GTZ Report on Accrual Accounting Status Quo - LGCDP

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Findings and observations in the Nepalese municipalities 17 • Lack of adequate human resources in the municipalities. Accrual accounting training will hardly be successful if a general capacity constraint in terms of human resources exists. This indicates an insufficient education system for public servants. • Problems in the valuation process of assets: the identification, documentation as well as valuation of capital and floating assets were major obstacles in the process. Due to that the valuation was incomplete or even completely failed. • Lack of sufficient integrated databases: the identification and documentation of tax and fee receivables mostly failed, caused by weak tax revenue databases. • Lack of an appropriate software solution: The DOS based accrual accounting software that was provided with the assistance of udle, appeared to be too complicated and not very user friendly. As an aftermath municipal staff with already low IT skill levels had difficulties applying the software. Only those municipalities succeeded to continue with the software which had at least one well trained IT expert within their accounting section that was capable of updating the software himself (Butwal, Dharan and Kathmandu). In addition, the provided accounting software could not be integrated with other existing software systems. The fact that the udle supported software was mostly designed only by a single person had the disadvantage that every municipality heavily depended on this one programmer since the existing municipal software education was not sufficient. Also due to that udle just did not have the capacity to support all municipalities in accounting software practice and updates in the same way. • Lack of a clear and strong udle commitment. Udle support was neither comprehensive enough, nor long term focused. It did not focus sufficiently on the crucial post implementation period due to own capacity constraints and a changed working focus. In addition, the technical, political and financial support udle gave was not equal towards all municipalities which tried implementation. • Lack of political commitment by the government, some mayors and accounting staff. • Missing links between local and national accounting practise. At the end of the fiscal year the few municipalities that actually are using accrual accounting can not send their accrual based accounting financial statements to the central government. The Comptroller General Office of the Nepalese Government only accepts cash accounting financial statements for auditing and is reluctant to adjust to current accrual accounting reforms. This creates a lot of double work for the municipalities, which was also a reason why some municipalities did not implement accrual accounting in the first place. Major reported facilitators of the process were: • Strong udle support (in the case of Dharan and Butwal). • Availability of well trained accountants and IT experts (Dharan, Butwal, KMC). • Availability of own resources for extra training. This holds especially true for KMC. • General administrative capacity in public finance. • Political commitment and enthusiasm existing in the municipalities by all relevant stakeholders.
Findings and observations in the Nepalese municipalities 18 • Existing experience in accounting software. • Availability of information about capital and floating assets as well as databases on revenues and expenses. 3.2. Status Quo in the Nepalese municipalities regarding Accrual Accounting Regarding the accounting systems of local governments in Nepal there are currently very different experience levels throughout the country. The following type assessment is based on the current status of the accounting system as well as the accounting software in the municipalities. The type assessment can be of major help during the preparation of a nationwide, flexible accrual accounting implementation strategy that wants to take into account individual municipal needs and starting points. These capacity differences will affect the type of accrual accounting that will be implemented, the type of manual and computerized training that is necessary, the extent of the accrual accounting software that will be provided and the amount of financial support that is needed. Possibly even a pre education and computerization will be necessary. Table 1: Municipality Types Municipality Characteristics Type Type I • These municipalities successfully implemented and use the accrual accounting system including an accrual accounting software (Dharan, Butwal and Kathmandu Metropolitan City). • They differ on their accrual accounting software and current accrual accounting practise. • Dharan and Butwal are using self updated and self managed versions of the old udle supported DOS based accrual accounting software. However this old software is not network based and can not integrate the databases from existing tax revenue software and house numbering information systems. • Both Butwal and Dharan are producing financial statements including a balance statement, an income statement and a cash-flow statement. They are used to asset management including depreciations and debt management. • Since the implementation of accrual accounting, Butwal was even able to reduce its debt level, to avoid deficit spending, to ease accounting in general, to report more efficiently and to improve in terms of transparency. • KMC uses an Oracle-network based accrual accounting software, recently provided by a private software company. This software manages to integrate different software modules (including tax, fee and citizenship software modules) and databases, functioning as an effective data interface. The software system is very well established, user friendly and is now effectively in practise in
Page 1 and 2: Urban Development through Local Eff
Page 3 and 4: Contents 01. Executive Summary (p.1
Page 5 and 6: Cash Accounting vs. Accrual Account
Page 17 and 18: Findings and observations in the Ne
Page 19: Findings and observations in the Ne
Page 23 and 24: Findings and observations in the Ne
Page 25 and 26: How to implement Accrual Accounting
Page 33 and 34: Annex 30 05. Annex Annex 1 IPSAS Li
Page 35 and 36: References 32 06. References ADB (2
Page 37: References 34 Schiavo-Campo, S. & T

GTZ Report on Accrual Accounting Status Quo - LGCDP

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