Best Practices in Annual Financial Reporting

8/2/2019 Best Practices in Annual Financial Reporting

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Annual Financial Reporting by

Governments - what is good

practice from sub-Saharan Africa?

Andy [email protected]

ICGFM Annual Conference, Miami, USA

April 2012


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Introduction


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Importance of financial reporting

Governments annual financial statements

& report of Auditor General key

accountability documents

Parliament sets the annual budget

Accounting Officers accountable to

Parliament (and citizens) for financialmanagement


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African Capacity Building

Foundation financial reporting

Identifies and collates existing good

practice - http://tinyurl.com/esaag2012

Based on a review of the financialstatements of 12 countries:

Botswana, Burkina Faso, Ghana, Kenya,

Mauritius, Namibia, Nigeria, Rwanda,Sierra Leone, South Africa, Tanzania and

Uganda
http://tinyurl.com/esaag2012http://tinyurl.com/esaag2012


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Expert panel

Expert panel to advice & review the study:

Reckford KampanjeAuditor General of

Malawi (and former Accountant General)

Maru Z Tjihumino Accountant General ofNamibia

Joseph Onumah - University of GhanaBusiness School, Legon

Michael Parry Independent Consultant.


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Common statements

Statement of Receipts & Payments

-comparison with the budget (Botswana, Mauritius,Nigeria, Rwanda, Sierra Leone, South Africa,

Tanzania & Uganda). May be splitrecurrent/capital

Statement of Financial Position -comparison to previous year (Botswana, Mauritius,

Nigeria, Rwanda, South Africa & Uganda)

Consolidated Cash Flow Statement -comparison to previous years figures (Botswana,

Mauritius, Nigeria, Sierra Leone, South Africa,

Tanzania and Uganda)


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Key Qualitative Characteristics

timeliness are they made public

promptly?

understandability are they clear andkey aspects and terms explained?

openness is the key financial

information made available?

consistency is the information

consistent from year to year and between

accounts?


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Timeliness


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Timeliness

Audited financial statements made public

promptly after the year end?

Presented to parliament within 12 monthsof the year end

Issued within nine months - so available

when the budget discussed by parliament(Burkina Faso, Mauritius, Tanzania,

Uganda & South Africa)


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Balance with other aspects

What is the use of out of date

information?

May conflict with the idea of consolidationor detailed disclosures

Needs draft financial statements

produced within five or six months

Audit completed in a further three or four

months


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Understandability


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Understandability

Covering letters from the Minister of

Finance and/or Secretary to the Treasury

(Mauritius, Nigeria, South Africa & Uganda)

Commentaries provided by the

Accountant & Auditor General (many

countries)

Explanation of key terms (Ghana,Namibia, Rwanda & South Africa)

Graphs & charts (Burkina Faso, Ghana,

Mauritius & South Africa)


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Understandability

Summary of last five years (Burkina Faso,

Ghana, Mauritius, South Africa)

Reference to the law & basis modified

cash (Ghana, Mauritius, Rwanda, South

Africa, Tanzania & Uganda)

Opinion of Auditor General (Botswana,

Mauritius, Nigeria, Sierra Leone, South

Africa, Tanzania & Uganda)


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Understandability

Listing of entities in the accounts

(Tanzania & types in Ghana & South

Africa)

Length - nearly 2,500 pages (Kenya),

only 30 pages - main report (Sierra Leone)


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Openness


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Variances and debt

Comparison of budget & actual with clear

explanations of significant variances

Government debt:- individual loans (Botswana),- details of interest rates (Mauritius)

- relevant exchange rates (Ghana)

Contingent liabilities (loan guarantees)- individual cases (Mauritius)- summary amounts (South Africa)


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Arrears, losses & waste

Revenue arrears (common)- analysed by MDA, with previous year

comparison (Mauritius, Tanzania &

Uganda)

Payment arrears - common definitions

not used (Ghana, Kenya, Sierra Leone,South Africa & Uganda)

Losses & wasteful expenditure- individual cases (Botswana)

- total for each MDA (Tanzania)


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Donor assistance

Financial assistance (loans and grants)

received from individual donors often

reported (Burkina Faso, Ghana, Mauritius,

Rwanda & Tanzania)- amounts in the local currency and the

currency of the donor (Rwanda)- project or non-cash aid

(Burkina Faso, Mauritius & Tanzania)


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Private benefits

Proceeds of privatisation (Rwanda, Sierra

Leone & Ghana)

Outstanding loans, advances & imprests(many countries)

Salaries etc for senior politicians &

officials; reference to asset declarations(five sub-Saharan Africa countries publish)


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Published on Internet

Burkina Faso

Mauritius

Nigeria

Sierra Leone

South Africa

Uganda


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Consistency


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Consistency

Consistent figures between different

statements (Nigeria and Sierra Leone)

Consistent format from year to year(Mauritius and Sierra Leone)

Reliable and free from material error


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Next steps?


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International good practice not

codified

Cash Basis IPSAS issued in January 2003

No government has adopted it (although

many have tried)

Problems with core requirement to:

consolidate all controlled entities

report payments by third parties, e.g. aid

in kind (but not from each country)


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Review of the cash IPSAS

to identify major technical issues in

implementation.. [modifications needed] in

light of those issues

Task Force reported to IPSAS Board June

2010, including recommendation to:

join with other international and nationalorganisations to develop guidance on what

may be encompassed under the modified

cash and modified accrual bases of

financial accounting


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Next steps?

Development of guidance on modified

cash basis by ESAAG?

Pilot trials in individual countries?

Revision of the Cash IPSAS

Research in South Asia


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Questions


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Consolidated accounts

Consolidation of:

government ministries,

departments and agencies

parastatal organisations

and

local governments?


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Structure of public sector accounts

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Timeliness of audited financial

statements

IPSAS recommends 6 months, but

strongly encourages three months

PEFA can score B with 18mths

Ensure audited accounts to

parliament within 9 months of yearend


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Cash flow statement

Required for companies - needed

for governments?

Confusion with Statement of

Payments and Receipts?

What additional information isbeing provided?


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Open Budget Partnership

Basic budget documents: Pre-Budget Statement Budget Summary Executives Budget Proposal Citizens Budget Enacted Budget

In-Year Reports Year-End Report


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Keep the accounts simple,

but yet be able to show howthe government has utilised

the resources under its

control. That should be thepurpose of public sector

accounts.

Teh Ben Chu,

former Deputy Accountant General, Malaysia 2008


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Andy Wynne

[email protected]

Questions

orcomments!

Documents

Best Practices in Annual Financial Reporting