FCGO to roll out new public accounting software by next fiscal

KATHMANDU:

The government is mulling over rolling out a new public sector accounting system of international standard in all the ministries by next fiscal year, in a bid to get detailed information on public spending and consolidate financial statements produced by various bodies.

The new accounting system, called the Nepal Public Sector Accounting Standard, is cash-based and developed in line with the International Public Sector Accounting Standard. It is currently being tested at the Ministry of Women, Children and Social Welfare and the Ministry of Physical Infrastructure and Transport.

“We are very happy with the test results and are planning to introduce it at all the ministries within the next fiscal year,” Financial Comptroller General Shankar Prasad Adhikari told The Himalayan Times. The software would be rolled out by the Financial Comptroller General Office (FCGO).

One of the benefits of the new system is that it will consolidate the financial statements prepared by various state bodies and provide detailed information on their spending.

Currently, various government agencies are preparing separate financial statements based on the number of programmes they implement. As a result, over 19,000 financial statements are being produced per year.

Yet, these statements do not provide a complete picture of revenue, expenditure and financing of various government agencies, FCGO officials said.

Once the new system is rolled out, the number of financial statements prepared by various state bodies is expected to come down to around 5,000.

This, on the one hand, raises the efficiency of public financial management, which will help in decision-making processes, and, on the other, enables the government to better track its spending.

One of the problems that the government is currently facing is the inability to determine exact recurrent and capital expenditure. This is because the existing system cannot automatically identify recurrent spending that is capital in nature.

For instance, money extended to Melamchi Water Supply Development Board, an autonomous body, may have been used to build tunnels or other physical infrastructure — spending which is capital in nature. But these spending is also labelled as ‘recurrent’ in the government’s account books because funds extended to autonomous bodies like Melamchi are booked as grants. And all grants extended by the government come under the category of recurrent spending even if they are capital in nature.

Application of the new accounting standard will also give a boost to the country’s image as the system is of international standard.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants has long been recommending that Nepal implement internationally-recognised cash-based accounting system. Although the government is maintaining its accounts on cash basis since the 1960s, it is not compatible with cash-basis accounting standard developed by the IPSASB.

Once the internationally-recognised cash-based accounting standard is applied, the IPSASB has recommended that Nepal gradually make a transition to accrual-based reporting because ‘cash accounting can too easily neglect asset management, accumulating arrears, future liabilities like pensions and contingent liabilities like guarantees’.

Source: THT