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ICAB-CAPA
INTERNATIONAL CONFERENCE
STRENGTHENING BANGLADESH PUBLIC SECTOR
ACCOUNTING AND AUDITING - GLOBAL REFORMS AND THE
WAY FORWARD
on
1
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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ACCOUNTABILITY ISSUES
Agencies In Democratic System: Legislative Branch
Executive Branch
Judiciary
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LEGISLATIVE BODIES
ParliamentParliament
Public Accounts CommitteePublic Accounts Committee
Public Undertakings CommitteePublic Undertakings Committee
Parliamentary Standing CommitteesParliamentary Standing Committees
Comptroller and Auditor GeneralComptroller and Auditor General
All the Law Courts All the Law Courts
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Prime MinisterPrime Minister
MinistersMinisters
Secretaries of The MinistriesSecretaries of The Ministries
Executives of The Government AgenciesExecutives of The Government Agencies
Accounts OfficesAccounts Offices
EXECUTIVES
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ACCOUNTABLE FOR WHAT?
Accountability for Stewardship of Financial Accountability for Stewardship of Financial
ResourcesResources
Accountability For Efficiency and Economy of Accountability For Efficiency and Economy of
OperationsOperations
Accountable for Faithful Compliance Adherence to Accountable for Faithful Compliance Adherence to
Legal Legal Requirements & Requirements &
Administrative Policies Administrative Policies
Accountability for Results of Government Activities Accountability for Results of Government Activities
Reflected in Reflected in
Accomplishments and EffectivenessAccomplishments and Effectiveness 14
Pertinent issues on Accountability: Pertinent issues on Accountability:
Audit objections so far disposed off by the PA CommitteeAudit objections so far disposed off by the PA Committee
What actions so far taken on PA Committee'sWhat actions so far taken on PA Committee'srecommendations?recommendations?
Have there been improvements ?Have there been improvements ?
ParliamenParliamen
t t President President
SAI (CAG)SAI (CAG)
PA PA
CommitteeCommittee
Audit Audit
ReportsReports
ACCOUNTABILITY FRAMEWORK
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Government / Public Sector Organisations
Applicable Laws Audit authority/b
yGovernment Ministries Constitution C AGDepartments/Divisions/Directorates
Constitution CAG
Autonomous /Semi Autonomous Bodies
CAG Addl. Functions Act.
CAG CA firms
Local Authorities Relevant laws CAG, CA Firms
State Owned Banks and DFIs CAG Addl. Functions Act.
CAG, CA firms
Government Owned Entities CAG Addl. Func /CA ‘94
CAG, CA Firms
Nationalised Industries Nationalisation Order,1972
CAG, CA Firms
Foreign Aided Projects CAG Addl Func Act-74 Donor
CAG, CA firms
Govt. Educational institutions/ Hospitals etc.
Constitution CAG
LEGAL JURISDICTION OF PUBLIC SECTOR AUDIT
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Bangladesh Constitution (1972)Bangladesh Constitution (1972)
C & AG’s (Additional Functions) Act (1974)C & AG’s (Additional Functions) Act (1974)
MOF Executive Order -CAG Estd. (1985)MOF Executive Order -CAG Estd. (1985)
Nationalization Orders (1972)Nationalization Orders (1972)
Denationalization Orders (1982)Denationalization Orders (1982)
Relevant Enactments/Presidential Orders Relevant Enactments/Presidential Orders
Companies Act (1994)Companies Act (1994)
Bank Companies Act (1991)Bank Companies Act (1991)
LEGAL FRAMEWORK FOR PUBLIC SECTOR
AUDIT
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OCAG ORGANOGRAM
Bangladesh Railway Finance Department
Bangladesh Railway Finance Department
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
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 Training Academy Audit Directorates Audit Directorates Defence Finance Department
Defence Finance Department
CAG Office CAG Office
DCAG (Senior) Gr. II DCAG (Senior) Gr. II CGDF Gr. IICGDF Gr. II DG Financial Management Academy, Gr. II
DG Financial Management Academy, Gr. II
DCAG (A&R) Gr. III DCAG (A&R) Gr. III
DCAG (Procedure) Gr. III
DCAG (Procedure) Gr. III
JDG (Finance), (BR) Gr. III
JDG (Finance), (BR) Gr. III
FA & CAO (East), BR Gr. IIIFA & CAO (East), BR Gr. III
FA & CAO (West), BR Gr. IIIFA & CAO (West), BR Gr. III
FA & CAO (Project), BR Gr. III
FA & CAO (Project), BR Gr. III
Addl. FA & CAO BR-3 Gr. IV
Addl. FA & CAO BR-3 Gr. IV
SFC (Army) Gr. III
SFC (Army) Gr. III
SFC (Navy) Gr. III
SFC (Navy) Gr. III
SFC (Air Force) Gr. III
SFC (Air Force) Gr. III
SFC (Defence Works) Gr. III
SFC (Defence Works) Gr. III
SFC (Defence Purchase) Gr. III
SFC (Defence Purchase) Gr. III
DG Post, Telegraph & Telephone Audit
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,
Gr. III
ADG (Finance) Bangladesh Railway (BR) Gr. II
ADG (Finance) Bangladesh Railway (BR) Gr. II
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GOVT / PUBLIC SECTOR FINANCIAL ACCOUNANTABILITY
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FINANCIAL ACCOUNANTABILITY OF
LOCAL GOVERNMENT AUTHORITIES
StakeholdeStakeholdersrs
Municipal Municipal BodiesBodiesOrdinancesOrdinances
C&AG AuditorC&AG Auditor
OwnershipOwnership ManagementManagement
MLGRDCMLGRDC
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PUBLIC SECTOR PURVIEW
IPSASB FrameworkIPSASB Framework
““Public sector refers to Governments, Regional Government, Public sector refers to Governments, Regional Government, Local Governments & Related Government entities including Local Governments & Related Government entities including Agencies, Boards, Commissions & Enterprises”Agencies, Boards, Commissions & Enterprises”
Public Sector Covers all Arena of Public Services Provided Public Sector Covers all Arena of Public Services Provided by the Following Agencies:by the Following Agencies: Government MinistriesGovernment Ministries Divisions /Directorates / DepartmentsDivisions /Directorates / Departments Government Sub-Ordinate Offices Government Sub-Ordinate Offices Local Government AuthoritiesLocal Government Authorities Autonomous/Semi-Autonomous BodiesAutonomous/Semi-Autonomous Bodies Public Sector CorporationsPublic Sector Corporations Foreign Aided Projects (SCOPE/SPEMP B)Foreign Aided Projects (SCOPE/SPEMP B) State Owned Enterprises (SOEs)State Owned Enterprises (SOEs) State Owned Bank (SOB)State Owned Bank (SOB) Hospitals/Educational Institutions etc.Hospitals/Educational Institutions etc.
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 IMPORTANCE OF FINANCIAL REPORTING SYSTEM FOR GOVERNMENTS / PUBLIC SECTORGOVERNMENTS / PUBLIC SECTOR
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PUBLIC SECTOR AUDITOR’S ROLE:PUBLIC SECTOR AUDITOR’S ROLE:
Determining Oversight Determining Oversight
Facilitating ForesightFacilitating Foresight
Increasing InsightIncreasing Insight
Conducting Objective Independent Financial AuditConducting Objective Independent Financial Audit
Conducting Performance/VMA Environment and IT Conducting Performance/VMA Environment and IT Audit Audit
Enhancing Economy, Efficiency and Effectiveness of Enhancing Economy, Efficiency and Effectiveness of Resources Utilization of Audit Entities Resources Utilization of Audit Entities
Meet Expectations or Development Partners/Fund Meet Expectations or Development Partners/Fund Provider’sProvider’s
Ensuring Transparency of Financial InformationEnsuring Transparency of Financial Information
Assuring Accountability of Management DecisionsAssuring Accountability of Management Decisions
Combating Corruption, Misuse & Wastage Combating Corruption, Misuse & Wastage 23
PUBLIC SECTOR AUDIT FOCUSPUBLIC SECTOR AUDIT FOCUS
Emphasis on Expenditure Emphasis on Expenditure
Availability of BudgetAvailability of Budget
Authorisation By Competent AuthorityAuthorisation By Competent Authority
Payment Acknowledged By Right PersonPayment Acknowledged By Right Person
Government Rules And Procedures CompliedGovernment Rules And Procedures Complied
Expenditures Properly ClassifiedExpenditures Properly Classified
Justification Of ExpendituresJustification Of Expenditures
Emphasis on Cash Expenditures And Cash Income Emphasis on Cash Expenditures And Cash Income
-- Not on Accruals (Cash Basis IPSAS)Not on Accruals (Cash Basis IPSAS)
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FINANCIAL STATEMENTS UNDER CASH/ACCRUAL FINANCIAL STATEMENTS UNDER CASH/ACCRUAL
REPORTING SYSTEMS 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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Objectives
Cash Accrual
Cash BasisModifications to the Cash
Basis
Modifications to the Accrual
BasisAccrual Basis
Compliance with legally adopted budgets
Yes Yes Yes Yes
Compliance with legal and contractual requirements, including spending limits.
Relating to cash requirement and limits.
Cash and near cash requirements 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 ACCOUNTINGALTERNATIVE BASES OF ACCOUNTING
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Cash Flows
Budget
GOVERNMENT PUBLIC SECTOR REPORTING GOVERNMENT PUBLIC SECTOR REPORTING - CASH / ACCRUAL ACCOUNTING- CASH / ACCRUAL ACCOUNTING
Revenues,
Expenses Budget
Assets, Liabilities
Estimate
Revenues,
Expenses Actuals
Assets, Liabilities
Actuals
Cash Flows Actuals
Cash Accounting
(SE)
Accrual Accountin
g(DE)
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CASH-BASIS IPSAS: TRANSITION STEP TO ACCRUAL CASH-BASIS IPSAS: TRANSITION STEP TO ACCRUAL IPSAS IPSAS
(OCAG BANGLADESH)(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 Fully
Integrated Adoption of Cash-
Basis IPSAS is
Facilitated 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)
Cash Basis IPSAS-Financial Reporting Under Cash Basis Accg.
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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INDIA Central & Provincial Government – Cash Accounting Local bodies moving to Accrual-Based Accounting ICAI Technical Support for Accrual-Based Accounting Government Accounting Standards Advisory Board
(GASAB) Developing Accrual-Based Accounting Standards
PAKISTAN
Federal & Provincial Government – Cash Accounting Local Bodies Moving to Modified Cash Accounting New Accounting Model Implemented for Accrual
Accounting CGA & AG cognizant of IPSAS
STATUS OF IMPLEMENTATION OF ACCRUAL-BASED STATUS OF IMPLEMENTATION OF ACCRUAL-BASED ACCOUNTING IN SOUTH ASIAN COUNTRIESACCOUNTING IN SOUTH ASIAN COUNTRIES
Contd.32
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
Strategic Partnership Between SAI(CAG) & Profession (ICAB)
Proactive Role by Accountancy Profession (ICAB)
POLICY ISSUES AND RECOMMENDATION
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Policy Decisions at Legislative LevelPolicy Decisions at Legislative Level Enabling Environment For CooperationEnabling Environment For Cooperation
-- Formation of Task ForceFormation of Task Force
Capacity Building /Strengthening InstitutionsCapacity Building /Strengthening Institutions Development of Action PlanDevelopment of Action Plan
-- Main Directions -Responsibility - Time FrameMain Directions -Responsibility - Time Frame
Progress Towards Accrual AccountingProgress Towards Accrual Accounting
Develop Standards, Methods and Practices Develop Standards, Methods and Practices
Synergize Strategic Partnership Between CAG and ICAB
THE WAY FORWARDTHE 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
MESSAGEMESSAGE
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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
IPSAS 15—Financial Instruments: Disclosure and Presentation Contd.
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 40
HAPPY PUBLIC SECTOR FINANCIAL HAPPY PUBLIC SECTOR FINANCIAL
MANAGEMENT MANAGEMENT
LET’S GO AHEAD LET’S GO AHEAD ANDAND
DEVISE SUSTAINABLE STRATEGIES FOR DEVISE SUSTAINABLE STRATEGIES FOR
STRENGTHENING PUBLIC SECTOR STRENGTHENING PUBLIC SECTOR
ACCOUNTING AND AUDITING IN ACCOUNTING AND AUDITING IN
BANGLADESHBANGLADESH
THANK YOUTHANK YOU
VERY MUCH INDEEDVERY MUCH INDEED41
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