The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A "road map" has been created to transition the Government to accrual-based accounting, the Deputy Prime Minister yesterday admitting it cannot currently account for its "day-to-day" liabilities.

K P Turnquest, speaking to Tribune Business at a workshop for permanent secretaries and department heads on the accrual-based accounting project, said transitioning from the current cash-based system would allow the Government to track revenue and expenditures in an "accurate and transparent manner".

The Minnis administration has created a steering committee to oversee, and a working committee to implement, an initiative to bring the Bahamas into line with International Public Sector Accounting Standards (IPSAS).

"What it basically entails is a conversion of the financial accounting and reporting from a cash basis, meaning that expenses and revenue are only recorded when they are actually received in the bank, to a system of accrual accounting, which records revenue and expenditure when the commitment is made. If a bill is issued the revenue is recorded; if an invoice is received the liability is recorded," said Mr Turnquest.

"It is an effort to provide more reliable data to the Government so they can make more efficient judgments and manage the finances on a current basis. Right now, you have commitments being made that are not entered in any system.

"As a result, the Government cannot tell you from day-to-day what is outstanding in terms of liabilities. One could imagine that in a system as wide and big as ours, not being being able to track in a central place what is being committed to on behalf of the Government, you could end up with surprises and unintended consequences as a result."

A concept paper on the implementation of accrual accounting has planned the transition in phases. Strengthening internal control and compliance has been targeted for the project's first phase, with a completion date of June 2018. The date of June, 30, 2022, as previously indicated by Prime Minister Hubert Minnis, is the completion date for the full switch, with the wider public sector and state owned enterprises finishing a year later on June 30, 2023.

Mr Turnquest told Tribune Business: "The Government predicts what the Budget deficit is going to be, and to the extent that you do not have tracking it is very difficult to keep an accurate track of where you are to that Budget, and so you could end up with unintended overspending.

"If you are able to track, you can adjust throughout the year to meet your targets.

"When we came in we found a lot of commitments unfunded or not recorded in any system. That resulted in a significant and unexpected amount of borrowing, and we had cash we had to come up with."

The Government currently operates a cash-based accounting system, which only recognises revenues when they come in, and expenditures when they become due for payment. An accrual-based system will give a more accurate picture of the Government's finances, as it will also recognise expenditures for which future commitments have been given, but monies not yet released.