

12 Background cont.. Current Financial Reporting Landscape in the Public Sector in Sri Lanka Financial Year : Calendar year Budgeting : Cash basis Accounting : Cash basis Financial Reporting - Published only budget and actual expenditure comparison report until 2004 Current financial reporting format was introduced in 2005 Financial information reporting system Computerized Integrated Government Accounting System(CIGAS)

13 Background cont Legal framework for financial reporting - Fiscal Management Responsibility Act The Minister shall cause to be released to the public, in respect of each financial year, a Final Budget Position Report, not later than five months from the end of the financial year (Section 13) The Final Budget Position Report in respect of a financial year shall contain: a) a statement of the estimated and actual expenditure for that year b) a statement of the estimated and actual revenue for that year c) a statement of the estimated and actual cash flows for that year (Section 14)

14 Background cont Presenation of Government Financial Statements Following reports are published annually at Reporting Entity s Level Appropriation Account (Comparison of budgetary provisions with actual expenditure) at National Level Statement of Financial Position Statement of Financial Performance Cash Flow Statement Statement of Changes in Net Assets/ Equity In addition, following are disclosed along with Government Financial Statements Acquisition of movable Assets Bank Guarantees and comforts Schedule of Public Investments Project wise (Financial Statement Chapter pdf)

15 Background cont Presenation of Government Financial Statements Consist of all financial transactions related to 199 reporting agencies (Ministries/ Departments ) A hybrid approach in financial reporting - modified cash accounting Revenue / Expenditure on cash basis Assets - financial assets - on accrual basis Equity contribution to SOEs On lending Advances to public officers Liabilities - on accrual basis Government borrowings Domestic & Foreign Deposits of third parties

16 Road Map for Conversion to Accrual Accounting Proposed Action 1. Perform a detailed gap analysis Time Period 2013/2014 Recognition, measurement & disclosure of Assets 2. Verify the completeness and the accuracy of the non moving- assets valuations (Land & Buildings) 2014/ Rectify the issues arising from the above valuations and implement the remedies to complete the process 2016/ Verify the accuracy and completeness of identification of moving non financial assets 2015/ Implementation of Proposed Action Draft the accounting policy on Property, Plant & Equipment including depreciation and impairment of fixed assets incorporating the requirements of SLPSAS 7 Property, Plant & Equipment, SLPSAS 4 Borrowing Costs

17 Road Map for Conversion to Accrual Accounting Proposed Action Time Period 7. Recognition and measurement of inventories Drafting the accounting policy on inventories assets incorporating the requirements of SLPSAS 9 - Inventories Streamline the process of identifying and recognition of receivables and prepayments Recognition, measurement & disclosure of Liabilities 10. Streamline the process of identifying, recognition of obligation and commitments Rectify any issues arising from recognition and measurement of commitments and obligations and verify the completeness of the process Streamline the process of identifying and recognition of payables and dues

18 Road Map for Conversion to Accrual Accounting Proposed Action Time Period Recognition, measurement & disclosure of Revenue and Expenses 13. Recognition, measurement & relevant disclosures of tax revenue and non tax revenue Recognition, measurement and relevant disclosures of expenses (commencing from recognizing commitments within the budgetary provisions) Rectify other issues relating to the presented financial statements 15. Reconsider the accounting implications of capital contributions to State Owned Enterprises Re- assessment of the measurement aspect of all recorded assets and liabilities System Development 17 System development for both in-house developed (CIGAS) and outsourced (ITMIS) systems enabling Accrual Accounting

19 Where we are now Recognition, measurement & disclosure of Assets Valuation of non moving assets (Land & Buildings) commenced in 2014 and around 60% completed Valuation of moving non financial assets commenced Assets registries updated System modifications completed enabling recording of Assets 2015 New coding system for Non financial assets was introduced in line with the GFS classifications

20 Where we are now cont Initiatives taken to adopt Accrual Accounting Reporting entities prepare Accrual Accounts in addition to Annual Appropriation Account on pilot basis - Circular issued in 2013 Capacity building programmes commenced in 2014 CASL in collaboration with CIPFA London to provide professional qualification to public sector Accountants ITMIS to be developed facilitating financial reporting on Cash to Accrual basis Localizing and adoption of IPSAS in the Sri Lankan Contest SLPSAS 1,2,3 Presentation of Financial Statements SLPSAS 4 Borrowing Costs

21 Sector Classification Readiness towards accrual accounting Preparation of financial statements on accrual basis Sector Law Enforcement & Natioanal Security (20) Public Services (60) Finance (22) Social Security (5) Real Economy (40) Environment (6) Human Resources (31) Infrastructure (15) Readiness Index 0% - 25% 26% - 50% 51% - 75% 76% - 100% Presented Not Presented Valuation of Non-movable fixed assets Submission of (Land& accual basis Building) financial statements From the entities which have submitted accrual basis financial statements Land & Building Movable fixed assets Inventories Receivables/ Loans and Prepayments obligations Payables/ Accruals

22 Challenges faced/are facing Changes in policy decisions / obtaining consent Lack of integrated chart of accounts Complexity in identification /measurement of assets and liabilities Recognition and measurement of contractual and legal obligations Resistance to disclose some financial information due to change in already published data Resistance to disclose controlled and administered items Lack of commitment / Technical knowledge / capacity issues

23 Challenges faced/are facing Adoption/taking ownership issues - Change Management Systems issues / readiness of financial information management system application Consolidation issues Knowledge sharing weaknesses/ employees are transferable No incentives for implementing - lack of support Difficulties in Implementation of two systems parallel

24 Lessons learned : What would have done differently Start with a proper Road Map Have a strong project management team Obtain professional support Phase out implementation process Encourage stakeholders direct participation Focus two way dialog in the system development process (prototype techniques)

25 Lessons learned : What would have done differently Revisit all processes and make necessary changes Conduct awareness programmes Conduct Knowledge sharing sessions with countries who implemented Accrual Accounting successfully Apply 80/20 Rule

26 Thank you