Improving the system of accounting and reporting for the public sector on the basis of the IPSASSep 23, 2015
Improving the system of accounting and reporting for the public sector on the basis of the International Public Sector Accounting Standards (IPSAS) is one of the directions of the budget system reform in Uzbekistan.
The reform is necessary as it is the system of accounting that reflects information needed for making qualitative and timely management decisions. The unification of accounting and reporting standards promoted the recognition of IPSAS, based on International Financial Reporting Standards (IFRS), as a uniform and comprehensive system of the international accounting standards for developing comparable and qualitative financial statements in public sector.
Applying IPSAS allows improving quality of financial information, helps to provide more opportunities for an assessment of results of public sector’s activity and to increase the level of transparency, improves management of state assets by increasing the reliability and completeness of information, and also provides possibility to compare public financial statements with the international indicators.
Along with the above reasons, necessity of transition to IPSAS is caused by practical problems in the legal base. In particular the assessment of legal base, taking into account criteria of application of IPSAS, revealed its following shortcomings:
1) Lack of clear bases for information disclosure
In the actual legislation the order of reflecting the operations in accounting is insufficiently accurately regulated. It was proposed that all questions of maintaining the budgetary account would be regulated in the Instruction for accounting in budget organizations; however, in practice it was impossible to consolidate all aspects of financial and economic activity of budgetary establishments in one instruction.
2) Lack of order in accounting specific financial, budgetary and off-budget operations, particularly, the operations of the state organizations related to agricultural activity, currency transactions, and etc.
3) Multiple accounting regulations which duplicate some aspects of the accounting and reporting.
4) Impossibility for external users to analyze statistics of public finance. The operating system of accounting doesn't allow forming the information that meets the requirements of external users. In particular, the form of reports on execution of the State Budget differs from the form of the reports provided to the IMF according to requirements of Government Finance Statistics Manual -2011.
5) Lack of consolidation of all accounts of public finance. Namely, the accounting of the state budget and all off-budget funds is kept separately now.
The necessity of adapting IPSAS has been confirmed by both national programs and the international estimates of the evolution of the system for public finance management in the Republic of Uzbekistan. The strategy to reform public finance management in 2007-2018 defines the development and introduction of national accounting standards, corresponding to IPSAS, as a key problem of the accounting reform. This need is also envisaged in the draft Budgetary code of the Republic of Uzbekistan prepared within the UNDP supported project "Budget system reform in Uzbekistan".
Following IPSAS is the most important indicator for assessing public finance by applying Public Expenditure and Financial Accountability (PEFA) system. Taking into account this criteria, during the latest assessment of public finance in Uzbekistan, the World Bank experts pointed out partial discrepancy between financial information and the requirements of the international standards of the accounting indicating that information provided was incomplete.
For competent introduction of IPSAS, in 2013-2014 the joint Project of UNDP and the Ministry of Finance "Budget system reform in Uzbekistan" rendered assistance in launching the reform of accounting and reporting in public sector. The Project has developed the Concept to improve the system of accounting and reporting on the basis of IPSAS. Namely, twelve draft Standards of the Budget Accounting (SBA) have been prepared. Putting them into operation of accounting all over the country will require training of experts in applying these standards, including training and retraining of accountants and financial officers in the budget sphere, reorientation of training programs in the secondary and higher educational institutions, and also updating and development of educational and methodical support to various categories of specialists trained.
The "Budget system reform in Uzbekistan" Project held a number of working meetings involving over 50 specialists of the ministries, budgetary organizations, teachers of higher educational institutions, experts of National association of accountants and auditors involving an international expert - the regional adviser for fiscal policy of the IMF. These meetings were organized to discuss the issues of reforming the accounting system on the basis of IPSAS.
For the audience of the Training center under the Ministry of Finance of the Republic of Uzbekistan the project organized an introductive workshop on adapting IPSAS to the national system of accounting and reporting. The workshop presented the methodology of IPSAS, opportunity and conditions of adapting the standards to the accounting system in Uzbekistan and the Concept to improve the system of accounting and reporting constructed on this basis. Practical issues were also discussed including the issues of consistency of the draft standards of budget accounting developed by the project with the international standards taking into account the specifics of the system of accounting and reporting in Uzbekistan.