icab capa keynote paper

PUBLIC SECTOR AUDITOR’S ROLE: Determining Oversight  Facilitating Foresight  Increasing Insight  Conducting Objective Independent Financial Audit  Conducting Performance/VMA Enviro

ICAB-CAPA INTERNATIONAL CONFERENCE

STRENGTHENING BANGLADESH PUBLIC SECTOR ACCOUNTING AND AUDITING - GLOBAL REFORMS AND THE WAY FORWARD

on

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ANWARUDDIN CHOWDHURY

Council member & Past President ICAB

Director CAPA Board

Keynote Paper on

“STRENGTHENING PUBLIC SECTOR ACCOUNTING AND

AUDITING IN BANGLADESH”

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LEGISLATIVE BODIES

 Parliament

 Public Accounts Committee

 Public Undertakings Committee

 Parliamentary Standing Committees

 Comptroller and Auditor General

 All the Law Courts

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 Prime Minister

 Ministers

 Secretaries of The Ministries

 Executives of The Government Agencies

 Accounts Offices

EXECUTIVES

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ACCOUNTABLE FOR WHAT?

 Accountability for Stewardship of Financial Resources

 Accountability For Efficiency and Economy of Operations

 Accountable for Faithful Compliance Adherence to Legal

Requirements & Administrative Policies

 Accountability for Results of Government Activities

Reflected in Accomplishments and Effectiveness

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Pertinent issues on Accountability:

 Audit objections so far disposed off by the PA Committee

 What actions so far taken on PA Committee's recommendations?

 Have there been improvements ?

Parliament President SAI (CAG)

PA Committee Audit Reports

ACCOUNTABILITY FRAMEWORK

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Government / Public Sector

Govt Educational institutions/ Hospitals

LEGAL JURISDICTION OF PUBLIC SECTOR AUDIT

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 Bangladesh Constitution (1972)

 C & AG’s (Additional Functions) Act (1974)

 MOF Executive Order -CAG Estd (1985)

 Nationalization Orders (1972)

 Denationalization Orders (1982)

 Relevant Enactments/Presidential Orders

 Companies Act (1994)

 Bank Companies Act (1991)

LEGAL FRAMEWORK FOR PUBLIC SECTOR AUDIT

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A & R = Accounts and Reports

CGDF = Controller General Defence Finance

DCAG = Deputy Comptroller and Auditor General

FA & CAO = Financial Adviser & Chief Accounts Officer

A & R = Accounts and Reports

ADG = Additional Director General

BR = Bangladesh Railway

CGDF = Controller General Defence Finance

DCAG = Deputy Comptroller and Auditor General

DG = Director General

FA & CAO = Financial Adviser & Chief Accounts Officer

FC = Finance Controller

JDG = Joint Director General

SFC = Senior Finance Controller

Training Academy Audit Directorates

Defence Finance Department

Defence Finance Department

DCAG (A&R) Gr III

FA & CAO (East), BR Gr III

FA & CAO (West), BR Gr III

FA & CAO (Project), BR Gr

Directorate, Gr III

DG Post, Telegraph & Telephone Audit

Directorate, Gr III

DG Local and Revenue Audit Directorate,

Gr III

DG Local and Revenue Audit Directorate,

Gr III

DG Commercial Audit Directorate, Gr III

DG Commercial Audit Directorate, Gr III

DG Works Audit Directorate

Gr III

DG Works Audit Directorate

Gr III

DG Railway Audit Directorate

Gr III

DG Railway Audit Directorate

Gr III

DG Civil Audit Directorate

Gr III

DG Civil Audit Directorate

Gr III

DG Foreign Aided Projects Audit Directorate, Gr III

DG Foreign Aided Projects Audit Directorate, Gr III

DG Defence Audit Directorate,

Gr III

DG Defence Audit Directorate,

Gr III

DG Mission Audit Directorate,

Gr III

DG Mission Audit Directorate,

Gr III

DG Performance Audit Directorate,

Gr III

DG Performance Audit Directorate,

GOVT / PUBLIC SECTOR FINANCIAL ACCOUNANTABILITY

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FINANCIAL ACCOUNANTABILITY OF LOCAL GOVERNMENT AUTHORITIES

Stakeholder

s

Municipal Bodies Ordinances

C&AG Auditor

MLGRDC

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PUBLIC SECTOR PURVIEW

IPSASB Framework

“Public sector refers to Governments, Regional Government, Local Governments & Related Government entities including Agencies, Boards, Commissions & Enterprises”

Public Sector Covers all Arena of Public Services Provided by the Following Agencies:

Bangladesh Public Sector Coverage

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 Essential for Increased Accountability and Transparency in

Use of Public Funds

 Developing Public Sector Awareness of Govt Spending

 Credibility of Financial Information for Public Trust

 Timeliness of Financial Information for Good

Governance and Decisions

 Increased Credibility for Attracting FDI

 Assurance to Development Partners

 Improved Sovereign Rating Awards

 Efficient Financial Reporting System for Economic

Development and Public Welfare.

IMPORTANCE OF FINANCIAL REPORTING SYSTEM FOR

GOVERNMENTS / PUBLIC SECTOR

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PUBLIC SECTOR AUDITOR’S ROLE:

 Determining Oversight

 Facilitating Foresight

 Increasing Insight

 Conducting Objective Independent Financial Audit

 Conducting Performance/VMA Environment and IT Audit

 Enhancing Economy, Efficiency and Effectiveness of

Resources Utilization of Audit Entities

 Meet Expectations or Development Partners/Fund Provider’s

 Ensuring Transparency of Financial Information

 Assuring Accountability of Management Decisions

 Combating Corruption, Misuse & Wastage

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PUBLIC SECTOR AUDIT FOCUS

 Emphasis on Expenditure

 Availability of Budget

 Authorisation By Competent Authority

 Payment Acknowledged By Right Person

 Government Rules And Procedures Complied

 Expenditures Properly Classified

 Justification Of Expenditures

 Emphasis on Cash Expenditures And Cash Income

-Not on Accruals (Cash Basis IPSAS)

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FINANCIAL STATEMENTS UNDER CASH/ACCRUAL

REPORTING SYSTEMS

Cash Basis of Accounting

 Cash Flow Statement

 Statement of Accounting Policies and Explanatory Notes

Accrual-basis Accounting

 Statement of Financial Position

 Statement of Financial Performance

 Cash Flow Statement

 Statement of Changes in Net Assets/ Equity

 Accounting Policies and Explanatory Notes to FS

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Yes Yes Yes Yes

Compliance with legal and

contractual requirements,

including spending limits.

Relating to cash

requirement and limits.

Cash and near cash requirement

s and limits.

Cash and financial resources requirements and limits.

Cash and economic resources

requirements and limits.

Sources, allocation and

uses of financial

requirements.

Cash resources Cash and near cash

resources.

Cash and financial resources.

Cash and financial resources.

Financing and cash

requirements.

Cash resources

Cash and near cash resources.

Cash and other financial

requirements.

Cash and other financial

requirements.

Ability to finance activities

and to meet liabilities and

commitments.

From cash From cash

and near cash

From financial resources From economic resources.

Financial condition and

changes therein.

Cash position

Cash and near cash position

Financial resources.

Financial and economic resources.

Financial performance in

terms of service costs.

Information not reported

Information not reported

Limited information reported.

Provides information necessary to assess performance.

Source: Government Financial Reporting, Study 11, issued by IFAC Public Sector Committee.

ALTERNATIVE BASES OF ACCOUNTING

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Cash Flows Budget

GOVERNMENT PUBLIC SECTOR REPORTING

- CASH / ACCRUAL ACCOUNTING

- CASH / ACCRUAL ACCOUNTING

Cash Accounting

(SE)

Accrual Accounting (DE)

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CASH-BASIS IPSAS: TRANSITION STEP TO ACCRUAL IPSAS

(OCAG BANGLADESH)

Accrual Accounting IPSAS 1-32(Accrual DE)

Cash-Basis IPSAS(Transition Step)Current

policies(Cash SE )

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ACCRUAL AND CASH ACCOUNTING : AN INTEGRATIVE APPORACH

Accrual and Cash Accounting are Full

y Integrated

Adoption of Basis IPSAS is Facilitated

Cash-Requiring Direct

Method Cash Flow

Statement

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 IFAC

IPSAS Board = IPSAS

IAAS Board = ISA

 IASB = IFRS

 INTOSAI = ISSAI

 (MOSAIC - INTOSAI / IFAC )

International Public Sector Accounting Standards

IPSAS 2011 (Appendix I)

 Accrual Basis IPSAS-32 Standards

ROLE OF INTERNATIONAL STANDARDS SETTING BODIES

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 Advocacy for Awareness Development

 Collaboration with CAG & Development Partners

 Impart Skills Development Training for Accrual Accounting,

 Preparation Double Entry Financial Statements

 Implementation of IPSAS, ISSAI, IFRS, ISA

 Organize Seminars/Workshops on Relevant Issues

 Provide Relevant Inputs to Standards Setters

 Devise Sustainable Strategies for Future Development

Public Sector Financial Management.

ROLE OF ACCOUNTANCY PROFESSION (ICAB)

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 Central & Provincial Government – Cash Accounting

 Local bodies moving to Accrual-Based Accounting

 ICAI Technical Support for Accrual-Based Accounting

Developing Accrual-Based Accounting Standards

PAKISTAN

 Federal & Provincial Government – Cash Accounting

 Local Bodies Moving to Modified Cash Accounting

 CGA & AG cognizant of IPSAS

STATUS OF IMPLEMENTATION OF ACCRUAL-BASED

ACCOUNTING IN SOUTH ASIAN COUNTRIES

Contd.

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BANGLADESH

 Government Agencies – Cash Accounting Moving to Cash IPSAS

 Local Bodies - Cash Accounting

 ICAB Committee on Government Accounting

 ICAB Members Cognizant of IPSAS

SRI LANKA

 Central Government & Provincial Councils – Cash Accounting

 Local Bodies using Accrual-Based Accounting partially.

 ICASL’s Developing Accrual-Based Accounting Standards

NEPAL

 Cash-Based Government Accounting System

 IPSAS are Included in the Curriculum of ICAN

 Plans for Accrual-Based Accounting System

STATUS OF IMPLEMENTATION OF ACCRUAL-BASED

ACCOUNTING IN SOUTH ASIAN COUNTRIES

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 Inducing Political Will/Commitment and Mindset Changes

 Encouraging Parliamentary Scrutiny

 Strengthening Public Sector Financial Management

 High Quality Financial Reporting & Credible Auditing

 Enhancing Accountability & Transparency in Govt Decisions

 Increasing Public Credibility of Govt Performance

 Meeting Donor Expectations

 Capacity Building & Institutional Development (Training)

 Implementation of Accrual Accounting.

 Implementation of Accounting/ Auditing Standards

 OCAG Organization Reforms

 Technology Orientation

NEED FOR REFORMS

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 Political Will /Commitment of Government.

 Mindset Changes in Civil Administration

 OCAG Capacity Building & Institutional Development

 Professional Skills Development

 Financial Resources Availability

 Support of Development Partners

 Implementation of Accrual Accounting System

 Preparation of FS on Double Entry Principles

 Implementation of IPSAS - Cash and Accrual

 Application of Auditing Standards - ISSAI/ ISA

 Valuation of Govt Assets / Determination of Liabilities

 Effective Implementation of TA Projects (SCOPE,SPEMP B)

CHALLENGES

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 Composition of High Powered Task Force

 Legislative Changes : Audit Act Enactment

 Effective Parliamentary Scrutiny Process

 Independent and Effective SAI (CAG)

 Separation of Accounting & Auditing Functions

 Capacity Building and Institutional Development of OCAG

 Adequate Appropriate Application of IPSAS & ISSAI

 Customization of International Standards - Adaptation

 Conversion to Accrual Accounting – Pilot Projects

 Timeframe Fixation for Double Entry & Accruals IPSAS

 Dedicated Training Program/ IT Orientation of OCAG

 Proactive Role by Accountancy Profession (ICAB)

POLICY ISSUES AND RECOMMENDATION

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 Policy Decisions at Legislative Level

 Enabling Environment For Cooperation

- Formation of Task Force

 Capacity Building /Strengthening Institutions

 Development of Action Plan

- Main Directions -Responsibility - Time Frame

 Progress Towards Accrual Accounting

 Develop Standards, Methods and Practices

 Synergize Strategic Partnership Between CAG and ICAB

THE WAY FORWARD

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 Develop Awareness for Mindset Changes

 Stimulate Political Will & Commitment for

Implementation of Reforms Agenda

 Establish Strategic Sense of Direction

 Catalyze Leadership Decisions for

Strengthening Public Sector Accounting and

Auditing With Global Best Practices

MESSAGE

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INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) 2011

IPSAS 1—Presentation of Financial Statements

IPSAS 2—Cash Flow Statements

IPSAS 3—Accounting Policies, Changes in Accounting Estimates and Errors

IPSAS 4—The Effects of Changes in Foreign Exchange Rates

IPSAS 5—Borrowing Costs

IPSAS 6—Consolidated and Separate Financial Statements

IPSAS 7—Investments in Associates

IPSAS 8—Interests in Joint Ventures

IPSAS 9—Revenue from Exchange Transactions

IPSAS 10—Financial Reporting in Hyperinflationary Economies

IPSAS 11—Construction Contracts

IPSAS 12—Inventories

IPSAS 13—Leases

IPSAS 14—Events after the Reporting Date

APPENDIX

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IPSAS 16—Investment Property

IPSAS 17—Property, Plant, and Equipment

IPSAS 18—Segment Reporting

IPSAS 19—Provisions, Contingent Liabilities and Contingent Assets

IPSAS 20—Related Party Disclosures

IPSAS 21—Impairment of Non-Cash-Generating Assets

IPSAS 22—Disclosure of Financial Information in Government Sector

IPSAS 23—Revenue from Non-Exchange Transactions (Taxes and Transfers) IPSAS 24—Presentation of Budget Information in Financial Statements

IPSAS 25—Employee Benefits

IPSAS 26—Impairment of Cash-Generating Assets

IPSAS 27—Agriculture

IPSAS 28—Financial Instruments: Presentation

IPSAS 29—Financial Instruments: Recognition and Measurement

IPSAS 30—Financial Instruments: Disclosures

IPSAS 31—Intangible Assets

IPSAS 32—Service Concession Arrangements - Guarantor

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HAPPY PUBLIC SECTOR FINANCIAL MANAGEMENT

LET’S GO AHEAD

AND

DEVISE SUSTAINABLE STRATEGIES FOR

STRENGTHENING PUBLIC SECTOR ACCOUNTING AND AUDITING IN BANGLADESH

THANK YOU

VERY MUCH INDEED

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