Change in public sector accounting system to strengthen accountability

Public sector accounting system to enhance accountability, credibility and transparency

Finance minister Edward Scicluna
Finance minister Edward Scicluna

The adoption and implementation of the International Public Sector Accounting Standards (IPSAS), which will revolutionise the current Government accounting system from a cash-based one, supplemented by accrual accounting templates, to an accrual based public sector accounting system, will enhance accountability, credibility and transparency, the finance ministry said.

The statement adds that the new system will also improve overall decision making within the public service.

“Furthermore, they will strengthen public finance management and have a positive impact on the nation’s reputation with credit rating agencies,” finance minister Edward Scicluna said on Thursday morning.

Opening a conference organised by the IPSAS Project Board within the Ministry for Finance on the benefits of the transition to accrual accounting and IPSAS, Scicluna remarked that the move to IPSAS will also include a change in the current cash-based accounting software.

“This will be replaced by a corporate financial management solution - a full accrual accounting package to be implemented across all central Government.”

The new system will reportedly be more responsive to business change and it will create improved and coherent financial reporting.

Scicluna mentioned the great deal of work that has been carried out over the past two years to ensure that the proper administrative and project management structures are set in place for this transition.

“Representation in the project teams is wide and cuts across many government departments, and Eurostat is also contributing through a grant,” he added.

“A shift to accruals has been on the agenda of the Maltese authorities for many years,” Scicluna recalled. 

He added however that in the past, this very important project unfortunately did not gather the desired momentum until the present administration got its act together to steer the project to success.

“On a European and international level, there is a growing movement to improve the quality of financial reporting in the public sector which has resulted in an ever-increasing number of countries on cash based accounting to move to a more sophisticated accrual basis and to adopt and implement accrual based IPSAS.”

“The implementation of IPSAS will obviously pose various challenges,” Scicluna pointed out.

“It will involve the re-engineering of business processes, revision of financial policies, the development of new skills and possibly, and the reorganisation of the finance function in the public service.”

The conference was also addressed by Maltese and international guest speakers including Ian Carruthers from the International Public Sector Accounting Standards Board (IPSASB), who spoke about the benefits of IPSAS, Ms Katarina Kaszasovà, the director general at the Slovak finance ministry, and Bernhard Schatz, deputy head of the Austrian finance ministry’s budget unit, who shared the implementation experience in their respective countries, among others.