‘We assist interrogate audit reports’

PUBLIC Accountants and Auditors Board (PAAB) has been working with the Public Accounts Committee of Parliament to assist them in discharging their oversight mandate to analyse reports by the Auditor-General on local authorities, State enterprises and appropriation accounts. NewsDay (ND) business reporter, Fidelity Mhlanga spoke to PAAB chairman, Brian Njikizana (BN) to get more insights about the works of the organisation. Below are the excerpts of the interview.

By Fidelity Mhlanga

ND: May you briefly tell us about the state of public sector accounting in Zimbabwe?

BN: I can do no better than to point you to the annual reports of the Auditor-General, which are an excellent source of information about the state of public sector accounting in Zimbabwe — across all the sectors: central government ministries, departments and agencies, urban and rural authorities and State enterprises and parastatals.

If I had to summarise, though, I think I would say that public sector accounting in Zimbabwe central and local government is stuck in a time warp and it needs to demonstrate proper transparency and accountability to the citizens of Zimbabwe. It needs to be brought up to date both in terms of the timeliness of accounts preparation and the accounting framework that underpins the production of these important financial reports.

Management of public funds is governed primarily by the provisions of the Public Finance Management Act [Chapter 22:19].

Central government uses the cash accounting basis for Appropriation Accounts and partial accruals accounting for fund accounts. The reporting framework for State Enterprises and Parastatals is International Financial Reporting Standards (IFRS).

The Auditor-General has stated in her 2017 report that local authorities were using generally Accepted Accounting Practice and are moving to International Public Sector Accounting Standards (IPSAS). IPSAS are issued by the independent IPSAS Board specifically for the public sector. In practice, there is a wide variation in the standard of reporting by local authorities.

ND: International Federation of Accountants (IFAC) chief executive officer, Fayezul Choudhury was in the country early this year. What came out of the meetings he had with government officials?

BN: IFAC is the global organisation for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of over 175 members and associates in more than 130 countries and jurisdictions, (including Zimbabwe), representing almost three million accountants in public practice, education, government service, industry, and commerce.

So, having the IFAC CEO visiting Zimbabwe for the second time in 18 months demonstrates how highly the Zimbabwean accountancy profession is regarded globally. Also, we viewed the meetings as part of the government programme to re-engage with the international community-given IFAC’s standing in the global financial architecture.

Choudhury had a very successful meeting with the minister of Finance and the major highlight was IFAC’s commitment to support the government of Zimbabwe in public financial management reforms in general and specifically the migration to accruals accounting by the government of Zimbabwe and the professionalisation of accounting and auditing staff in the public sector under the DFID-funded project, which is being jointly implemented by IFAC and PAAB. Not only did he meet with government officials, we also had meetings with development partners and donors, who expressed their desire to support the government of Zimbabwe in its reforms agenda.

ND: How far have you gone in assisting government to introduce IPSAS?

BN: Your newspaper reported on the consultative discussions we hosted as the first part of our consideration of a possible transition from cash-based accounting to a framework based on IPSAS. As a result of those discussions, the government has committed to reforming the public sector accounting framework of Zimbabwe. This is reflected in the regulation that PAAB approved on November 7, 2017, prescribing IPSAS as the basis for accrual reporting for public sector entities in Zimbabwe, this was done in terms of section 44 of the Public Accountants and Auditors Act and in Chapter 5 of the 2018 National Budget Statement, where the minister of Finance and Economic Development announced that the government of Zimbabwe will be migrating to accruals accounting based on IPSAS starting January 1, 2018. The above completes the legal framework that supports the migration to accruals accounting based on IPSAS. Also, having a legal framework in place demonstrates political will and buy-in for the programme.

The hard work is about to start. We are in the process of arranging another roundtable — to be held from March 20 to 22, where we will do two things. First, we will anchor the introduction of accrual accounting in the Zimbabwean public sector on the wider public financial management reform that the country is undertaking. Second, we will seek the views of those attending the roundtable on the challenges they foresee in moving to accrual accounting and reporting and what how those challenges might be dealt with. This will allow us to prepare an IPSAS implementation strategy and plan to move us through the next part of the journey.

Of course, we aren’t doing this entirely on our own. We continue to have the very welcome support of IFAC, working with UK Aid and the UK’s Chartered Institute of Public Finance and Accountancy as our partner. We also recognise that we are not the first to make this journey; we will be inviting a few speakers from the region to our roundtable to share their experiences and will continue to engage them — and others — as we continue with this complex project.

ND: What advantages does the use of IPSAS have to the country as compared to cash accounting?

BN: In the modern world, citizens expect to be kept informed about all sorts of things. The state of the government’s finances might not appear high on their wish list for all of the time, but it will be there some of the time. Governments need to be able to demonstrate their accountability to the citizen and they need to do this in a way that clearly shows the state of the public sector finances.

Cash accounting is recording your receipts and payments. Accrual accounting brings in obligations and entitlements. For example, if you have enjoyed a service but have not yet paid, accrual accounting will record that service that has been enjoyed as an obligation. Also, if government has rented a service to which it is become entitled to money that will be recorded as revenue,”

Accrual accounting will record the government’s assets and liabilities. And recording those assets and liabilities will have the effect of enforcing accountability. Assets and liabilities will not be hidden and so, for the first time, the citizen of Zimbabwe will be able to see what the government owns and what the government owes — not just what the government manages to collect in revenue and what it spends in cash terms. The government will be demonstrating its accountability in a transparent way.

It is critical that government works to establish greater trust between itself and constituents; this should be one of the highest priorities for national leaders and public officials. To establish such trust, it is important that the government provide accurate and complete information on expenditures and transactions, in order to demonstrate accountability and stewardship, and reinforce their own credibility

ND: When can we expect the country to fully adopt IPSAS?

BN: The IPSAS Board, based on its wide experience, suggests that the journey has two parts. The first is preparation, which is what we are starting now and it could take up to two years to get everything in place to ensure success. The second part is the implementation phase and that should take no more than three years, as long as we’ve concluded the preparatory work properly. So we’re probably looking at full adoption from around 2021, but with some earlier adoption of some elements earlier than that.

ND: What other issues are you assisting government with as PAAB?

BN: In addition to what we have stated above, PAAB has a statutory mandate to protect the interests of the people of Zimbabwe and that of other with interests in the Zimbabwean economy by ensuring the maintenance of high standards of professional performance by members of the accountancy profession, to foster investment

We work with the Public Accounts Committee of Parliament to assist them in discharging their oversight mandate, included under this is working with the PAC to analyse reports by the Auditor-General on local authorities, state enterprises and appropriation accounts.

We have also created a database of professional accountants that are registered with PAAB and are available to serve on boards of State-owned enterprises.

We are working on a project to identify and upskill about 3 000 civil servants in finance related positions. We plan on starting with the health and agriculture sectors.

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