Annual Financial Reporting by Governments - what is good practice from sub-Saharan Africa?

  Andy WynneICGFM - www.icgfm.org

ESAAG Annual Conference, Mbabane, SwazilandFebruary 2012

Introduction

Importance of financial reporting

Government’s annual financial statements & report of Auditor General key accountability documents

Parliament sets the annual budget

Accounting Officers accountable to Parliament (and citizens) for financial management

African Capacity Building Foundation – financial reporting

Identifies and collates existing good practice - http://tinyurl.com/esaag2012

Based on a review of the financial statements of 12 countries:

Botswana, Burkina Faso, Ghana, Kenya, Mauritius, Namibia, Nigeria, Rwanda, Sierra Leone, South Africa, Tanzania and Uganda

Expert panel

Expert panel to advice & review the study:

• Reckford Kampanje

• Maru Z Tjihumino

• Joseph Onumah

• Michael Parry

Common statements

• Statement of Receipts & Payments -comparison with the budget (Botswana, Mauritius, Nigeria, Rwanda, Sierra Leone, South Africa, Tanzania & Uganda). May be split recurrent/capital

• Statement of Financial Position -comparison to previous year (Botswana, Mauritius, Nigeria, Rwanda, South Africa & Uganda)

• Consolidated Cash Flow Statement - comparison to previous years figures (Botswana, Mauritius, Nigeria, Sierra Leone, South Africa, Tanzania and Uganda)

Key Qualitative Characteristics

timeliness – are they made public promptly?

understandability – are they clear and key aspects and terms explained?

openness – is the key financial information made available?

consistency – is the information consistent from year to year and between accounts?

Timeliness

Timeliness

• Audited financial statements made public promptly after the year end?

• Presented to parliament within 12 months of the year end

• Issued within nine months - so available when the budget discussed by parliament (Burkina Faso, Mauritius, Tanzania, Uganda & South Africa)

Balance with other aspects

• What is the use of out of date information?

• May conflict with the idea of consolidation or detailed disclosures

• Needs draft financial statements produced within five or six months

• Audit completed in a further three or four months

Understandability

Understandability

• Covering letters from the Minister of Finance and/or Secretary to the Treasury (Mauritius, Nigeria, South Africa & Uganda)

• Commentaries provided by the Accountant & Auditor General (many countries)

• Explanation of key terms (Ghana, Namibia, Rwanda & South Africa)

• Graphs & charts (Burkina Faso, Ghana, Mauritius & South Africa)

Understandability

• Summary of last five years (Burkina Faso, Ghana, Mauritius, South Africa)

• Reference to the law & basis – modified cash (Ghana, Mauritius, Rwanda, South Africa, Tanzania & Uganda)

• Opinion of Auditor General (Botswana, Mauritius, Nigeria, Sierra Leone, South Africa, Tanzania & Uganda)

Understandability

• Listing of entities in the accounts (Tanzania & types in Ghana & South Africa)

• Length - nearly 2,500 pages (Kenya), only 30 pages - main report (Sierra Leone)

Openness

Variances and debt

• Comparison of budget & actual with clear explanations of significant variances

• Government debt:- individual loans (Botswana), - details of interest rates (Mauritius) - relevant exchange rates (Ghana)

• Contingent liabilities (loan guarantees)- individual cases (Mauritius)- summary amounts (South Africa)

Arrears, losses & waste

• Revenue arrears (common)- analysed by MDA, with previous year comparison (Mauritius, Tanzania &

Uganda)

• Payment arrears - common definitions not used (Ghana, Kenya, Sierra Leone, South Africa & Uganda)

• Losses & wasteful expenditure - individual cases (Botswana) - total for each MDA (Tanzania)

Donor assistance

• Financial assistance (loans and grants) received from individual donors often reported (Burkina Faso, Ghana, Mauritius, Rwanda & Tanzania)

- amounts in the local currency and the

currency of the donor (Rwanda)- project or non-cash aid (Burkina Faso, Mauritius & Tanzania)

Private benefits

• Proceeds of privatisation (Rwanda, Sierra Leone & Ghana)

• Outstanding loans, advances & imprests (many countries)

• Salaries etc for senior politicians & officials; reference to asset declarations (five sub-Saharan Africa countries publish)

Published on Internet

• Burkina Faso

• Mauritius

• Nigeria

• Sierra Leone

• South Africa

• Uganda

Consistency

Consistency

• Consistent figures between different statements (Nigeria and Sierra Leone)

• Consistent format from year to year (Mauritius and Sierra Leone)

• Reliable and free from material error

Next steps?

International good practice not codified

Cash Basis IPSAS issued in January 2003

No government has adopted it (although many have tried)

Problems with core requirement to:

• consolidate all controlled entities

• report payments by third parties, e.g. aid in kind (but not from each country)

Next steps?

• Development of guidance on modified cash basis by ESAAG?

• Pilot trials in individual countries?

• Revision of the Cash IPSAS

• Research in South Asia

Questions

Consolidated accounts

Consolidation of:

• government ministries, departments and agencies

• parastatal organisations

and

• local governments?

Structure of public sector accounts

•28

Timeliness of audited financial statements

• IPSAS recommends 6 months, but ‘strongly encourages’ three months

• PEFA – can score ‘B’ with 18mths

• Ensure audited accounts to parliament within 9 months of year end

Cash flow statement

• Required for companies - needed for governments?

• Confusion with Statement of Payments and Receipts?

• What additional information is being provided?

“Keep the accounts simple, but yet be able to show how the government has utilised the resources under its control. That should be the purpose of public sector accounts.”

Teh Ben Chu, former Deputy Accountant General, Malaysia 2008

Andy Wynne

andywynne@lineone.netwww.icgfm.org

Thank you!

Questions or

comments!