PUBLIC SECTOR ACCOUNTING

CASH VS. ACCRUAL ACCOUNTING IN PUBLIC SERVICE- ASSIGNMENT

Discussion Point 1 Scenario: Transition from cash based accounting to modified accrual accounting has imperatively been slow but a gradually evolving global movement across the nation which is being undertaken by majority state and local governments over past two decades. This migration from cash to modified accrual accounting was being called from increased demand for accountability and transparency in the public sector which only the use of cash accounting was not able to suffice. Therefore, the Public Service Committee [PSC] of International Federation of Accountants [IFAC] has been continually putting forward words of encouragement to adopt the International Public Sector Accounting Standards [IPSAS] to all developing nations.

Fiji has made several attempts to achieve this on two previous occasions back in the years 1994 and 1998, however the project of migration was put aside on both occasions. Besides that, in the year 2005 a similar attempt was made, yet Fijis public service ended up adopting a different approach which was used in the previous unsuccessful attempts. Despite of many years of attempts, Fiji is still in the process of this migration. It was noted that overall unstable government and regular coups created hindrance in the progress of fast migration towards modified accrual accounting.

Therefore, modified accrual accounting is yet to be effectively blended into the accounting systems of Fijis public service. IFAC has signified that there may have been certain factors that has influenced the migration of cash based accounting to modified accrual accounting and made it a slow progress.

DISCUSSION POINT 1: From your viewpoint what could have been these factors that IFAC is placing emphasis on?

Discussion Point 2 Scenario: A great value of effort and expense had been considered when the first two attempts of migration to modified accrual accounting in Fijis public service had failed. As a result, in the election of the year 1999, the Permanent Secretary had given an advice to the Public Accountants Committee: the failure of the project in the year 1994 was driven by a major contributing factor of the absence of an appropriate manager to oversee and guide the operations when accrual accounting project was in the process of being implemented. Furthermore, the Auditor General [AG] supported this notion by saying that these additional expenses of migration were borne by the government due to lack of accounting expertise in Fijis public service who could have understood the concepts of accrual budgeting better.

If referred back to a past literature, Fellow and Kelaher [1991] argued that the concepts of cash accounting are simple to understand and so is the case for accrual accounting, however, accrual accounting is complex to implement. On this note, the Public Sector Committee [from the treasury board of Canada] has examined some lessons which are claimed, that it has been experienced by the nations that has already converted to modified accrual accounting systems. One of these lessons was that Professional development training for staffs serve to be the best when actual data is used, either trained locally or internationally, because it becomes more appropriate and meaningful to those personnel who are being trained to serve back their public sector

DISCUSSION POINT 2: From your viewpoint do you agree/disagree with this statement? If Yes, then explain why and if No then explain why not. Use relevant examples where appropriate to support your justifications.

Discussion Point 3 Scenario: Now it has been evidently known that the project of migration from cash to modified accrual basis accounting was at a very slow pace in Fiji. Obviously, the scale of this migration project has been reduced or downsized over the years from what it was when it was being implemented initially. From the above underlined statement, it can be concluded that professional training should be more structured and focused in public sector. The reason being that the trained expertise will oversee the operation of the whole project of migration from cash to modified accrual accounting instead of only providing consultations as to how to manage a software for example. Since accountants are now more engaged into managerial roles rather than bookkeeping, they appreciate the fact that the budge to modified accrual accounting comprise of more aspects than just getting an expensive software.

DISCUSSION POINT 3: When it comes to providing professional trainings to public sector officials, there are always vital questions that perhaps remains in the minds of the public sector. From your viewpoint, discuss some of these questions that would come to your mind if you have to represent yourself as the Government of Fiji.

Discussion point 4 Scenario: Once you attempt discussion points one to three, it will be rectified that there are potential difficulties for Fiji as being a developing nation to completely shift from cash to accrual accounting, it surely will take some more years.

DISCUSSION POINT 4: However, to you as students for Public Sector Accounting, questions that should be coming up to your minds are: Is it wise for Fiji and other developing countries to adopt accrual accounting or IPSAS? Whether cost vs. benefit analysis will be favorable? Will modified accrual accounting reports prove to be a better measure of decision making and

assessing financial performance? To be fair from my perspective, these are unanswered questions in accounting literature. Critically present your contentions on these questions from your viewpoint.

PREPARATION OF THE ASSIGNMENT

1. The assignment report should be of at least 1500 2000 words

2. The report must be compiled individually.

3. Students must include a reference list [Mandatory] APA referencing style

4. In writing the report emphasis should be placed on the above mentioned 4 discussion points [content/body of the assignment]

FORMAT OF THE ASSIGNMENT REPORT Sections	Allocated Marks
Introduction	1.5
Literature Review	5
Analysis and Discussion [4 discussion points]	20
Conclusion	1.5
Reference List	2
Total Marks	30
Weighting	10%