KAMPALA — The International Public Sector Accounting Standards Board (the ‘Board’) works to improve public sector financial reporting worldwide through developing and maintaining IPSAS and other high-quality financial reporting guidance for the public sector.
Adoption and application of IPSAS in Uganda
The Institute of Certified Public Accountants of Uganda (ICPAU) is the official accountancy standard-setting body in Uganda. One of the functions of the Council under Section 12(i) of the Accountants Act, 2013 is to “issue and (or) adopt internationally accepted accounting and auditing standards, promote their usage in Uganda, and make suitable adaptation where necessary’. The ICPAU therefore determines the applicable financial reporting standards for use in Uganda.
The Institute is equally obligated as a member of the International Federation of Accountants (IFAC) to comply with IFAC’s Statements of Membership Obligations (SMOs), which aim at assisting Professional Accountancy Organizations (PAOs) like ICPAU, to ensure high-quality performance by professional accountants. Of particular interest in relation to IPSAS standards, is SMO 5_International Public Sector Accounting Standards and Other Pronouncements. SMO 5 sets out the requirements of an IFAC member body with respect to International Public Sector Accounting Standards (IPSAS) and other pronouncements issued by the Board.
ICPAU has fully adopted and implemented the IPSAS as guiding standards for the preparation of general purpose financial statements in the public sector. The Institute adopted the standards with effect from FY 2006/2007. The Council communicated adoption of these Standards through correspondence with the Accountant General‘s Office and the Office of the Auditor General.
The Public Finance Management Act 2015 (PFMA), mandates the Accountant General to issue guidelines on the accounting standards to be used in preparation of the financial statements of the various votes. Section 3 of the PFMA interprets Generally Accepted Accounting Practice (GAAP) to mean accounting practices and procedures recognized by ICPAU and approved by the Accountant General as appropriate for recording and reporting the financial information of a vote.
The Institute therefore has shared responsibility for the adoption of public sector accounting standards, and plays a leading role in promoting their usage in Uganda. Although ICPAU reports that all IPSAS have been adopted without modifications in Uganda, the government is currently implementing a modified accrual-basis form of accounting while committing to the full adoption and implementation of accrual-basis IPSAS.
The government and the ICPAU, have developed a strategic roadmap towards implementation of accrual-basis IPSAS. Together, they have operationalized a Public Sector Accountancy Working Group (PSAWG), that will allow continued working relationship with the key stakeholders in public sector reporting, including Offices of the Accountant General, the Auditor General, Internal Auditor General and the Local Government Finance Commission, on the road to implementing full accrual-basis IPSAS.
Why implement full accrual-basis IPSAS?
The current economic order has strengthened the countries’ interdependence and, at the same time, required a shared financial information standard. This has been influenced by technological progress in the communication area, advances in transportation means and the growth of international trade, which have increasingly approximated the world in recent decades.
As a result, a call for more universally applicable accounting standards becomes more relevant. Below are some of the advantages associated with the IPSAS accounting standards:
Improved financial reporting – By requiring the presentation of useful financial information (i.e. information that is relevant, reliable, comparable etc.), high quality global financial reporting standards, such as the IPSAS, improve the efficiency of the allocation of resources.
Enhanced comparability – Accrual-basis IPSAS applied consistently, enhance the comparability of financial information. Accounting differences can obscure the comparisons that users need to make. Working with an internationally accepted set of standards will support the comparability of accounts both internally (between government controlled entities) and between jurisdictions. This international comparability can further reinforce fiscal credibility, as the country will be able to benchmark its financial performance with international peers.
Improved consistency – Accrual-basis IPSAS also improve consistency and standardization in reporting, which allow for harmonization of public financial management making the information more accessible and comparable as required by regional groupings such as the East African Community, the African Union, etc. Agostino, Drago and Silipo (2011, pp.437- 438) affirm that, if there are economic events of the same kind among countries, then these events should be reported consistently and in similar disclosure models. Thus, the financial statements are molded according to an information standard that permits making more accurate information where IPSAS is applied.
Strengthened transparency and accountability – Transparent financial reports increase accountability, improve public sector financial management and better decision-making, and ultimately superior value for money for taxpayers. This also facilitates public scrutiny as the information contained in financial statements prepared using the IPSAS is more complete and accurate. Users are provided with full accountability of the government resources and how they were deployed. Pina and Torres (2003, p. 335) consider that the justification to apply the international accounting standards in the public area is that, through this standard, the public entity can provide more precise information about the measuring of equity goods and about the costs of public services.
Adoption and Implementation Challenges
Despite the strong benefits described above, fully adopting and complying with accrual IPSAS standards in Uganda has not yet been achieved, and requires sustained effort. IPSAS implementation in Uganda will require government to have a clear strategy, with realistic timescales, milestones and resources.
Some of the current challenges pertaining to IPSAS adoption and implementation in Uganda include;
Broader change management and programme management issues – not all government systems and administrative machinery may support IPSAS adoption and implementation. As a result, the programme may be perceived as inconveniencing to some.
Poor IT infrastructure – in terms of availability, access and spread across the country, to allow for integration of systems and consolidation of accounts that is required by the accrual-IPSAS. As a result, and with the creation of new districts and resultant local government units, manual accounting systems have persisted.
Apparent complexities and weaknesses in the IT systems – some terminologies used in the IPSAS may not apply to the Government’s financial reporting system due to the uniqueness of some financial operations and the reliability of government’s financial management information system (IFMS).
Bad record keeping and scantiness of core accounting information – required to comply with accrual IPSAS especially at the Lower Local Government level.
Cost to implement – including costs of rewriting accounting manuals to incorporate IPSAS terminologies and also conform to local requirements; education and training of staff, identification and valuation of assets and liabilities, etc.
Lack of adequate qualified accountants – many public sector entities and government agencies still lack the necessary personnel to adequately carry out the changes required by IPSAS.
ICPAU’s role in promoting the adoption and usage of the IPSAS
ICPAU supports members’ understanding and professional competence in implementing IPSAS standards through a number of ways including but not limited to the following;
Raising awareness and knowledge of the IPSAS, and providing periodic summaries to members on Exposure Drafts and Consultation Papers issued by the Board.
Providing training on IPSAS standards and ensuring that initial professional development and examination syllabi are updated to reflect any updates/ changes in these standards.
Sharing updates on new and revised standards, as well as implementation guidance and other resources prepared and issued by the Board.
Providing online technical support to members to enhance their knowledge and encourage application of the standards.
Updating training and continuing professional development requirements to incorporate new and revised standards, and provide the necessary training.
Increasing awareness of the need for transparent financial reports in the public sector, through the annual Financial Reporting (FiRe) awards, held to recognize excellence in financial reporting under the IPSAS Reporting Category.
ICPAU also participates in the international standard-setting process by providing comments on Exposure Drafts and consultation papers to the Board. These comments are generally drawn from the ICPAU members’ responses on the respective exposure drafts/consultation/discussion papers. The Board is currently consulting on three (3) Exposure Drafts 70 – Revenue with Performance Obligations, 71 – Revenue without Performance Obligations and 72 – Transfer Expenses, aimed at developing new standard-level requirements and guidance on revenue to amend or supersede guidance that is currently located in IPSAS 9, Revenue from Exchange Transactions; IPSAS 11, Construction Contracts; and IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers).
ICPAU fully adopted and implemented the International Public Sector Accounting Standards (IPSAS) as guiding standards for use in the preparation of general purpose financial statements in the public sector. IPSAS is therefore one of the generally accepted frameworks adopted in Uganda.
As the world recovers from the far reaching effects of the Coronavirus pandemic, governmental accountability and transparency in its reporting of assets and liabilities continues to take centre stage. The PSAWG is working towards full adoption and implementation of accrual IPSAS in order to reap the benefits.
This writer, CPA Lydia Nankabirwa, is a Technical Officer at Institute of Certified Public Accountants of Uganda