ACCOUNTANT GENERAL’S OFFICE

IPSAS WORKSHOP FOR PUBLIC SECTOR ENTITIES

The Journey Towards Accrual Accounting in

Public Sector
Presented By:
Promise Ambrose
Ag Commissioner Accounts, Public Sector Accounts

HOTEL AFRICANA, KAMPALA | Tuesday 4th July 2019 | 2:30 pm

Structure of the Presentation 2

Introduction & Background

Global Perspective

The Move to Accrual Accounting

Conclusion
 Introduction 3

• GoU recognizes that Public Financial

Management (PFM) reforms are essential in
service delivery, stimulating economic
transformation and eradicating poverty.
• Public Sector Accounting is instrumental to this
transformation
• Part of Development journey since 1986 in
Three Stages
• Economic Reforms 1986-1996, Poverty
eradication Reforms 1997-2009 and Growth
and social economic transformation 2010-
todate
What is Public Sector Accounting? 4

• Process of collecting, identifying,

classifying, measuring, recording and
communicating public sector economic
information
• Summary of transactions occurring in public
sector entities and
• Focus on resource mobilisation and
allocation for efficient and effective service
delivery
 Why Public Sector Accounting? 5

Objectives:
• Provide information useful for making
economic, political and social decisions, and
demonstrating accountability and
stewardship;

• Provide information useful for evaluating

managerial and organizational performance.
Public Sector Accounting Standards 6

• Generally Accepted Accounting Practice (GAAP) –

accounting practices and procedures recognized by the Institute
of Certified Public Accountants of Uganda and approved by the
Accountant General, as appropriate for recording and reporting
the financial information of a vote.
(PFMA S. 3 Interpretation)
• Adoption of International Public Sector Accounting
Standards (IPSAS)
• Modified Cash Basis of Accounting:
• Compliance framework based Reporting
Public Sector Accounting Standards 7

• GoU seeks to enhance accounting and

reporting on GoU operations which is
supported by Accrual Accounting.

• IPSAS provides effective guidance and

compliance for accrual accounting within
the Public Sector.
 What is Public Sector?
Scope Components

• Any part of the economy that is • Central Government

owned, operated and controlled – Ministries 23
– Agencies 58
by the State
– Referral Hospitals 16
• any entities, established and – Universities 12
owned by central or local – Missions Abroad 36
government and any entity • Local Governments
established under any Act of – Municipal Councils 41
– Districts 134
Parliament, which requires the
• Public Corporations and State
presentation of the annual Enterprises 75
financial statements to the
Parliament.

8
 Cash Vs Accrual Accounting
Cash Accounting
• Revenue is reported on the
income statement only when
cash is received.
• Expenses are only recorded
when cash is paid out
• Simplicity and easier to apply
• May overstate financial
position/ performance
Accrual Accounting
• Revenue is accounted
for when it is earned.
Typically, revenue is recorded
before any money changes
hands.
• Expenses of goods and
services are recorded despite
no cash being paid out yet
for those expenses.
• Complex and difficult to apply
• More accurate and holistic
picture of financial standing
9
 Global Perspective 10

• A joint index released in 2018 by the

International Federation of Accountants
(IFAC) and CIPFA indicate that 25% of
governments around the world report on
accrual basis however, this is predicted to
jump to 65% within the next five years.
 Global Perspective 11

• Pioneer Newzealand 1992 presented its

Crown Financial Statements
• Australia 1999/2000 Accrual budgeting and
Financial Reporting
• United Kingdom 2003/2004 Central
Government
Global Perspective 12
THE MOVE TO ACCRUAL ACCOUNTING
GOVERNMENT OF UGANDA

13
 Stimuli for Accrual Accounting ?
14

• To establish what Government owes and

owns in a comprehensive manner.
• EAC convergence criteria EAMU Protocol no.3
• African Union – adopted IPSAS Accrual
• Fiscal Transparency Evaluation (IMF) 2017 –
compare budget and fiscal reports
• IMF East AFRITAC – gap analysis
• Various Diagnostic studies & oversight reports
– weaknesses in asset and liability
management & related reporting
 Benefits of Accrual Accounting
15

• Shows how Government financed its activities

and met its cash requirements;
• Allows users to evaluate Government’s ongoing
ability to finance its activities and to meet its
present liabilities and future commitments;
• Shows the financial position of Government
and changes in financial position;
• Provides Government with the opportunity to
demonstrate successful management of its
resources; and
• Is useful in evaluating Government’s
performance in terms of its service costs,
efficiency and accomplishments.
 Current Challenges 16

• Understating Non-Current Assets resulting from 100% depreciation of assets

in the year of purchase.
• Loan financed capital expenditure – 3.9% of GDP not reported
• Inability to link the huge GOU annual expenditure to the resultant assets
acquired. The write off of most GOU assets due to the cash basis of
accounting creates a false impression that GOU expenditure is going to
waste
 Current Challenges 17

• Different Accounting Standards: Difficult to

compare performance across entities and
affects consolidation of Government operations.
 Current Challenges 18

• Limited human resource capacity most

especially in LGs. A couple of LGs have failed to
submit accounts over the last years .
 Key success Factors 19

Policy, Legal and Regulatory Framework – Political Commitment, asset mgt policy, harmonisation,
provision for accrual accounting

Institutional Framework –roles and functions of accounts and audit to be enhanced

Accounting and Financial Reporting Framework – FRT, standards, practices to be streamlined,

alignment with fiscal reports

IT systems and application – completeness and data quality, accounting treatment

Human Resource Management – skills, competency, Curricula, manpower plan

Consolidation – public sector/general government, scope, system functionality, monitoring

project

Project and Organizational Change management

 Progress to Date 20

• Undertaken a Gap Analysis

– determine the nature of the required change; the
structure,
– speed, context and sequencing of change; and
– resources required for the implementation of the
migration process.
• Asset Management Department – Asset Register
• Non current asset management policy draft
• Fixed asset module
• Recognition of Non-Produced Assets e.g Land
• Revised Financial Reporting Template
• Issued Financial Reporting Guide
• Alignment of Chart of Accounts to GFS 2014
GOING FORWARD –
PLANNED ACTIVITIES

21
 Planned Strategies 22

• Phased approach beginning

2019/20
• Project approach 8 years
• Policy, Systems and Human
Resource Re-alignment
 CONCLUSION 23

• PFM systems are not an end in themselves. It’s

the effective use of the systems to improve
efficiency and enhance transparency
accountability that is most critical.
• Government is committed to improve fiduciary
assurance and strengthen PFM systems.
• the success of these reforms has been a result
of commitment from all of us.
 End of Presentation 24

A boat doesn’t go forward if each one is

rowing their own way!
Swahili Proverb

Discussion

Comments/Questions