Govt mulls introducing new accounting system
KATHMANDU:
The government is mulling over introducing a new public sector accounting system of international standard in selected ministries from the next fiscal year, to better track spending of various state bodies and consolidate financial statements produced by them.
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 will be rolled out by the Financial Comptroller General Office (FCGO).
“We are currently testing the new system using data of fiscal years 2010-11 and 2011-12 of the Ministry of Women, Children and Social Welfare and the Ministry of Physical Infrastructure and Transport,” deputy financial comptroller general Babu Ram Gyawali told The Himalayan Times. “Once the pilot test concludes in the next
two months, we will conduct a cost-benefit analysis and decided on when and where to introduce the new system.”
One of the benefits of the new system is that it will consolidate the financial statements prepared by various state bodies.
Currently, various bodies are preparing separate financial statements based on the number of programmes they are implementing. As a result, over 19,000 financial statements are being prepared per year. “However, these statements do not show a complete picture on revenue, expenditure and financing of the bodies that are implementing the programmes,” spokesperson of the Office of Auditor General, which is supporting the FCGO in implementing the system, Babu Ram Gautam said.
Once the new system is rolled out, the number of financial statements prepared by various state bodies will come down to around 5,000, Gautam added. 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.
Currently, the government has not been able to determine its exact recurrent and capital expenditure because the existing system cannot automatically flag 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 are 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 fall under recurrent spending.
“Once the new system is introduced, such problems will be solved and we will be able to determine the nature of spending of every government body,” Gautam added.
Application of the new accounting standard will also give a boost to the country’s image as it 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 a 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
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