MINISTRY OF FINANCE & ECONMIC DEVELOPMENT -ACCOUNTANT GENERAL’S DEPARTMENT

ICAZ 2019 PUBLIC SECTOR CONVENTION

Transitional arrangements for Public Sector Organisations from cash based to full compliance

with accrual IPSAS

Presentation Outline

Background

Reform Aims and Objectives.

Implementation Strategy and Plan

Products of the project.

Summary of the Implementation strategies – Journey so far.

Critical Success Factors and the Key Performance Indicators.

Way forward

Reform Background.

Reform Aims

1. Harmonising the various reportingframeworks of the Public Sectorentities.

2. Revise, update and harmonise theChart of Accounts of the Public Sectorentities to comply with IMF’s GFSM2014.

3. Enhancing the GovernmentAccounting Systems and AuditingFrameworks.

4. Capacity development for PublicSector Accountants and Auditors.

Reform Objectives

1. Enhancing accountability by the Public Sector entities.

2. Improve efficiency of business processes.

3. Collective transparency by the Public Sector.

4. Improved Assets and Liabilities disclosure and management.

5. Expressive financial analysis.

“Strengthening the Capacity of Public Sector Accountancy Professionals in Zimbabwe”

4

Overview: Current Reporting Framework

Public Sector- Government of Zimbabwe

General government

Centralgovernment

Stategovernments

Public Corporations

Localgovernments

Financial – To use IFRS Nonfinancial

State assisted institutions, -Accrual Based.(Not IPSAS)

Use Cash Based Accounting. –(Not IPSAS)

Use Accrual based Accounting -(Not IPSAS).

One Government with a spectrum of Accounting Bases! How can the results be consolidated?

Problem

Solution - migrate from the current accounting system to Accrual Based IPSAS!

Challenges of the current reporting framework.

• The current framework does not support Result Based Management (RBM) and Results Based Budgeting (RBB) systems.

• Lack of full disclosure of assets and liabilities.

• Does not show a true and fair view of our financial performance and position.

• Lack of proper accountability and transparency.

• Lack international credibility

Why IPSAS: Benefits

• Improve Governance.

• Foster Transparency and Accountability

• Attract International Aid and Foreign Direct Investment.

• Inform Decision Making.

IPSAS: Two basis

Allows for transparent financial reporting

of cash receipts, payments and balances,

under the cash basis of accounting.

Focuses on revenue, cost, assets, liabilityand equity, instead of cash flow only.

The implementation of IPSAS would require a migration from the current accounting system to Accrual Accounting.

Cash basis Accrual Accounting

What’s changing?• The accounting framework for central government will change from cash-based accounts to accrual based IPSAS.

• The accounting framework for Local Authorities and defined SEPs will change from a mixture of accounting bases to IPSAS.

• Adoption of IPSAS will change both the structure and the content of the financial reports.

ENFORCEABILITY STATUS OF ADOPTED FRAMEWORKLegal Mandate –

• Constitution of Zimbabwe Chapter 17, provides the broad framework that governs public financial management (PFM).

• PFM Act sect 37 - requires that the Financial Statements be prepared in accordance with the Generally Accepted Accounting Practice.

• Statutory Instrument (SI) 41 of 2019 was gazetted in terms of Section 44 (2) (a) of the revised Public Accountants and Auditors Act Chapter 27:12 and gave birth to the legal framework for the Government of Zimbabwe to adopt or adapt the IPSAS framework.

The Strategy.• Progressive pilot implementation strategy of IPSAS

• Strong Governance structures.

• Accounting Policy and Revised Accounting Procedures Manual.

• Risk Management Framework.

• Unified Public Sector Chart of Accounts complying with the GFSM 2014

riding on the PFMS and other approved IFMIS.

• Benefits Realisation Plan - Management of benefits and sustainability Plan.

• Change management and Communication strategy.

• Professionalisation of Public sector Accountants [Next slides]

Accounting Policy

Document

Revised Accounting

Procedures Manual

Products of the IPSAS Project

Government

Asset or Property

& Liabilities

Inventory

Professional

Public Sector

Accountant

Unified Chart of

accounts aligned to

the International

Monetary Fund’s

GFSM 2014

12

Unified Public

Sector Financial

Reporting

Framework

Other:

• Risk Management Framework.

• Business Process Re - engineering Report.

• Accredited Training offices / infrastructure.

Law & Regulation

Policy& Standards

Human Resource

Process & Technology

Gap Analysis:

1. Revising Accounting Procedures Manual &

BPR.

2. Unifying the Classification of events and

transactions – CoA.

3. PFMS - new functional specifications and

developments being activated to meet the

new reporting environment

4. Legacy Issues - Resolution strategies

developed (Workshop on ISP revision).

1. Grouping of Standards: Business area - Presentation of financial statements, Accounting boundaries, Assets, Financial instruments, Liabilities, Income and Expenditure; Other

2. Developing Accounting Policy – Procurement of the

consultant in process, several meetings held with the potential contractor

Alignment of laws & Regulation

Gazetting of the IPSAS framework – statutory

Instrument No 41 of 2019, Public Accountants.

and Auditors (Prescription of International

Standards) Regulations; 2019 Gazetted.

1. Change Management - Enhancing communication

through gatherings like ZIWG updates . Workshops for senior

Mgmt. for LAs & SEPs scheduled 7 & 9 October.

2. Human Capacity Building. - Professionalisation of the Public Sector Accountant and IPSAS Certification

Peer Education – Study Tours to Tanzania & SA (Next Slides)

The Journey so far - Summary of Key Activities

3. Involvement of non Accounting staffs in implementing IPSAS.• Accounting Officers.• CEOs and Town Treasurers.• Parliament

Top Management Commitment Change Management

Data Collection

Accounting System

CRITICAL SUCCESS

FACTORS

1. Establishment of Reform Governance

structures at National and Sectoral levels

2. Political Buy in through 2018 Budget

Statement.

3. Allocation of Resources in the 2019 Budget

Substantial work has been done including

setting up of key SAP points at District level.

PFMS Interface with external system

qUpdate asset records and registers

• Identification of government property (See

next slides)

• Identification of the location

• Correct description of the property

(MoFED, LG,PW &NH and Deeds Office)

q Awareness Program – Done to

central Gvt DoF, CA , CIAs & LAs

q Comprehensive Capacity Building – ICSAZ

introduced Professionalisation, ICAZ

developing profesionalisation curriculum

q Training Program – CIPFA IPSAS & ICAZ

IPSAS certification ongoing

Law & Regulation

SI No 41 of 2019, Public

Accountants and Auditors

(Prescription of International

Standards) Regulations; 2019

Gazetted.

Auditor General Involvement

Audit Protocol draft ready for approval

PROGRESS TO DATE

• Zimbabwe IPSAS Working Group.

• National Steering Committee (NSC) – Project Board (9 Permanent Secretaries).

• Project Implementation Team (PIT).

• Local Authorities Project Implementation Team (LAPIT)

1. Establishment of Governance Structures

Various change management workshops have been held starting with high

levels.

3. Development of Sectoral ISP.

The sector specific draft ISP has been developed, to determine each sector specific

take off positions and guide on key actions.

The 4th ZIWG round table (September 2019) will give an update the Sectoral

roadmaps with take - off positions.

2. Change Management

PROGRESS TO DATE

4. Legacy Issues.

The legacy issues were identified under the guidance of the consultant

(Informed by the Auditor General and PEFA reports .

Strategies for resolution of the legacy issues was developed.

15 pilot entities identified

3 Ministries;

2 Commissions;

2 Parastatals and

8 local Authorities (4 Rural and 4 Urban).

5. IPSAS Pilots

The identification of entities to report using the IPSAS framework across the sectors –Preliminary list.

6. Scoping exercise

7. Professionalisation of the Public Sector Accountant Professionalisation of the Public Sector Accountant – Introduction of the Public Sector

Accounting Qualification as capacity development to support the IPSAS implementation.

Consultants have been engaged to guide the process of developing the qualification.

Two pilot Professional Accountancy Organisations

PSC Training Centers and ZIPAM to be used

Project to start by 3rd quarter 2019

8. Identification and valuation of Assets and government properties

Inventory stock take.

Identification of government asset and property with correct descriptions.

Preliminary work undertaken with the Deeds office to starting identifying

Government Property.

inventory stock in rest of Ministries started last year now we are to enter the

verification stage of the assets identified.

Property valuation

• Engaging experts in property valuation.

Way Forward – Transitioning to the new reporting Landscape.

• IPSAS 33 First-time Adoption of Accrual Basis IPSAS to help entities navigate

the transition challenges.

• IPSAS 33 grants transitional exemptions to entities adopting accrual basis

IPSASs for the first time, providing a major tool to help entities along their

journey to implement IPSASs.

• It allows first-time adopters three years to recognize specified assets and

liabilities. This provision allows sufficient time to develop reliable models for

recognizing and measuring assets and liabilities during the transition period.

Way Forward – Professionalisation of Public Sector Accountants

• Is in line with the IPSAS implementation theme “Strengthening the Capacity of Public Sector Accountancy Professionals in Zimbabwe”.

• The reform is a response to the key activities outlined on sections 5.3.2 to 5.3.7 in the Implementation Strategy and Plan (ISP) for the implementation of the International Public Sector Accounting Standards (IPSAS).

• Professionalisation ensures that individuals maintain and develop their professional competence throughout their careers that merely relate to the day’s job.

• It guarantees that qualifications acquired matches the defined standards of knowledge, skills and values.

• The adoption of the accrual based IPSAS represents a fundamental change inthe approach to handling of public finance which necessitates thestrengthening of the capacity of the Public Sector Accountancy professionthrough acquisition of professional skills and structured trainings.

• The model to be institutionalised in Professional Accountancy Organisations (PAOs) as a means of establishing high eminence knowledge-based profession.

• The Government will not establish any PAO but will work and support the existing PAOs. (Two pilot PAOs identified; ICAZ and ICSAZ).

• Individual PAOs may choose to incorporate public sector competencies into existing qualifications, or take a “streaming” or “specialisation” approach to mirror the competence framework designed by PAAB.

Way Forward – Professionalisation ….

Professionalisation: the journey so far - ICAZ

Launched the 3 months IPSAS certificate on the 10th July 2019 in preparation for thebig thing; the professionalisation (300 senior Gvt Officers to benefit as pilots).

Public Service Commission Training Institutions will provide the Public Sectorgeneric learning facilities and Professional Accountants Organisation (PAOs) willcustomise and implement these for their local context.

Establishment of Accredited Training Offices (ATOs) - Accreditation confirmscommitment to delivering exemplary training by the Public Sector. It confersconfidence in the standard of training the organization will provide.

Four entities have been identified to be recognized as esteemed Accredited TrainingOrganizations (ATOs) for practical trainings and these are:• Ministry of Finance and Economic Development; Accountant General’s Department – Financial

Accountant.

• Office of the Auditor General - Auditors.

• Zimbabwe Revenue Authority – Tax Accountants.

• Bulawayo City Council – Municipal Accountants

Way forward - Sectoral ISP

• Take off positions according to the respective sector

4 sectors were identified and the take off positions and completion timeframe were agreed as follows:

Sector Migration time frame

Central government 2018-2025

Rural Local Authority 2018-2023

Urban Local Authority 2018-2022

Borads, Commisions and Parastatals 2018-2021

Way forward - Audit protocol issues• The objective of these Audit Protocols is to set the transitional provisions for

Central government, public entities, municipal entities, constitutional institutions and Funds.

• Transition to accrual accounting will be a learning process for auditors and the entities. Auditors will need to understand the reporting framework and the effect this will have on the audit opinion. It is good practice for entities to include input from, and feedback to, their auditors at all stages of the transition.

• The planned approach should be discussed and agreed with auditors at an early stage so that the audit approach can be developed. This also has the added advantage of: sharing expertise with audit bodies strengthening the entity’s project planning as it incorporates an agreed audit

approach, checkpoints and milestones with the Finance Ministry allowing auditors to be involved with overall implementation planning

Key Actions in 2019• Developing the National Accounting Policy

• Developing the Accounting Procedures Manual

• Developing the Financial Reporting Manual (see KA6, 2018). (National Trigger Point 2)

• Chart of Accounts for compliance with GFSM 2014 and IPSAS

• IFMIS - PFMS configured to produce accrual based financial reports.

• Ongoing work on resolution of existing issues to remove audit qualifications.

• Pilots start comprehensive physical asset stocktake. For larger ministries and those with more complex functions, this may take several months.

Revenue (taxes and duties) collecting entities start planning the implementation of IPSAS 23.

• Pilot entities produce Process and Procedure Instructions reflecting the requirements of accrual accounting. (National Trigger Point 2)

• Asset valuation exercise (pilot entities) begins (dependant on decisions made under KA4A).

• Training – practical IPSAS.

• Training – updated PFMS (Chart of Accounts).

• Training – finance for non-finance managers

Summary of Key ActionsAction Report ref 2018 2019 2020 2021 2022 2023 2024 2025+

Effective communication 5.4

Change management 5.4

Monitoring and reporting

Legis lation 2.1.12

ICT - PFMS changes 2.1.4-2.1.10

ICT - Chart of Accounts 7.2

ICT - Consol idation 6.3.7

Accounting Pol icies 8.2

Financia l Reporting Manual 8.3.1

Pol icy/procedures guidel ines 8.1.2, 8.3.4

Governance Manual 8.3.3

Legacy issues 3, 6.2

Asset inventory 6.3.2, 8.2.2

Asset va luation 8.2.2

Debt and reserves/

financia l assets and

l iabi l i ties6.3.4

Employee benefi ts 6.3.5

Opening balances 9.3.4

Dry run Accounts 9.3

Ful l accrual Accounts 2.5.2

Taxation revenues 6.3.6

Tra ining project 10

THE END