The Director

RE; REPORT ON PUBLIC SECTOR ACCOUNTING

The International Public Sector Accounting Standards Board (IPSASB) issue International Public Sector
Accounting Standards (IPSAS) which are based around IFRS, but tailored towards not-for-profit entities.
This report will give the findings about Public Sector Accounting.

Public Sector Accounting is a system of accounting used by government officials to systematically collect,
analyze, record, summarize and interpret public sector financial information for users. It ensures that
public funds are properly accounted for. This involves properly recording government revenue
expenditure, assets and liabilities in an acceptable form for proper audit. Also, it is a system that puts in
place adequate internal controls for government resources in order to safeguard them. Public Sector
accounting, also known as government accounting, is the application of accounting principles to the
preparation and presentation of financial records for the government and related institutions for users
of public sector accounting information.

In the world of today Preparations are being made to migrate public sector accounts fully to IPSASs.

• Changing of accounting systems through gap analysis

• Training of public sector accountants

IPSASs and IFRSs

As a general rule, the IPSAS maintain the accounting treatment and original text of the IFRS, unless
there is a significant public sector issue that warrants a departure. IPSASs cover reporting issues that are
either not addressed by adapting an IFRS or for which no IFRS has been developed.

• Both have conceptual framework and the standards.

• Both deal with general purpose financial statements

Public Sector Accounting is needed for the purpose of;

 Report on managers’ stewardship

 Assessment of the performance of public institutions
 Facilitate auditing of financial statements and projects.
 For useful decisions like undertaking public investment projects
 For economic policy formulation and review
 As a means of sourcing for support from international development agencies

The main aim of Public Sector Accounting is to improve on transparency and accountability of public
sector entities. It also compare and contrast between public sector organization and private sector
organization. Examples of not for profit and public sector organization includes; Central and local
government departments, schools, hospitals, charities. Public sector organizations is not to achieve a
profit or return on capital but to achieve value for money. Value for money is achieved by a combination
of the three Es:

 Effectiveness – success in achieving its objectives/providing its service.

 Efficiency – how well its resources are used.

 Economy – keeping cost of inputs low.

As profit and return are not so meaningful, many ratios will have little importance in these
organizations, for example: ROCE, gearing, and investor ratios in general. However such organizations.
Must also keep control of income and costs therefore other ratios will still be important, such as working
capital ratios. As for our organization which is a private sector all these ratios are meaningful since our
main objective is profitability and wealth maximization

In Conclusion, the accounting requirements for not-for-profit and public sector entities are moving
closer to those required for profit-making entities. However, they do have different goals and purposes.
There is a general move to get public bodies reporting under the accruals system. Many private not-for-
profit organizations still use cash accounting. Not-for-profit and public sector entities are required to
manage their funds efficiently but are not expected to show a profit. Their performance is measured in
terms of achievement of their stated purpose.

Report Compiled by:

Belenga G.

Finance Manager.