Finance directors in local authorities set to adopt new accounting system

Local authorities have embraced government’s direction to fully implement the International Public Sector Accounting Standards (Ipsas) accrual-based accounting from cash-based accounting as one way of increasing transparency and accountability.

Kaira-Mwale: We are going to improve .-Photo by Glory Msowoya
Dalitso Mainjeni guidance from the Accountant General that all MDAs should comply with Ipsas.-Photo by Glory Msowoya

National Local Government Finance Committee (NLGFC) has since drilled Finance Directors on the use of recommended system.

“Malawi has developed a four-staged implementation approach to full Ipsas accrual and the plan is that by 2026, all government ministries, departments and agencies [MDAs], including local councils, prepare their financial statements on full accrual,” said  NLGFC director of finance Kondwani Santhe during regional trainings to orient local councils to the new system.

Santhe said the development follows guidance from the Accountant General that all MDAs should comply with Ipsas accrual Stage Two as a minimum requirement as well as in the 2019/20 financial statements preparations.

Speaking during the Blantyre training, the committee’s financial analyst Dalitso Mainjeni said the orientation would enhance standardisation and reporting by councils so that there is comparability in council performances and timely generation of transactions.

“In the past, councils have been failing to present their elaborative financial statements due to lack of knowledge of IPSAS.

“We have noted that government employees lack capacity to handle international accounting standards, hence, we thought of training the officers as a way of helping Malawi to improve its profile on international accounting standards,” he said.

Maijeni said with the coming in of this system, most financial directors will be able to broaden their statements for authorities to be able to clearly understand them.

Chief Accountant in the Ministry of Finance, Steve Chimenya has singled out the absence of International Public Sector Standards to be the main challenge leading to failure of councils to successfully present their financial statements.

“There have been numerous hurdles in councils since the adoption of IPSAS when it comes to application, as most could not successfully implement it.

“If the system gets fully adopted, it has likelihood of helping authorities in the allocation of resources while promoting transparency and accountability,” said Chimenya.

In his presentation during one of the training sessions, chief auditor in the National Audit Office, Wachawaseme Mwale, said the trainings for directors of finance and other accounting personnel from all local councils nationwide will improve accountability and transparency in financial reports, ensuring that they meet international standards.

On her part, Finance Managers Network (Local Authorities) chairperson Ellen Kaira-Mwale, who is also director of finance at Mulanje District Council,  said the training will improve local councils’ financial reporting and other capabilities following harmonisation, standardisation and migration of accounting processes from the Ipsas cash to Ipsas accrual Stage Three.

She commended the the committee for taking the council officers through the process.

Said Kaira-Mwale: “It is a new system and is easy to follow and audit. It also increases transparency, reporting and accountability. If a council fails to provide financial statements by October 31 this year, it shall be an individual officer’s inefficiencies.”

Ipsas accrual reporting complies with Section 13 of the Public Finance Management Act while Ifac encourages governments and public enterprises to use the Ipsas.

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