Good Practice with Financial Reporting by Governments of sub-Saharan Africa
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A presentation to the annual ESAAG Conference (February 2012) on good practices by African Governments with their annual financial statements
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Good Practice with Financial Reporting by Governments of sub-Saharan Africa
- 1. Annual Financial Reporting by Governments - what is good practice from sub-Saharan Africa? Andy Wynne ICGFM - www.icgfm.org ESAAG Annual Conference, Mbabane, Swaziland February 2012
- 2. Introduction
- 3. Importance of financial reporting Government’s annual financial statements & report of Auditor General key accountability documents Parliament sets the annual budget Accounting Officers accountable to Parliament (and citizens) for financial management
- 4. African Capacity Building Foundation – financial reporting Identifies and collates existing good practice - http://tinyurl.com/esaag2012 Based on a review of the financial statements of 12 countries: Botswana, Burkina Faso, Ghana, Kenya, Mauritius, Namibia, Nigeria, Rwanda, Sierra Leone, South Africa, Tanzania and Uganda
- 5. Expert panel Expert panel to advice & review the study: • Reckford Kampanje • Maru Z Tjihumino • Joseph Onumah • Michael Parry
- 6. Common statements • Statement of Receipts & Payments -comparison with the budget (Botswana, Mauritius, Nigeria, Rwanda, Sierra Leone, South Africa, Tanzania & Uganda). May be split recurrent/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)
- 7. Key Qualitative Characteristics timeliness – are they made public promptly? understandability – are they clear and key aspects and terms explained? openness – is the key financial information made available? consistency – is the information consistent from year to year and between accounts?
- 8. Timeliness
- 9. Timeliness • Audited financial statements made public promptly after the year end? • Presented to parliament within 12 months of the year end • Issued within nine months - so available when the budget discussed by parliament (Burkina Faso, Mauritius, Tanzania, Uganda & South Africa)
- 10. Balance with other aspects • What is the use of out of date information? • May conflict with the idea of consolidation or detailed disclosures • Needs draft financial statements produced within five or six months • Audit completed in a further three or four months
- 12. 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)
- 13. 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)
- 14. 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)
- 15. Openness
- 16. 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)
- 17. 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)
- 18. 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)
- 19. 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)
- 20. Published on Internet • Burkina Faso • Mauritius • Nigeria • Sierra Leone • South Africa • Uganda
- 21. Consistency
- 22. 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
- 23. Next steps?
- 24. 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)
- 25. 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
- 26. Questions
- 27. Consolidated accounts Consolidation of: • government ministries, departments and agencies • parastatal organisations and • local governments?
- 28. Structure of public sector accounts •28
- 29. 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 year end
- 30. Cash flow statement • Required for companies - needed for governments? • Confusion with Statement of Payments and Receipts? • What additional information is being provided?
- 31. “Keep the accounts simple, but yet be able to show how the government has utilised the resources under its control. That should be the purpose of public sector accounts.” Teh Ben Chu, former Deputy Accountant General, Malaysia 2008
- 32. Thank you! Questions or comments! Andy Wynne andywynne@lineone.net www.icgfm.org
Notes de l'éditeur
- 18/05/12 13:12 [email_address] Notes Page
- 18/05/12 13:12 [email_address] Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page Along with the auditor’s report, a government’s annual financial statements provide the essential financial data necessary for accountability purposes. It is the prime document enabling parliaments and citizens to hold their governments to account for the effective management its financial resources.
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page This study builds on and complement the East and Southern African Association of Accountants General (ESAAG) study Financial Reporting Survey and Database (2006).
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page This study builds on and complement the East and Southern African Association of Accountants General (ESAAG) study Financial Reporting Survey and Database (2006).
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page Consolidated Cash Flow Statement with comparison to previous years figures (Botswana, Mauritius, Nigeria, Sierra Leone, South Africa, Tanzania and Uganda) Statement of financial assets and liabilities with comparison to previous years figures (Botswana, Mauritius, Nigeria, Rwanda, South Africa and Uganda) Statement of recurrent receipts and payments with comparison with the budget – often statement of the Consolidated Revenue Fund (Botswana, Mauritius, Nigeria, Rwanda (no separate statement for capital), Sierra Leone, South Africa (no separate statement for capital, but disclosed in the single statement) Tanzania and Uganda (no separate statement for capital). Statement of capital receipts and payments with comparison with the budget – often statement of the Capital Development Fund (Botswana, Mauritius, Nigeria, Sierra Leone and Tanzania).
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page Accountant General provides a commentary on the financial statements and this is complemented, in some countries, by the report of the Auditor General. These commentaries are made more understandable with the inclusion of graphs and charts. In addition, the inclusion of a glossary or explanation of key terms can assist users to understand the technical language which is used. A summary of the financial results for the last few years may also help to provide the context for the government’s financial statements.
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 [email_address] Notes Page Details of government debt are provided in most of the financial statements we reviewed. This may include individual loans (Botswana), details of interest rates and the value in foreign currency of external debts (Mauritius) and changes over the year and the relevant exchange rates (Ghana).
- 18/05/12 13:12 [email_address] Notes Page Many countries provide details of arrears for revenue and this may be analysed by ministry, department and agency with a comparison with the previous year (Mauritius, Tanzania and Uganda). Fewer governments report on payment arrears and common definitions are not used – PEFA 30 days and UEMOA 90 days.
- 18/05/12 13:12 [email_address] Notes Page Details of financial assistance received from individual donors are often reported and may include the amounts in the local currency and the currency of the donor (Rwanda). The figures are usually analysed into loans and grants. However, Mauritius is one of the few countries that provides details of most of its project or non-cash aid.
- 18/05/12 13:12 [email_address] Notes Page
- 18/05/12 13:12 [email_address] Notes Page
- 18/05/12 13:12 [email_address] Notes Page Different values are given for cash and cash equivalents in different parts of the financial statements, for example, Note 18 provides a value of Rand 105,156,062 whilst in the Cash flow statement a figure of Rand 101,432,127 is provided (South Africa) - year ended 31 March 2009
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page India GAP analysis, did not accept the need to: November 2008 www.gasab.gov.in/pdf/Gap_Analysis.pdf consolidate government companies disclose payment by third parties Working party reported in June 2010 No action for the last 18 months – as resources not available
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- Traditional model is to produce accounts for each budget entity. In UK whole of Government accounts are to be published for the first time for 2009/10 (was 2006/07) in early 2011. In the US consolidated Federal accounts were first introduced for the financial year ending 30 September 1997. However, as indicated by the Government Accountability Office (GAO report March 1, 2006: http:// www.gao.gov/new.items/d06406t.pdf) it has not yet been possible to issue a clear audit report on these accounts: One of the three main reasons is that the federal government’s process for preparing consolidated financial statements is seen as ineffective due to a number of important issues, including having inadequate systems, controls, and procedures to ensure that the consolidated financial statements are consistent with the underlying audited entity financial statements Also problem of mixture of bases. Parastatals often use the accrual basis others modified cash. GFS does not require sales by for example, Parastatals to government ministry.
- The governments of France the UK and the US have all faced significant problems in producing annual consolidated financial statements. The US Government Accountability Office has been unable to provide an opinion on the Government’s consolidated financial statements for the last 14 years. The Government of India considers that full consolidation of all public sector entities, “is likely to cause more distortion than bringing in clarity in the financial statements of government” and so it does not plan to consolidate its government business enterprises or sub-national governments. Consolidated fund – established in 1787 « One fund into which shall flow every stream of public revenue and from which shall come the supply for every service » Several countries (Ghana, Tanzania, Uganda and South Africa) provide separate audited financial statements for individual ministries, departments and agencies, so some of the detail may be provided in such accounts.
- Production of audited accounts within 12 months of year end Required by: IMF Code of Good Practices on Fiscal Transparency PEFA Performance Measurement Framework (10 months for A; 18 months for B) The IPSAS recommends “within six months of the reporting date, although a timeframe of no more than three months is strongly encouraged” page 23, paragraph 1.4.4 Achieved by Mauritius, South Africa (7mth), Uganda law saws 9 months (done for 2002/03accounts and previous years). Kenya 24 mths (2000/01 audit in 2 years). Tanzania 19 months (except 2004). Malawi until recently 2-3 years ( 2002/03 – one year?). Zambia within 12 months for 2002 financial statements (includes a balance sheet) – was 2yrs.
- 18/05/12 13:12 © andywynne@btinternet.com Notes Page
- 18/05/12 13:12 [email_address] Notes Page