ACC 181- GOVERNMENT

ACCOUNTING
BAF-BS I
TOPIC 1: INTRODUCTION TO
GOVT ACCOUNTING

School of Business, Mzumbe University.

 TOPIC LAYOUT
• Definition of Government Accounting
• Sources of Government Revenue
• Classification of Government Revenue
and Expenditure
• Doctrine of Accountability
• Systems of Accounting
• Similarities and Differences between
Commercial and Government Accounting
2
 Government Accounting
Defined
• Government Accounting is a system that has been established
by the Government for the purpose of preparing, maintaining
and retaining financial and related records of the Government
for accountability and administrative control.
• Its usefulness covers various purposes that include the control
of the Government money and other properties, provision of
management information, appraisal of financial soundness, etc.
• All these can be achieved through the evaluation of past
performance, evaluation of the current financial position, and
planning for the future action.
Government Accounting System
in Use in Tanzania
Integrated Financial Management System (IFMS).
The following laws govern it:
• The Constitution of the United Republic of Tanzania
(1977)
• The Public Finance Act (2001)
• The Public Procurement Act (2004/2011)
• The Public Finance & Procurement Regulations
• The Treasury Circulars.
 Requirement of the Laws and
Regulations
• Authority to collect revenue
The GoT shall levy no taxes unless the Parliament has passed an act to
allow such imposition of taxes.
• Exchequer Account and The Consolidated Fund
All revenue derived from various sources for the use of the United
Republic of Tanzania shall be deposited to the general fund known as
Consolidated Fund, and the Bank of Tanzania shall credit these
monies to an account known as Exchequer Account
• Authority to Spend Public Monies.
All expenditure charged to the CF must be within the authority of the
Constitution of the URT or by any other law, or by the Parliament
through the Appropriation/ Supplementary Acts
 Requirement of the Laws and
Regulations (Cont’d)
• Financial Control and Returns
Accounting Officers of the Government are required to prepare and
submit to the Controller and Auditor General for audit, various financial
statements eg
   (i) A statement of vote account
(ii) An Appropriation Account divided into Recurrent and
Development Vote Accounts.
   iii) A statement of Assets and Liabilities at the end of the year in respect
of loans issued by the Government.
     iv) A statement of Revenue Received during the year.
v) A statement of amounts outstanding at the end of the year in
respect of the loans issued by the Government
 Sources of Government
Revenue
The Government has got various sources of its revenue. These sources
can be divided into two main categories namely internal sources and
external sources
• Internal Sources
(i) Taxes: Main sources of Govt revenue. They are categorized into
Direct Taxes and Indirect Taxes. Direct taxes include Income tax,
Corporate tax, Rent tax, Property tax, Export tax, etc. Indirect taxes
sources are Value Added Tax (VAT), excise duties etc.
(ii) Internal Borrowing and Gifts.
(iii) Investments eg plant and equipments, transportation
(iv) Sell and Disposal of Assets
 Sources of Government
Revenue (Cont’d)
(v) Forfeitures : properties acquired by the GoT from illegal activities
(vi) Dividends
(vii) Miscellaneous Income: includes fines, fees, penalties, licenses,

External Sources
Sources of the Government revenue originating outside the country.
(i) Loans: the Government can borrow money from outside sources. The
sources can be the international organizations like the World Bank,
International Monetary Fund, African Development Bank etc
(ii) Grants and Gifts: these are always presents or rewards without
conditions received from various sources.
 Classification of Government
Revenue and Expenditure
• Government Revenue
1.  Recurrent Revenue
Revenues raised by the Government specifically for the purpose of meeting its day-to-
day operating expenses. Such expenses are like payment of salaries to employees,
administrative expenses, etc.
Main sources: taxes, fines, fees, rates, rents, etc.
   2   Development Revenue
Revenues collected by the Government for the purpose of meeting its long-term
development projects. These long –term projects may be construction of dams, roads
and bridges, building of schools and hospitals and the like.
Main sources: long tern loans, grants and aids.
 

 
Classification of Government Revenue
and Expenditure (Cont’d)
• Government Expenditure
1-Statutory expenditures
These are the expenditures that are paid directly from
the Consolidated fund without requiring prior annual
approval of the National Assembly. Have been
provided in the Constitution of the URT eg Payment of
salaries and allowances of the President of the URT,
state house upkeep costs, payment of salaries and
allowances of judges of high court, public debts etc
 Classification of Government Revenue
and Expenditure (Cont’d)
2- Recurrent/ Supply Expenditure
These are expenditures necessary to furnish the day-to-day operations
of the Government.eg salaries and wages for Government
employees, office expenses, traveling, maintenance and running
expenses of plants and vehicles and equipment, etc.

3- Development Expenditure
These are the expenditures relating to development projects of the
Government. Eg construction of roads and bridges, school building,
acquisition of plants, equipment and vehicles
 Doctrine of Accountability
• Accountability means answerability, that is the
obligation to:
i. Explain and justify ones actions or inactions.
 ii.Provide explanations and evidence required by an
independent investigator in order for him to
establish an opinion concerning the rightness of
ones actions.
 Essential Features of
Accountability
• There must be an external audit with a reasonable degree of
independence.
• A good internal control, which is feasible and operational within
the organization.
• Annual accounts which prescribe disclosure requirements
• Budgetary control that provide the basis for comparison of actual
performance and the prescribed targets.
• Parliamentary authorization of expenditure in the form of
estimates that offer a possible check on any excessive
expenditure.
•    Miscellaneous: these may include public opinion i.e. mass media,
trade unions, opposition parties etc.
 Systems of Accounting
1 Cash Basis System of Accounting
• Recognises transactions and events when cash is
received or paid
• Measures financial result of period as the difference
between cash received and cash paid
• Discloses information about sources of cash raised,
uses and application of funds and the balance at the
end of the period
• Cash includes cash in hand, cash in transit, cash on
deposit and near cash
 Systems of Accounting Cont’d-
Cash Basis
• Near cash consists of temporary
investments in marketable securities
• All other assets other than cash are not
recognised (in “pure” cash accounting)
• Non- cash transactions are not recognised
i.e unrealised gains or losses in assets,
purchase of goods and services or long term
assets on credit, incurrence of liabilities etc
 Systems of Accounting Cont’d-
Cash Basis
Benefits
• Typical cash based financial report is useful to a wide
range of stakeholders of government entity
• Principles underlying cash basis are easy to understand
and explain
• To the extent that cash flows are uniform over time, the
information may have high levels of reliability and
comparability
• Requires less skills to operate
• Costs of operating a cash based accounting system
may be lower- use few trained staff
 Systems of Accounting Cont’d-
Cash Basis
Limitations
• Demands of governments and external financial
statement users for more complex information have
grown. Users expect to get information on assets,
liabilities and impact of current consumption on the stock
of net assets held by government
• Cash accounting is not designed to meet these needs
• Cash accounting limits the ability of electorate to hold the
government accountable for its management of assets
and liabilities
 Systems of Accounting Cont’d-
Accrual Basis
• Accrual basis of accounting recognises transactions and
events when they occur rather than when cash is paid or
received
• The elements recognised are: revenues and expenses
hence result into assets and liabilities
• Assets include besides cash, accounts receivable,
accrued revenues and physical assets
• Liabilities include creditors, accrued charges
 Systems of Accounting Cont’d-
Accrual Basis
Benefits
• Accrual accounting provides users of information with a
wide range of information about such matters as the
resources controlled by the entity, cost of its operations,
financial position and changes in it, information on the
efficiency and effectiveness of operations
• Ability of electorate to hold the government accountable
for its management of assets and liabilities
For these reasons governments are now adopting accrual
basis of accounting. A framework in Tanzania has
already been prepared by the Office of the ACGEN
 Similarities and Differences between
Commercial and Government Accounting
Similarities
• Both systems are for preparing; maintaining and retaining
financial and related records of the organization for which
they are specifically designed to serve.
• Both systems use the books of accounts like cashbooks,
journals and ledgers as well as vouchers.
• Both systems consider the classification of data and use of
code numbers.
• Both systems recognize the use of the double entry
system of accounting.
• Proper determination of the financial position as at the end
of the financial period and of the results of the operations
for the year then ended is facilitated by these systems.
 Similarities- Commercial Vs
Government Accounting Cont’d
• Both systems recognize the essence of
preparing, maintaining and retaining
proper records, which are complete,
accurate, relevant and concise.
• Each day’s transactions are recorded in
the books in a chronological order and in a
systematic way being clearly supported by
vouchers.
 Commercial Vs Government
Accounting - Differences
Differentiating Factors
• Source of Income
• Basis of Accounting
• Stewardship and Accountability
• Auditing
• Final Accounts
• Sources of Accounting Norms
 OFFICERS AND ORGANS
INVOLVED IN GOVERNMENT
FINANCIAL REPORTING AND
ACCOUNTABILITY
 INTRODUCTION
• The Government accounting system, currently in
use in Tanzania is known as Integrated Financial
Management System (IFMS)
• The IFMS generally aims at ensuring
transparency, accountability and integrity in
overall operations of handling government
resources i.e ensuring that national resources
are handled efficiently, ethically and
professionally.
 INTRODUCTION Cont’d
Brief requirements of the System:
• Clear cut division of responsibilities and control
of authorities, that allows for internal check
• Disclosure of information regarding liquid cash
resources
• Disclosure of information of assets and liabilities
of the government
• Disclosure of information in respect of
government revenue and expenditure.
 INTRODUCTION Cont’d
• The system further requires that all moneys
raised or received by the government (except
revenue set aside by any other law, for special
purposes), shall be deposited to the to the credit
of an account designated as the exchequer
account maintained at the Bank of Tanzania
(BoT).
• The system has generally vested the task of
accounting for all government moneys on the
Treasury/ Ministry of Finance. See also the
attached structure of Govt Accounting.
 ACCOUNTING OFFICERS
• Any person appointed by the Treasury in writing
as such and charged with the duty of accounting
for any services in respect of which money has
been appropriated by the National Assembly
• Examples of Accounting Officers:
– Permanent Secretaries of Ministries;
– Regional Administrative Secretaries (RASs)
– Heads of Extra Ministerial Departments
 ACCOUNTING OFFICERS
Cont’d
Duties:
• To ensure that public funds entrusted to them
are properly safeguarded
• Funds are applied for purposes intended
• Expenditure does not exceed Ambit of Vote.
• Submitting estimates of expenditure to Treasury
• Submitting reports to the Treasury and /or
Controller and Auditor General
 ACCOUNTING OFFICERS
Cont’d
Powers of Accounting Officers include:
• May spent money as appropriated by the
Appropriation Act and not otherwise
• May issue warrant of funds to functional
officers indicating specified amounts for
various services etc.
 RECEIVERS OF REVENUE
(RRs)
• Any officer appointed in writing by the Treasury
and charged with the duty of collecting and
accounting for specified public moneys.

Duties of RRs
• Making sure that revenue item under his vote
are properly assessed, collected, deposited and
accounted for
 RECEIVERS OF REVENUE
(RRs) Cont’d

• Appointing collectors of revenue

• Answerable to the Public Accounts
Committee (PAC), regarding revenue
collection (Actual Vs Estimates).
CONTROLLER AND AUDITOR
GENERAL (CAG)
• Is a person appointed in writing as such by the
President to carry on the control of public fund
and audit thereon

Duties of the CAG (Sect 30- 31 ; PFA) :

• To satisfy himself that moneys appropriate by
National Assembly have been well spent
• Grants authority to withdraw money from the
Consolidated Fund for the Paymaster General
and Accountant General.
 CONTROLLER AND AUDITOR
GENERAL (CAG)
• To examine, inquire into and audit, at least once
in every year public accounts, as submitted to
him by Accounting Officers or Receivers
Revenue.
• To submit report to the Minister for Finance for
submission to the National Assembly
• To perform any other such duties as may be
required by law.
CONTROLLER AND AUDITOR
GENERAL (CAG)
Powers of the CAG:
• Not subject to directions of any person or
authority
• Has access to all accounting and related records
of the government
• May call any officer for explanation on public
accounts
• May without any fee, cause search to be made
in and extracts to be taken from any book,
document or report in any public office
CONTROLLER AND AUDITOR
GENERAL (CAG)
• In any case of irregular or dubious on
expenditure, he can recommend to PAC, POAC
& LAAC through the speaker, for the responsible
officer to be surcharged or penalized

Termination of service as CAG :

• Retirement (upon attaining 65 years or any age
as the law may specify)
• Due to infirmity of body or mind or any other
cause.
CONTROLLER AND AUDITOR
GENERAL (CAG)
• Misbehaviour as confirmed by Tribunal
appointed by the President.

Consequences of termination:

• Not to be appointed in any other public

post within the United Republic of
Tanzania.
 ACCOUNTANT GENERAL
(ACGEN)
• He/ she is the chief accountant of the
government appointed by the President.

Duties of the ACGEN

• Heads the Accountant General’s Division;
• Responsible with the formulation of broad
accounting policies and procedures regarding
disposition and utilization of public funds;
 ACCOUNTANT GENERAL
(ACGEN) Cont’d

• Management of the Consolidated Fund

where in all revenues are paid, and upon
grant of credit (authority) by the CAG,
withdraws from the fund are made to
Accounting Officers as Exchequer Issues;
• Management of Public Debt.
 PERMANENT SECRETARY-
MoF
• Also appointed by the Minister of Finance to be
the Paymaster General (PMG)
Duties of the PMG:
• Administrative head of the Ministry;
• Advisor to the Minister of Finance;
• Issue instructions to Accounting Officers;
• Prepares annual estimates
 MINISTER OF FINANCE
• The duties and responsibility of the
Minister of Finance are provided in Section
5 of the PFA and Regulation 2.4 of the
PFR
• The Minister is the Executive head of the
Ministry and also empowered to supervise,
control and direct all matters relating to the
financial affairs of the government.
 PUBLIC ACCOUNTS
COMMITTEE (PAC)
• This is a standing committee of the National
Assembly, set up under S. 47(1) of the
Constitution, and consisting of between 8 and 12
members of the National Assembly.

Functions of the PAC

• To examine the Audited statement of accounts
in the light of annual audit report of the CAG –
conformity with laid down regulations and
procedures
 PUBLIC ACCOUNTS
COMMITTEE (PAC) cont’d
• Making conclusions on the audited statements
and recommending to the speaker for any action if
necessary. e.g. change of the system of internal
control in order to avoid irregularities etc

Note: In carrying out these functions, the committee:

• is assisted in its deliberations by the CAG and officers
from Treasury.
• May call the Accounting Officers /Receivers of Revenue
and questions then on any aspect of their responsibilities.
 PUBLIC ACCOUNTS
COMMITTEE (PAC) cont’d
 Other standing committee of the National
Assembly involved in oversight of public
finances matter are:
– Local Authority Accounts Committee
(LAAC)- for local government authorities
– Parastatal Organisations Accounts
Committee (POAC)- for all parastatal
organizations.
 THE TREASURY
The treasury has the responsibility of control and
management of public finances. Some of its functions
/roles are as follows:

• Initiation of estimates of revenue and expenditure,

checking them and consolidating the proposed public
budget prior to its presentation to the parliament;
• Releasing the exchequer issues on quarterly /
monthly to the AOs;.
• To sanction Virement /reallocations;
 THE TREASURY Cont’d
• Appointing RRs and AOs.
• Issuing financial regulations and circulars as a
general guidance to RRs and AOs
• Posting of Internal Audit staff to various
Ministries, Independent Departments and
Regions to review and report on operations.
• Monitoring the progress of revenue collection
and expenditure.
 THE TREASURY Cont’d
• Officers of the Treasury also assist the Public
Accounts Committee (PAC), POAC & LAAC in
their examination and deliberations of the annual
report by the CAG.

• To take necessary actions on the

recommendations made by the PAC & LAAC.