Zimbabwe’s oldest and largest professional accountancy organisation, the Institute of Chartered Accountants of Zimbabwe (ICAZ) believes the adoption of the International Public Sector Accounting Standards (IPSAS) will be a ‘game changer”.
The country has adopted the IPSAS implementation plan and targets to fully implement it by 2025 to enhance financial accountability in central government, urban and rural authorities.
The development comes at a time when Zimbabwe has been admitted under the International Monetary Fund’s Staff Monitored Programme. This means the steps taken by government to have a reporting framework that captures all transactions and ensures full disclosure in financial reports audited by Auditor General, is a welcome development.
Central government has been using the cash accounting system, a method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made.
The implication has been that key transactions entered into but not settled in cash are excluded from the financial reports for example receivables and liabilities. These balances not being reported on are very important for decision making and for users to ascertain the
financial position or health, in particular funders.
A typical case in point is the Mozambique government case where international funders halted financial assistance to the country after they discovered that it had not disclosed debts of over US$ 1 billion.
Now, government wants to migrate towards adoption of an accrual-based reporting system, IPSAS, to ensure great transparency and accountability in how government records, reports utilising the wealth of financial data it receives and processes at any given time.
Government has since roped in ICAZ to help in the revamping of the public sector’s financial management system and professionalisation of the public sector, to enhance performance and overall service delivery. ICAZ, together with the Chartered Accountants Academy, introduced an IPSAS certificate course. ICAZ will also be offering training and workshops to ensure proficiency in IPSAS by public sector practitioners to aid in meeting the target of full IPSAS adoption by 2025.
The move will also ensure that government accounting personnel are qualified and experienced to deliver what is expected of them.
Zimbabwe’s central government, urban and rural authorities spend a large sums of public funds on a range of services, meaning a stronger accounting system in the public sector will help government meet tax payers’ demands for transparency and accountability. Fixing Zimbabwe’s public sector is key because a strong accountancy backbone is crucial
to the health of Zimbabwe’s economy.
The new accounting system is expected to contribute to better use of public funds. Enhanced transparency is part of the core focus of the accounting profession. This can support in solving endemics issues of corruption and financial mismanagement and drive economic development.
Some parastatals and other state institutions had moved away from cash basis of accounting to the accruals basis under IFRS.
While this was noble, the IFRS based reporting framework is better suited for entities with a profit motive as opposed to those entities operating based on a specific mandate as is the case in the public sector where service provision is the key mandate for most.
In-order to come up with a consolidated public sector position, there was need for a uniform framework of accounting so that a consolidated financial position for the whole public sector can be achieved. IPSAS adoption will assist in this regard.
Macdonald Chitauro is a technical manager at ICAZ