Financial reporting framework critical for state enterprises
A comprehensive financial reporting framework for state-owned enterprises (SoEs) and public sector entities (PSEs) is a must to ensure accountability in the use of public resource and money, discussants said at a workshop yesterday.
The level of compliance in the government business entities is not encouraging in the absence of any statutory obligations and enforcement mechanism for compliance, they said.
All financial transactions of the ministries and their subordinate departments are carried out under a national budget execution system through various accounts offices under the Controller General of Accounts.
But the accounting system does not comply with any international accounting or financial reporting standards, they said, while requesting the government to adopt the International Financial Reporting Standards (IFRS) and the International Accounting Standards for the entities.
Comptroller and Auditor General of Bangladesh Masud Ahmed said it would take time to adopt the accounting and auditing standards by the government in public sector entities.
The concerned departments and ministries are arranging workshops and trainings on the relevant subject matter for the officials to make them updated with knowledge and information, he said, while addressing a workshop on roadmap to strengthening financial reporting framework for public sector entities.
The workshop was jointly organised by the World Bank and the Institute of Chartered Accountants of Bangladesh at Sonargaon Hotel.
Mohammad Atikuzzaman, team task leader of the WB, gave an overview of strengthening financial reporting framework and audit practice.
Referring to the multilateral agency's updated “Report on the Observance of Standards and Codes (ROSC)”, he said the SoEs and other PSEs, which represent large investment of public money, do not have a structured financial reporting framework.
There is no statutory requirement for SoEs with respect to the IFRS, and thus there is a wide variation in financial reporting practice among SoEs.
“The regulatory authorities are mainly concerned with reviewing budget and the receipt of periodic utilisation.”
There is a need for quality financial reporting among the SoEs to ensure accountability in the use of public resource and to achieve the expected results, both financial and social, he said.
The ROSC also recommended the government should develop a comprehensive financial reporting framework with enforcement and implementation mechanism, he said.
He also emphasised effective and efficient use of public resource, strong accountability and fostering public-private partnerships for better public service delivery.
ICAB President Adeeb Hossain Khan said the financial reporting framework for the private sector in Bangladesh is sufficiently comprehensive and satisfactorily documented, driven partly by demands of stakeholders, partly by global standards and partly by professionalism of standard setters.
“A framework for the public sector close to this or its equal is long overdue,” he said.
Burhanuddin Ahmed, a chartered accountant, presented a keynote on the current reporting system of the PSEs and suggested measures for strengthening the financial reporting framework in line with international benchmarks.
A number of studies conducted by the WB between 2003 and 2010 have assessed the status of accounting and auditing in the public sector with reference to international standards and best practices.
The reports identified various gaps in the institutional and regulatory framework and made recommendations, he said.
Even a follow-up report in 2014 by the WB noted that the gaps identified a decade ago still remain, though somewhat narrowed down on some dimensions, Ahmed said.
Without an acceptable financial reporting framework, the management does not have an appropriate basis for preparing financial statements and the auditor does not have suitable criteria for auditing the financial statements.
Mohammad Muslim Chowdhury, additional secretary of the finance ministry, and Suraiya Zannath Khan, lead financial management specialist of the WB, also spoke.