Various challenges have faced countries in Africa that adopted IPSAS. Those challenges have been identified in national audit reports and other publicly available documents, including presentations, articles and research reports. Other documents reviewed included annual reports of supreme audit institutions and finance ministries/treasuries.
Ghana has adopted IPSAS for all public sector accounts, beginning from 2016 (Government of Ghana, 2016). However, in recognition of the complexities involved it has encouraged a step-by-step approach to implementation, spanning a five-year period from 2016. The adoption was recommended by the Institute of Chartered Accountants Ghana (ICAG), the Controller and Accountant-General’s Department (CAGD) and the Audit Service. The ICAG has partnered with the Accountant-General’s Office to boost Ghana’s public sector accounting capacity, while the Chartered Institute of Public Finance and Accounting (CIPFA) has partnered with ICAG for the IPSAS roll-out.
Nigeria’s federal government fully adopted IPSAS from January 2016 (Ugwumadu, 2015), but each of Nigeria’s 36 independent states will determine its own implementation period. Under the Financial Reporting Council of Nigeria Act of 2011, Nigeria’s Financial Reporting Council (FRC) is responsible for setting public sector accounting standards which are in line with IPSAS. The FRC developed a roadmap for the phased adoption and implementation of IPSAS at all levels of Nigeria’s federal government (IFAC: Nigeria). Nigeria says it expects IPSAS to assist with attracting foreign investment, improving financial management, transparency and accountability, and in tackling corruption.
While Nigeria is committed to the improvement of financial reporting and accountability, there is more to be done in terms of best practice. Some government agencies have failed to move to IPSAS as required (Premium Times, 2016) and Nigeria’s Accountant General has conceded that the country needs to build accountancy capacity to cope with the demands of IPSAS implementation (World Stage, 2017). One academic study concluded that the quality of financial reporting and accountability in Nigeria’s public sector ‘leaves a lot of room for improvement’ (Akhidime, 2012). There are also on-going challenges in terms of the internal audit function in some entities.
4.3 South Africa
South Africa has partially adopted IPSAS, but is awaiting completion of the Financial Management Information Systems project that supports Generally Recognised Accounting Practice (GRAP) before full implementation can be enabled. Current reporting uses accruals, but is not fully compliant with GRAP standards.
There remain significant problems with the quality of public sector accounts in South Africa, though the number and proportion of qualifications is reducing. The Auditor-General of South Africa (AGSA) has noted that the main reason for qualified, adverse and disclaimed opinions is inadequate or missing documentation for amounts disclosed in the financial statements (Auditor-General of South Africa, 2017). In particular, infrastructure assets, revenue and receivables were identified as problem areas. A sample of the qualification paragraphs of the 92 municipalities and municipal entities that received qualified audit opinions suggests the qualifications are primarily related to financial management, rather than financial reporting standards. Common areas of qualification related to property, plant and equipment; revenue and debtors; provisions; irregular and wasteful expenditure; and investment property. Common qualification themes included the lack of supporting documentation and misstatements arising from inconsistent presentation of documents. Technical accounting issues and challenges include valuation, depreciation, impairments, the accounting of infrastructure assets and fair value of investment property. Staffing challenges have also been identified.
Tanzania adopted IPSAS in 2012/13 for the entire government. A number of implementation problems have been observed by the National Audit Office of Tanzania (NAOT). For the year ending 30 June 2016, of 222 audited financial statements, 24 had qualified opinions, three had adverse opinions and five had disclaimers (Central Government Annual General Report, 2015-16). Specific accounting areas that needed improvement included the identification and recognition of intangible assets and reconciliation between cash book and bank statements. Weaknesses in the IT system resulted in IPSAS cash accounting being used instead of IPSAS accrual accounting. Moreover, the financial reporting framework used IPSAS accrual accounting, while the budget was compiled under a cash basis, so financial statements contained some entries based on accruals and others on cash. Another problem was inadequate capacity building through training of staff involved in the preparation of financial statements.
The initial adoption of IPSAS in Tanzania was based on legislation that was inconsistent with accrual basis IPSAS and as a result significant accounting issues were identified (Central Government Annual General Report, 2015-16). Consolidated financial statements did not include the revenue, expenditure, assets and liabilities of local government authorities (LGAs) and parastatal institutions. This was contrary to IPSAS 6 requiring a controlling entity to issue consolidated financial statements of all government controlled entities and resulted in a disclaimer of audit opinion on the accounts. The government also lacked actuarial valuation of benefits plans for government retirees, contrary to IPSAS 25. Without performing actuarial valuations, the government was unable to report the initial liability for the defined benefit plans, the amount of actuarial gains and losses, past and current service, or the interest cost of the benefit plan. Intangible assets also did not meet the definition and recognition criteria under IPSAS 31; inventory valuations breached IPSAS 12 (44); debts were incurred but not reported in the statement of financial performance, understating reported expenses; not all income received was disclosed in cash flow statements; land and building assets were not separated in financial reports as required by IPSAS 17; there were errors in asset valuations; and grant and borrowing were not properly separated in financial reports (Central Government Annual General Report, 2015-16).
Zambia’s government announced in 2013 that, as part of its public finance management reform, IPSAS will be adopted as its reporting framework by 2020 (Government of the Republic of Zambia, 2013; IMF, 2015). Preparation for IPSAS is underway, with the Zambian Institute of Chartered Accountants (ZICA) holding sensitisation workshops in 2016 and 2017 on IPSAS implementation (ZICA, 2017). Funding has been allocated by the World Bank to assess the ‘Road Map for Zambia’ (World Bank n.d.). The accounts of the Republic of Zambia for the financial year ended 31 December 2016 were not prepared in accordance with cash or accrual basis IPSAS.
Challenges facing IPSAS implementation and the transition to sound financial management practices have been recognised in the country. The Auditor-General of Zambia reported that failure to collect and account for revenue was a consistent problem, as was a paucity of information on expenditure, assets and liabilities (Auditor General, 2015). Basic financial management controls seem to be lacking including expenditure that exceeded the budget and spending incurred in the contravention of procurement prescripts were also consistent failings; assets were also not adequately safeguarded, bar coded or recorded in fixed asset registers.
Zimbabwe has announced that it will adopt IPSAS by 2021 – central government and local authorities are currently using cash accounting. Zimbabwe is being supported by a range of international institutions in moving to IPSAS. The World Bank offered a $20m grant to improve the country’s public finance management system (The Herald, 2015), while IFAC has been funded by the UK’s Department for International Development for capacity building undertaken by professional accountancy organisations. IFAC, through CIPFA, is funding the Institute of Chartered Accountants Zimbabwe to do this, with the Institute holding a sensitisation workshop in 2016 on IPSAS implementation (IFAC, 2016).
There are weaknesses in the quality of accounts at present, though the Auditor-General has found improvements in transparency and accountability in the 2016 year. There was a reduction in the proportion of audited fund accounts with material audit findings that warranted management attention, falling from 85% in 2015 to 76% in 2016. Outstanding issues include governance weaknesses, reconciliations, lack of invoices and receipts, delays in submitting accounts and weak debt recovery systems, which meant that debts were often uncollected for many years (Auditor General, 2016).