1

Topic Two: The Legal Framework

Governing The Financial Accounting
IBRAHIM YUSUF

Reporting In The Public Sector

Introduction 2

 Public sector accounting in government departments is a major function

that incorporates the accounting and recording of the money received by
the government and also the expenditure from the government funds in
order to fulfill public duties. The government is the custodian of public
money and hence various laws govern the accounting in public sector.
 Public sector accounting governed by the various acts and statutes is done
by various accounting officers appointed under the Public Finance Act and
the Constitution of the United Republic of Tanzania.
Nature and scope of public sector financial 3
discipline
 The nature and scope of public sector financial discipline in public
enterprises depends largely on the scope and objectives of setting them up.
Public finance is a study of how the public sector enterprises and bodies
like the government (regional and national) raises finance in the form of
taxes and borrowings from the public and incurs public expenditure with a
view to achieving its social and economic objectives.
 The main aim of public sector enterprises and bodies like the government:
regional and national, includes building and maintaining public welfare
structures and schemes. These are carried out by mainly employing public
money collected through taxes. Hence the main aim of public sector
financial discipline must be to ensure that the public money is
safeguarded.
The Nature and Scope of Public Sector
4
Financial Discipline Ideally Include The
Following
(a) To make sure that public money is used efficiently and effectively in
accordance within statutory regulations for the benefit of public.
(b) To aid the function of stewardship. This includes preparing accounting
records in a manner that ensures transparency and accountability towards
the stakeholders which mainly includes the general public.
(c) To assist the reporting function and appraisal of management efficiency.
(d) To create financial information which will aid in policy formulation.
(e) To facilitate in proper audit of the accounts in order to add credibility to
the proper use of public money.
(f) To provide a clear picture of the loans, liabilities and assets of the
government and the ability to fulfill long term goals.
(g) Facilitate comparison of budgeted with actual in order to appraise the
performance of the government o the use of public money.
 5

 To ensure economic and financial stability in an economy. Economic stability

is the absence of excessive fluctuations in the economy, whereas financial
stability can be achieved by efficient allocation of resources by appropriate
policy making. For example, an increase in direct taxes will reduce the money
available with the people to purchase goods and services and will, in turn,
help to reduce inflation. On the other hand, increase in public expenditure
during depression helps to increase demand for goods and services, which is
otherwise very low during periods of depression.
 To ensure optimum utilisation of scarce resources by adopting suitable
monetary policies.
 To tackle unemployment - for example, the government sets up fiscal policies
which increase employment opportunities.
 To provide infrastructure like railways, road-ways, improved transportation
etc. This kind of capital expenditure, in turn ensures increase in capital
formation, which brings about long-term benefits to the public in general.
Legal Framework Governing The Public
6
Sector Financial Accounting And Reporting

 Financial reporting in public sector in Tanzania is governed

by the Constitution, legislations, national accounting
standards and the International Public Sector accounting
standards (IPSAS).These standards have been issued by the
IASB and are based on the IFRS for use by public sector.
The legal framework for public sector accounting mainly
includes the following
 7

 The Constitution – the constitution mainly lays down the foundation for accounting, the books
of account to be kept and the authorisation for revenue and expenditure of the federal, state
and local governments.
 The Public Finance Act, 2001 - this act shall govern the entire operations carried out by the
Treasury under the supervision and authority of the accountant general and the controller and
auditor general.
 The Income Tax Act, 2006.
 The Public Procurement Act 2011 – It applies to the extent public finance is used for
procurement.
 National standards- there are standards set and applicable within a certain jurisdiction. They
differ between one country and another. In Tanzania we have TFRSs, TAS, TFASs which were
all withdrawn from use since 2004 (see NBAA Technical Pronouncement No.1 of 2009)
 Standing orders
 Staff circulars
 Accounting circulars
 Various other state legislations and acts that support the purpose of protecting public interest
and the stewardship function:
International Public Sector Accounting Standards (IPSAS)
8

 International Public Sector Accounting Standards (IPSAS) are a set of

accounting standards issued by the IPSAS Board (IPSAS Board) for
use by public sector entities. IPSAS are broadly based on International
Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB). In this regards public sector
entities include national governments, regional governments, local
government and related government entities such as agencies boards,
commission and enterprise.
 While the IPSAS are IAS / IFRS changed to meet the requirements of
public sector entities, the IPSAS state that where there is no currently
applicable IPSAS, the IAS / IFRS should be looked to for guidance on
disclosure on accounting events.
 The Government has adopted both national and international
accounting standards for the purpose of facilitating comparability of
financial statements prepared, and is accountable to users and the
Code of ethics for public servants in Tanzania
9

 In order for the public service to be efficient and respected, public

servants must behave and conduct themselves in a manner as stipulated
below
(a) Respect all human rights and be courteous;
(b) Perform diligently and in a disciplined manner;
(c) Promote team work;
(d) Pursue excellence in service;
(e) Exercise responsibility and good stewardship;
(f) Promote transparency and accountability;
(g) Discharge duties with integrity, and
(h) Maintain political neutrality.
Main Legislative Requirements and Standards
Governing The Form/Contents Of Public Sector
10
Accounting
 The United Republic of Tanzania has developed various acts and statutes
that govern the form and contents of public sector accounting. The
financial discipline includes the practices adopted by the Government
such as rules and regulations which must be adhered to in order to
enhance revenue collections and expenditure. The rules and regulations
are grouped into laws passed by the National Assembly, financial orders
and Treasury accounting circulars, standing orders, staff circulars and
internal circulars.
 11

 Laws passed by the national assembly

 Accounting operation in the public sector is governed by laws passed by the National Assembly;
thus no individual or authority has the capacity to contravene the requirement of the laws.
Government accounting has to comply with only those laws and with provisions relating to or
affecting the collection and expenditure of public funds. Some of these include the Constitution
of United Republic of Tanzania of 1977(RE), the Public Finance Act of 2001 RE 2004, the
Pension Act, the Severance Act, the Appropriation Act, the Finance Act, the Public Procurement
Act etc.
 The Public Finance Act
 The Public Finance Act, the related legislations and by laws passed from time to time and the
Appropriation act are the main legislatives that govern the form and contents of the public sector
accounts. The Public Finance Act lays down the foundation of who will prepare the accounts and
the frequency of preparation of the accounts to be submitted to the National assembly. The
Public Finance Act is one such act that has been passed to provide for effective management,
control and regulation of public money collection and use. It lays down various rules for
accounting the money collected and recording expenses made under authority of parliament. It
basically governs the operations of treasury under the accountant general and the controller and
auditor general. It lays down requirements related to nature and control of financial records like
payments, receipts and vouching, treasury cash books, need for audit trail etc.
 12

 Financial orders and treasury accounting circulars

 These are a set of instructions and procedures issued to the public entity in
control of public funds by Treasury for the purpose of providing guidance
on how to collect, spend and manage the public funds.
 Internal circulars
 These are issued for the purpose of enhancing the overall control of public
resources caused by the nature, location and complexity in areas where the
Treasury circular may prove to be inadequate. Accounting officers are
allowed to give instructions which they deem appropriate for proper
execution and control of Government activities under their responsibility
and control.
The various hierarchy levels and ranks accorded to
officers at these levels 13

 The financial management hierarchy intends to explain the functional

relationship between officers or departments of the Government as far as
performance is concerned. There are three levels: operational, tactical and
strategic. There are different officers working on each of these levels.
These are listed and identified as below.
(a) Operational level
 The operational level officers will generally work at the local level and
collect revenue and issue warrants locally.
 This level consists of the following:
(i) warrant holders
(ii) sub-warrant holders
(iii) collector of revenue
(iv) sub collector of revenue
The various hierarchy levels and ranks accorded to
officers at these levels 14

 Tactical level
 This level consists of the following:
(i) accounting officers
(ii) receivers of revenue
 At the tactical level the accounting officers and receivers of revenue will
be responsible for keeping an account of the tax money received and also
record the amount utilized in various public duties of the government
The various hierarchy levels and ranks accorded to
officers at these levels 15

 Strategic level
 These are the central government level officers who are the main decision
makers and main custodians of the Consolidated Fund account and public
money. They decide on the revenue requirements of the public sector /
government to be raised from levying taxes. These are to be used for
various development projects.
 This level consists of the following:
(i) the President of the United Republic of Tanzania
(ii) The Parliament
(iii) The Treasury
(iv) Central establishment/The Public Service Management
16
Roles and Responsibilities of Central and Local Government Officers Shown In
Government Financial Management Hierarchy components 17

 The various levels of the governmental financial management hierarchy

are entrusted with many different tasks. These tasks are decided according
to the level of hierarchy and the responsibilities handled by them.
Although the strategic level management is responsible for the overall
policy formulation and direction, the lower levels are responsible for
monitoring and implementing these policy decisions. Following are the
duties and responsibilities starting from the strategic level
The Strategic Level 18

 This is the top management level for the public sector’s financial
management
 The position is mostly held by politicians and other highly ranked
strategic positions including economists and administrators
 They are the policy makers; they formulate the strategies, mission and
goals of the nation.
 This level comprises of the following officials
i. President of the URT
ii. The Parliament
iii. The Treasury
iv. The Public Service Management
 19
Strategic level management
(a) The President
(i) The President is an authority for the establishment or abolition of the
Government offices and the appointment of certain officers into the public
services (Article 36 of the Constitution of URT – United Republic of Tanzania).
(ii) President shall direct the concerned authorities to prepare and submit to the
national assembly the estimates of revenue and expenditure for each year.
(iii) The President signs bills to give effect to the Acts like the Finance Act, the
Appropriation act etc.
(iv) The President can authorize the withdrawal of funds from the consolidated
fund if the Appropriation Act pertaining to a particular year has not come into
operation to authorize expenditure has not been in force by the commencement
of the year.
(v) The President receives the Audit Report from the Controller and Auditor
General (CAG) and presents it to the Parliament as per Article 143(4) of the
Constitution of URT and Section 27(2) of the Exchequer and Audit Ordinance.
Strategic level management… 20

(b) The national assembly

(i) The National Assembly has the role of authorizing and controlling finance for
public expenditure as per the Constitution of URT and the Public Finance Act of
2001 as amended in 2004
(ii) Approval of the appropriation bill for withdrawal of money from the
consolidated fund, where after being signed by the President, it becomes the
Appropriation Act.
(iii) Approval of Finance bill that controls revenue from taxes and other non-tax
revenue before being signed by the President, which will then be the Finance Act.
(iv) Approval of the write off of all Government losses and investigate all excess
unauthorized expenditure.
(v) Deliberation on the report of Controller and Auditor General (CAG) and
Annual Reports prepared by Accounting Officers.
(vi) Direct it’s standing committees to receive and discuss the accountability
reports and take further action.
Parliamentary Standing 21

Committees
The Parliament comprises of four main standing committees which are
responsible over the proper management and control of the public finance.
 These committees include
a. The Finance and Economic committee
b. Public Accounts Committee (PAC)
c. Local Authority Accounts Committee (LAAC)
d. The Parastatals Organization Accounts Committee (POAC)
Parliamentary Standing 22

Committees
 The Finance and Economic Committee
 It is responsible for the scrutiny of the estimates of the expenditures. They
are first scrutinized by Treasury and then submitted to this committee for
approval and amended if necessary.
 The committee may call upon the attention of Accounting officers or any
other officer concerned with budget estimates to expalin and/or defend
their estimates
 The committee may in the process of budgeting propose amendments,
adding or reducing the amounts that were previously included by
Accounting officers
Parliamentary Standing 23

Committees
 Public Accounts Committee (PAC)
 Responsible for the examination of accounts presented by the Central
Government’s Accounting officers
 Local Authority Accounts Committee (LAAC)
 Responsible for examination of accounts presented by Local Authority
Accounting Officers.
 Parastatals Organization Accounts Committee (POAC)
 Responsible for accounts presented by the Chief Executives of Parastatal
organizations
Strategic Level Management 24

 The Treasury
 The treasury means minister responsible for finance and includes all other
officers appointed by the President and by the Minister to exercise certain
duties and powers in management of public finance.
Strategic level management… 25

(c) The Treasury

(i) Preparing and issuing Financial Regulations and Treasury Circulars
(ii) Supervising the accounts of Federal Government, Ministries and Extra-
Ministerial Departments.
(iii) Providing authority to various Government Institutions to open, maintain
and operate the bank account.
(iv) Appointing accounting officers and receiver of revenue
(v) Managing the exchequer account
(vi) Formulating accounting principles, policies and control techniques on the
day to day administration and control of public funds and other property.
(vii) Designing and approving necessary accounting documents
(viii) Ensuring all revenue is monitored and accounted for
(ix) Servicing public loans and debt.
(x) Managing Government investments
Strategic Level Management… 26

 The Public Service Management

 Previously known as Central Establishment
 The duties and responsibilities of the Public service management over the
proper management and control of the public finance include the
following:
I. Approve all public sector establishments’ personnel within URT and
assigned schemes of services
II. Design and approves salaries and salary scale to various public sector
posts in civil services and other public sector entities and agencies
III. Recruits employees in all public sector entities,commissions and
agencies
IV. Issuing staff circulars and standing orders governing various aspects of
the civil services. It entails of matters such as appointments,
confirmations and promotions
Tactical level management accounting officers
27

(a) The accounting officers are responsible:

(i) To ensure that the ministry under his control has proper budgeting and
accounting systems in place.
(ii) To aim at eliminating or minimizing waste and frauds by having proper
management tools in place.
(iii) To ensure that all revenues collected from the public are deposited in the
Consolidated Fund account without any delay.
(iv) To submit regular returns and transcripts to the Accountant General of the
Federation as required by financial regulations.
(v) To ensure proper safety and maintenance of assets under his custody.
(vi) To respond to all audit queries pertaining to the ministry / extra ministerial
departments including appearing before the Public Accounting Committee
(vii) To ensure that the public funds are accurately collected and accounted for.
(viii) To ensure that expenses are prudently accounted for.
Accounting Officers 28

 The management and control of the public finances in Tanzania are vested
to Accounting Officers. Basically this management and control is in the
case of votes.
 The Accounting Officers are those officers categorized as Permanent
Secretaries of Ministries, RASs, Chief Executives of Local Governments
and Heads of extra- Ministerial (Independent) Department.
 In general these officers are the one referred to as Accounting officers or
Receivers of Revenue
 29

 An Accounting officer means any person appointed by the

PMG and charged with the responsibility of accounting for
any services for which moneys was appropriated by the
National Assembly or for the issue made to their votes from
the exchequer accounts
Tactical level management 30

accounting officers…
(b) Receivers of revenue
 The receivers of revenue are responsible for:
(i) Collection of tax revenue from the collectors and sub-collectors of
revenue at the village, ward, district and city council levels.
(ii) Ensuring that revenue is promptly deposited in the consolidated
fund account
(iii) Facilitating collection of revenue and accounting for it accurately
(iv) Support audit functions by maintaining proper audit trails.
(v) Act as the custodian of public money collected through taxes till it
is deposited in the Consolidated Fund Account.
(vi) Support the councils and collectors of revenue in the collection of
revenues and provide guidance conforming to the Treasury guidelines
 31
Operational Level
(a) Warrant holder
 The warrant holders and the sub-warrant holders are responsible for controlling the
expenses and accounting function at the council level. They have the following
duties:
(i) To have transparent financial and accounting policies in place that are
periodically reviewed to check if they are relevant.
(ii) Ensure diligent policy observation and application.
(iii) Institute internal checks through separation of roles in accounting
(iv) To establish budgetary control measures
(v) To cross check book information with physical information
(vi) Have a competent staff and clear job descriptions for staff handling various
tasks
(vii) To do strict follow up on audit queries and punish those who are found guilty
of misusing funds
(viii) To get reports thoroughly checked by officers responsible for checking them.
Operational Level… 32

(b) Collector of revenue

 The main responsibilities of collectors of revenue are:
(i) Collecting cash and cheques from people making payments
(ii) Issuing receipts after verifying the genuineness of the tax bills
and authenticating them
(iii) Compiling the cash collected
(iv) Handing over the cash and cheques to the cashier on a daily basis
(v) Prepare daily and weekly collections report and submit it to the
assistant accountant
(vi) Issuing authorized online or manual receipts to all tax payers
under the approval of the Finance and Administration manager /
Managing Director
(vii) Report on cancelled receipts
Conclusion 33

 Tanzania adopted IPSAS in 2012/13 for the entire government. A number

of implementation problems have been observed by the National Audit
Office of Tanzania (NAOT). For the year ending 30 June 2016, of 222
audited financial statements, 24 had qualified opinions, three had adverse
opinions and five had disclaimers (Central Government Annual General
Report, 2015-16). Specific accounting areas that needed improvement
included the identification and recognition of intangible assets and
reconciliation between cash book and bank statements. Weaknesses in the
IT system resulted in IPSAS cash accounting being used instead of IPSAS
accrual accounting