Africa-Press – Tanzania. TANZANIA is one out of only two African countries that have adopted accrual accounting system in year-end financial reports, in efforts to promote efficient and effective use of public funds.
According to the International Public Sector Financial Accountability Index, 2021 Status Report, Tanzania is among 30 per cent of jurisdictions reporting on accrual based on International Public Sector Accounting Standards (IPSASs) by last year – up 6 per cent since 2018.
The East African second largest economy is the only one in East and Central Africa to have migrated from cash accounting to accrual accounting, where revenues or expenses are recorded when a transaction occurs rather than when payment is received or made.
The report prepared by the International Federation of Accountants (IFAC) and the Chartered Institute of Public Finance and Accountancy (CIPFA), shows that Nigeria is another country in Africa that has adopted the accrual accounting system.
By providing a comprehensive view of government finances, accrual reporting helps ensure that expenditure of public funds is transparent, public officials are held accountable and future liabilities are recognised officially and planned for properly.
The system is meant to improve the quality of general purpose financial reporting by public sector entities leading to better informed assessments of the resource allocation decisions made by governments, thereby increasing transparency and accountability.
IFAC and CIPFA’s International Public Sector Financial Accountability Index collects, verifies, and analyses current financial reporting bases and frameworks used by federal and central governments around the world. It also provides an overview of public sector reporting trends.
Analysing data captured by the Index, the 2021 status report provides an update on the progress made since 2018 in implementing accrual-based reporting.
It gives a snapshot of the position in 2020 and looks ahead by using currently available data to forecast the position in 2025 and provide indicative projections of the position in 2030. The 2020 Index contains data from 165 jurisdictions, compared to 150 in the 2018 Index.
The 2018 Index data has therefore been restated to provide comparability with the 2020 Index data. Commenting, Dr Neema Kiure-Mssusa, a member of International Public Sector Accounting Standards Board (IPSASB) and former Vice- Chairperson of the National Board of Accountants and Auditors (NBAA) said migration from cash accounting to accrual accounting system marked an important milestone in efforts to improve management of public finances.
Accrual reporting which records economic substance of transactions when they occur rather than when cash settlement happens is fundamental to good decision making, transparency and accountability, she said.
Dr Kiure-Mssusa said financial reports prepared on an accrual basis allow users to assess accountability of all resources the entity controls and their use.
They also allow users to assess the financial position, financial performance and cash flows of the entity and allow users to make decisions about providing resources to or doing business with the entity.
She said Tanzania adopted International Public Sector Accounting Standards from 1 July 2004, for all public sector entities and the move was underpinned by the wholesale adoption of International Accounting Standards by the National Board of Accountants and Auditors (NBAA).
She said the Ministry of Finance and Planning then decided to migrate to the Accrual- Based IPSASs and by 2015 Tanzania had complied with IPSASs Accrual, consolidating 614 government entities then, and performing elimination of inter-entity transactions. The consolidation and elimination tasks were accomplished in June 2015.
Tanzania has begun with year-end financial reports only, she said noting only five governments worldwide have managed to accrual budgeting.
The East Africa’s second largest economy is regarded as an IPSAS implementation success story, she said.
