ICAB-CAPA
INTERNATIONAL CONFERENCE
on
STRENGTHENING BANGLADESH PUBLIC SECTOR ACCOUNTING
AND AUDITING - GLOBAL REFORMS AND THE WAY FORWARD
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Keynote Paper on
“STRENGTHENING PUBLIC SECTOR ACCOUNTING AND
AUDITING IN BANGLADESH”
ANWARUDDIN CHOWDHURY
Council member & Past President ICAB
Director CAPA Board
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ACCOUNTABILITY ISSUES
Agencies In Democratic System:

Legislative Branch

Executive Branch

Judiciary
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LEGISLATIVE BODIES

Parliament

Public Accounts Committee

Public Undertakings Committee

Parliamentary Standing Committees
 Comptroller and Auditor General

All the Law Courts
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EXECUTIVES
 Prime Minister
 Ministers
 Secretaries of The Ministries
 Executives of The Government Agencies
 Accounts Offices
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ACCOUNTABLE FOR WHAT?

Accountability for Stewardship of Financial Resources
 Accountability For Efficiency and Economy of Operations
 Accountable for Faithful Compliance Adherence to Legal
Requirements & Administrative Policies
 Accountability for Results of Government Activities
Reflected in Accomplishments and Effectiveness
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ACCOUNTABILITY FRAMEWORK
Parliament
President
SAI (CAG)
PA Committee
Audit Reports
Pertinent issues on Accountability:

Audit objections so far disposed off by the PA Committee

What actions so far taken on PA Committee's

Have there been improvements ?
recommendations?
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LEGAL JURISDICTION OF PUBLIC SECTOR AUDIT
Government / Public Sector
Organisations
Government Ministries
Departments/Divisions/Directorates
Applicable Laws
Constitution
Constitution
Audit
authority/by
C AG
CAG
Autonomous /Semi Autonomous Bodies CAG Addl. Functions Act.
CAG CA firms
Local Authorities
Relevant laws
CAG, CA Firms
State Owned Banks and DFIs
CAG Addl. Functions Act.
CAG, CA firms
Government Owned Entities
CAG Addl. Func /CA ‘94 CAG, CA Firms
Nationalised Industries
Nationalisation
Order,1972
CAG Addl Func Act-74
Donor
Constitution
Foreign Aided Projects
Govt. Educational institutions/
Hospitals etc.
CAG, CA Firms
CAG, CA firms
CAG
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LEGAL FRAMEWORK FOR PUBLIC SECTOR AUDIT
 Bangladesh Constitution (1972)
 C & AG’s (Additional Functions) Act (1974)
 MOF Executive Order -CAG Estd. (1985)
 Nationalization Orders (1972)
 Denationalization Orders (1982)
 Relevant Enactments/Presidential Orders
 Companies Act (1994)
 Bank Companies Act (1991)
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OCAG ORGANOGRAM
CAG Office
DCAG (Senior) Gr. II
Bangladesh Railway Finance
Department
ADG (Finance) Bangladesh Railway
(BR) Gr. II
CGDF Gr. II
JDG (Finance), (BR)
Gr. III
SFC (Army)
Gr. III
FA & CAO (East), BR Gr. III
SFC (Navy)
Gr. III
DCAG (A&R) Gr. III
DCAG (Procedure)
Gr. III
Defence Finance
Department
FA & CAO (West), BR Gr. III
FA & CAO (Project), BR Gr.
III
Addl. FA & CAO BR-3
Gr. IV
A&R
=
Accounts and Reports
ADG
=
Additional Director General
BR
=
Bangladesh Railway
CGDF
=
Controller General Defence Finance
DCAG
=
Deputy Comptroller and Auditor General
DG
=
Director General
FA & CAO =
Financial Adviser & Chief Accounts Officer
FC
=
Finance Controller
JDG
=
Joint Director General
SFC
=
Senior Finance Controller
SFC (Air Force)
Gr. III
SFC (Defence Works)
Gr. III
SFC (Defence Purchase)
Gr. III
Audit Directorates
DG
Commercial Audit Directorate, Gr. III
Training Academy
DG Financial Management
Academy, Gr. II
DG
Local and Revenue Audit Directorate,
Gr. III
DG
Post, Telegraph & Telephone Audit
Directorate, Gr. III
DG
Works Audit Directorate
Gr. III
DG
Railway Audit Directorate
Gr. III
DG
Civil Audit Directorate
Gr. III
DG
Foreign Aided Projects Audit
Directorate, Gr. III
DG
Defence Audit Directorate,
Gr. III
DG
Mission Audit Directorate,
Gr. III
DG
Performance Audit Directorate,
Gr. III
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GOVT / PUBLIC SECTOR FINANCIAL ACCOUNANTABILITY
Stakeholders
Govt. Agencies
Constitution
SAI - C&AG BD
CAG FUNCT ACT-1974
Ownership
Citizens
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FINANCIAL ACCOUNANTABILITY OF
LOCAL GOVERNMENT AUTHORITIES
Stakeholders
Municipal Bodies
Ordinances
C&AG Auditor
MLGRDC
Ownership
Management
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PUBLIC SECTOR PURVIEW
IPSASB Framework
“Public sector refers to Governments, Regional Government, Local
Governments & Related Government entities including Agencies,
Boards, Commissions & Enterprises”
Bangladesh Public Sector Coverage
Public Sector Covers all Arena of Public Services Provided by the
Following Agencies:
 Government Ministries









Divisions /Directorates / Departments
Government Sub-Ordinate Offices
Local Government Authorities
Autonomous/Semi-Autonomous Bodies
Public Sector Corporations
Foreign Aided Projects (SCOPE/SPEMP B)
State Owned Enterprises (SOEs)
State Owned Bank (SOB)
Hospitals/Educational Institutions etc.
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IMPORTANCE OF FINANCIAL REPORTING SYSTEM FOR
GOVERNMENTS / PUBLIC SECTOR

Essential for Increased Accountability and Transparency in
Use of Public Funds

Developing Public Sector Awareness of Govt. Spending

Credibility of Financial Information for Public Trust

Timeliness of Financial Information for Good
Governance and Decisions

Increased Credibility for Attracting FDI

Assurance to Development Partners

Improved Sovereign Rating Awards

Efficient Financial Reporting System for Economic
Development and Public Welfare.
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PUBLIC SECTOR AUDITOR’S ROLE:

Determining Oversight

Facilitating Foresight

Increasing Insight

Conducting Objective Independent Financial Audit

Conducting Performance/VMA Environment and IT Audit

Enhancing Economy, Efficiency and Effectiveness of
Resources Utilization of Audit Entities

Meet Expectations or Development Partners/Fund Provider’s

Ensuring Transparency of Financial Information

Assuring Accountability of Management Decisions

Combating Corruption, Misuse & Wastage
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PUBLIC SECTOR AUDIT FOCUS
 Emphasis on Expenditure
 Availability of Budget
 Authorisation By Competent Authority
 Payment Acknowledged By Right Person
 Government Rules And Procedures Complied
 Expenditures Properly Classified
 Justification Of Expenditures
 Emphasis on Cash Expenditures And Cash Income Not on Accruals (Cash Basis IPSAS)
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FINANCIAL STATEMENTS UNDER CASH/ACCRUAL
REPORTING SYSTEMS
Cash Basis of Accounting
 Cash Flow Statement
 Statement of Accounting Policies and Explanatory Notes
Accrual-basis Accounting





Statement of Financial Position
Statement of Financial Performance
Cash Flow Statement
Statement of Changes in Net Assets/ Equity
Accounting Policies and Explanatory Notes to FS
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ALTERNATIVE BASES OF ACCOUNTING
Cash
Objectives
Cash Basis
Modifications
to the Cash
Basis
Accrual
Modifications
to the Accrual
Basis
Accrual Basis
Compliance with legally
adopted budgets
Yes
Yes
Yes
Yes
Compliance with legal and
contractual requirements,
including spending limits.
Relating to
cash
requirement
and limits.
Cash and
near cash
requirement
s and limits.
Cash and
financial
resources
requirements
and limits.
Cash and economic
resources
requirements and
limits.
Sources, allocation and
uses of financial
requirements.
Cash
resources
Cash and
near cash
resources.
Cash and
financial
resources.
Cash and financial
resources.
Financing and cash
requirements.
Cash
resources
Cash and
near cash
resources.
Cash and other
financial
requirements.
Cash and other
financial
requirements.
Ability to finance activities
and to meet liabilities and
commitments.
From cash
From cash
and near
cash
From financial
resources
From economic
resources.
Financial condition and
changes therein.
Cash
position
Cash and
near cash
position
Financial
resources.
Financial and
economic resources.
Financial performance in
terms of service costs.
Information
not reported
Information
not reported
Limited
information
reported.
Provides information
necessary to assess
performance.
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Source: Government Financial Reporting, Study 11, issued by IFAC Public Sector Committee.
GOVERNMENT PUBLIC SECTOR REPORTING
- CASH / ACCRUAL ACCOUNTING
Cash Flows Budget
Cash Flows
Actuals
Revenues, Expenses
Revenues, Expenses
Budget
Actuals
Assets, Liabilities
Assets, Liabilities
Estimate
Actuals
Cash
Accounting
(SE)
Accrual
Accounting
(DE)
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CASH-BASIS IPSAS: TRANSITION STEP TO ACCRUAL IPSAS
(OCAG BANGLADESH)
Cash-Basis
IPSAS
(Transition
Step)
Accrual
Accounting
IPSAS 1-32
(Accrual DE)
Current
policies
(Cash SE )
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ACCRUAL AND CASH ACCOUNTING : AN INTEGRATIVE APPORACH
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ROLE OF INTERNATIONAL STANDARDS SETTING BODIES

IFAC
IPSAS Board = IPSAS
IAAS Board = ISA

IASB = IFRS

INTOSAI = ISSAI
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(MOSAIC - INTOSAI / IFAC )
International Public Sector Accounting Standards IPSAS 2011 (Appendix I)
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Cash Basis IPSAS-Financial Reporting Under Cash Basis Accg.

Accrual Basis IPSAS-32 Standards
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ROLE OF ACCOUNTANCY PROFESSION (ICAB)

Advocacy for Awareness Development

Collaboration with CAG & Development Partners

Impart Skills Development Training for Accrual Accounting,

Preparation Double Entry Financial Statements

Implementation of IPSAS, ISSAI, IFRS, ISA
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Organize Seminars/Workshops on Relevant Issues

Provide Relevant Inputs to Standards Setters

Devise Sustainable Strategies for Future Development
Public Sector Financial Management.
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STATUS OF IMPLEMENTATION OF ACCRUAL-BASED
ACCOUNTING IN SOUTH ASIAN COUNTRIES
INDIA

Central & Provincial Government – Cash Accounting

Local bodies moving to Accrual-Based Accounting

ICAI Technical Support for Accrual-Based Accounting

Government Accounting Standards Advisory Board (GASAB)
Developing Accrual-Based Accounting Standards
PAKISTAN

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Federal & Provincial Government – Cash Accounting
Local Bodies Moving to Modified Cash Accounting
New Accounting Model Implemented for Accrual Accounting
CGA & AG cognizant of IPSAS
Contd.
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STATUS OF IMPLEMENTATION OF ACCRUAL-BASED
ACCOUNTING IN SOUTH ASIAN COUNTRIES
BANGLADESH
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Government Agencies – Cash Accounting Moving to Cash IPSAS
Local Bodies - Cash Accounting
ICAB Committee on Government Accounting
ICAB Members Cognizant of IPSAS
SRI LANKA
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Central Government & Provincial Councils – Cash Accounting
Local Bodies using Accrual-Based Accounting partially.
ICASL’s Developing Accrual-Based Accounting Standards.
NEPAL
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
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Cash-Based Government Accounting System
IPSAS are Included in the Curriculum of ICAN
Plans for Accrual-Based Accounting System
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NEED FOR REFORMS

Inducing Political Will/Commitment and Mindset Changes

Encouraging Parliamentary Scrutiny

Strengthening Public Sector Financial Management

High Quality Financial Reporting & Credible Auditing

Enhancing Accountability & Transparency in Govt. Decisions

Increasing Public Credibility of Govt. Performance

Meeting Donor Expectations

Capacity Building & Institutional Development (Training)

Implementation of Accrual Accounting.
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Implementation of Accounting/ Auditing Standards

OCAG Organization Reforms

Technology Orientation
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CHALLENGES

Political Will /Commitment of Government.

Mindset Changes in Civil Administration

OCAG Capacity Building & Institutional Development

Professional Skills Development

Financial Resources Availability

Support of Development Partners

Implementation of Accrual Accounting System.

Preparation of FS on Double Entry Principles

Implementation of IPSAS - Cash and Accrual

Application of Auditing Standards - ISSAI/ ISA
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Valuation of Govt. Assets / Determination of Liabilities

Effective Implementation of TA Projects (SCOPE,SPEMP B)
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POLICY ISSUES AND RECOMMENDATION
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Composition of High Powered Task Force

Legislative Changes : Audit Act Enactment

Effective Parliamentary Scrutiny Process

Independent and Effective SAI (CAG)

Separation of Accounting & Auditing Functions

Capacity Building and Institutional Development of OCAG

Adequate Appropriate Application of IPSAS & ISSAI

Customization of International Standards - Adaptation

Conversion to Accrual Accounting – Pilot Projects

Timeframe Fixation for Double Entry & Accruals IPSAS

Dedicated Training Program/ IT Orientation of OCAG

Strategic Partnership Between SAI(CAG) & Profession (ICAB)

Proactive Role by Accountancy Profession (ICAB)
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THE WAY FORWARD
 Policy Decisions at Legislative Level
 Enabling Environment For Cooperation
-
Formation of Task Force
 Capacity Building /Strengthening Institutions
 Development of Action Plan
-
Main Directions -Responsibility - Time Frame
 Progress Towards Accrual Accounting
 Develop Standards, Methods and Practices
 Synergize Strategic Partnership Between CAG and ICAB
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MESSAGE
 Develop Awareness for Mindset Changes
 Stimulate Political Will & Commitment for
Implementation of Reforms Agenda
 Establish Strategic Sense of Direction

Catalyze Leadership Decisions for Strengthening
Public Sector Accounting and Auditing With Global
Best Practices
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APPENDIX
INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) 2011
IPSAS 1—Presentation of Financial Statements
IPSAS 2—Cash Flow Statements
IPSAS 3—Accounting Policies, Changes in Accounting Estimates and Errors
IPSAS 4—The Effects of Changes in Foreign Exchange Rates
IPSAS 5—Borrowing Costs
IPSAS 6—Consolidated and Separate Financial Statements
IPSAS 7—Investments in Associates
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
8—Interests in Joint Ventures
9—Revenue from Exchange Transactions
10—Financial Reporting in Hyperinflationary Economies
11—Construction Contracts
12—Inventories
13—Leases
14—Events after the Reporting Date
15—Financial Instruments: Disclosure and Presentation
Contd.
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IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
IPSAS
16—Investment Property
17—Property, Plant, and Equipment
18—Segment Reporting
19—Provisions, Contingent Liabilities and Contingent Assets
20—Related Party Disclosures
21—Impairment of Non-Cash-Generating Assets
22—Disclosure of Financial Information in Government Sector
23—Revenue from Non-Exchange Transactions (Taxes and Transfers)
24—Presentation of Budget Information in Financial Statements
25—Employee Benefits
26—Impairment of Cash-Generating Assets
27—Agriculture
28—Financial Instruments: Presentation
29—Financial Instruments: Recognition and Measurement
30—Financial Instruments: Disclosures
31—Intangible Assets
32—Service Concession Arrangements - Guarantor
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HAPPY PUBLIC SECTOR FINANCIAL MANAGEMENT
LET’S GO AHEAD
AND
DEVISE SUSTAINABLE STRATEGIES FOR
STRENGTHENING PUBLIC SECTOR ACCOUNTING
AND AUDITING IN BANGLADESH
THANK YOU
VERY MUCH INDEED
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