Module Code and Title:   ACT309 Public Sector Accounting

Programme:                          Bachelor of Commerce

Credit Value:                         12

Module Tutor:                       Madhav Verma, Arindam Ghosh, Laxmikanth Dhakal,

                                             Dilli Ram Sharma, Ritu Barna Adhikari, Tshering Pemo, Nawang Yangden

Module Coordinator:            Arindam Ghosh

General objective: This module aims at introducing students to public sector accounting concepts and reporting requirements under the existing financial management rules of the Public Finance Act. The module will discuss the budgetary systems of government as the basis of public sector accounting and elucidate cash system of accounting through recording of transactions and preparation of financial statements. The module will also expose students to emerging accrual systems of public sector accounting by discussing the conceptual framework for public sector entities enunciated by the International Public Sector Accounting Standards Board.

Learning Outcomes: On completion of the module, student will be able to:

1. Explain the concept and basis of public sector accounting as a means of public accountability;
2. Explain financial reporting and financial management decisions of profit and not-for-profit organizations;
3. Discuss the principles and procedures of budgetary basis of accounting for public sector;
4. Evaluate the impact of emerging accrual systems in public sector accounting on the improvement of financial reporting;
5. Explain the concept and the principles of budget and budgetary process;
6. Account for public sector receipts and payments transactions, works and other procurements of goods and services in accordance with the existing financial rules and regulations;
7. Discuss the functions and the roles of public sector auditing;
8. Demonstrate how performance audit can add value to public financial management system;
9. Explain the accounting and financial information to financial and non-financial managers through the analysis of business problems.

Teaching and Learning Approach:

Assessment Approach:

1. Written assignments: Portion of Final Marks: 10 %

Each student will complete 2 written assignments, each being worth 10%, on topics related with public sector accounting and financial management. Each assignment shall be within the word limit of 1500-2000 words. The exact topics will be informed during the session. (The 20% marks will be converted to 10 % later).

4%       Content, identifying the problems areas

4%       Analysis of problems and suggesting solutions using appropriate accounting tools and techniques.

2%       Presentation, writing style- use of proper academic style

1. Problem Solving tests based on business situations and applications: Portion of Final Marks: 15%

Students will be required to solve situation based problems in-class using conceptual knowledge and technical skills of public sector accounting and financial management covered in class. There will be 2 problem solving tests each of 1hour duration. Each problem solving test is worth 7.5% and will be assessed on the following criteria.

3.5%    identifying the appropriate accounting technique to solve the problem

4%       correct solution of the problem

1. Class test: Portion of Final Marks: 10%

There will be a class test for the students to submit. Students will be provided questions from the topics covered. The questions will be both objective type and that require critical analysis by the student. The test will be assessed based on the following criteria.

            3%       correct solutions to the questions

5%       critical aspect of the answer

            2%       appropriate use of the accounting techniques

1. Quizzes (2): Portion of Final Marks: 10%

Each student will complete two written individual quizzes of 60 minutes duration each. Each quiz worth 5% will be fact-based in-class quizzes to evaluate their knowledge of the subject. 

1. Midterm Examination: Portion of Final Mark: 20%

Students will take a written exam of 2 hours duration covering topics up to the mid-point of the semester.

1. Semester-End Examination: Portion of Final Marks: 30%

The module will have a semester-end exam for 2 hours covering the entire syllabus. The question will be divided into two parts – Part A (carrying 40% of the exam weightage) will be mostly of short answer including objective questions. Part-B (carrying almost 60% of the exam weightage) will be mostly of essay type or an extended response to the given question. This part of the question requires students to apply, analyse, and evaluate or construct knowledge and skills. Cases will also be used to test the levels of knowledge.

Pre-requisites: ACT101 Financial Accounting

Subject matter

1. Introduction to Public Sector Accounting and Reporting

1.1.        Difference between profit, government and other not-for-profit entities

1.2.        Characteristics of government and not-for-profit entities and its implications on accounting and financial reporting

1.3.        The purpose of financial reporting in government and not-for-profit entities

1.4.        Users of financial reports in government and other not-for-profit entities

1.5.        Government financial management rules and regulations 2015 –purpose and authority

1.6.        Government financial management systems- agency linkages and the role of Ministry of Finance, financial management tools and financial powers

1.7.        Cash system of accounting – meaning and recognition principles, implication on financial reporting

2. Public Sector Accounting and Regulatory Environment

2.1   Public Finance Act of Bhutan 2007 and Public Finance (Amendment) Act of Bhutan 2012-

2.2  Public sector accounting standards- purpose and authority of such standards

2.3  Income Tax Act of the Kingdom of Bhutan 2001

2.4  The Parliament- Public Accounts Committee

2.5  Office of the Attorney General- public sector prosecution and legal arms of the government

2.6  Impact of Gross National Happiness and Good Governance Reforms on Public Sector Accounting

2.7  Royal Audit Authority and Public Sector Audit Mandates

2.8  Difference between government and business audit

2.9  Purpose of government audit

2.10       Types of audit performed for the government organizations

2.11       Government auditing standards –relevance and issue of standards

2.12       The Auditor General as an ex-officio signatory of the government financial statements

2.13       The role of International Standards for Supreme Audit Institutions on the local auditing practices

3. Budgetary operations and control systems

3.1.        Budget concepts and principles including multi-year rolling budget

3.2.        Difference between Government budget and business budgets

3.3.        Classification of expenditure- capital and revenue expenditures (threshold amount for accounting recognition purpose)

3.4.        Sources of government budgets- internal and external financing

3.5.        The key phases of budget cycle

3.6.        Agency budget proposal and budget execution

3.7.        Cash basis of budget accounting – receipts and payments

3.8.        How does budget enhance control systems over public fund

3.9.        Budget accountability and reporting

3.10.      Budget performance and mid-term budget reviews

4. Government Accounting System

4.1.        Public Expenditure Management System (PEMS)-concept and operations of PEMS

4.2.        Double entry system of book keeping-use of journal, ledger and cashbook systems

4.3.        Operation of agent budgetary LC and PLC accounts

4.4.        Types of Government bank accounts- revenue account, budget fund account, non-revenue deposit account, audit recoveries account, trust fund accounts and current accounts with Gewogs and communities

4.5.        Government consolidated account at the central bank

5. Accounting for government funds and expenditures

5.1.        Concept and characteristics of government fund

5.2.        Consolidated government funds

5.2.1.    Proceeds of the government revenue account

5.2.2.    Proceeds of the government budget fund account

5.2.3.    Proceeds of the non-revenue receipts and deposit account

5.3.        Other receipts including refundable deposits account

5.4.        Accounting principles and procedures of government revenue accounts, budget fund account and non-revenue receipts and deposit account

5.5.        Accounting principles and procedures of government expenditure-permanent and temporary advances and claims

5.6.        Types of government claims- pay bills, medical benefits, travel bills, utilities, supplies and materials, rental of property, maintenance of property and operating expenses

5.7.        Write off- loss of cash and goods

5.8.        Accounting for capital expenditure –e.g. acquisition of land and buildings, plant and equipment

5.9.        Accounting for government loan and loan servicing

5.10.      Cash book and bank account reconciliation

6. Accounting for works and procurement system

                        6.1       Concept and functions of public sector procurement

6.2       Public sector procurement cycle-Procurement Rules and Regulations

                  6.3       Value creation by effective management of procurement

6.4       Accounting and procurement of goods and services – operation of stock and purchases accounts

6.5       Strategic management of public sector procurement

6.6       Procurement and accounting of works –meaning of works or civil contracts

6.7       General principles and procedures of works

6.8       Accounting for work transactions-payment of public work advances, transfer of funds, deposit works, payments to suppliers and contractors, and closing of works accounts

6.9       Reporting on completion of works and procurement

7. Financial statements and Analysis

                        7.1       Reporting systems under cash basis of accounting

7.2       Preparation and filing of monthly statements for each LC and PLC accounts

7.3       Preparation and filing of monthly statements of consolidated accounts

7.4       Preparation and presentation of government annual financial statements

7.5       Presentation of annual financial statements to Parliament

7.6       Financial statement analysis

            7.6.1    Common-size ratios –percentage distribution

7.6.2    Analysis of government financial position (e.g. net assets/total expenses or changes in net assets or fund balance/ total expenditure)

            7.6.3    Fiscal capacity

            7.6.4    Risk and exposure

8.    Emerging trend in public sector accounting

                        8.1       Limitations of cash basis of accounting

                        8.2       The use of accrual basis and the conceptual framework

8.3       The emergence of public sector accounting standards and reporting requirements

8.4       Role and authority of the International Public Sector Accounting Standards (IPSAS) in the local economy

Reading List:

1. Essential Reading

1.1.        Budding, T., Grossi, G. &Tagesson, T. (2015). Public Sector Accounting, Rutledge

1.2.        Granof, M.H.  &Khumawala, S.B. (2016). Government and Not-for profit Accounting: Concepts and Practices, Pearson

2. Additional readings

2.1.        Adhikari, P. &Gårseth-Nesbakk, L. (2016). Implementing public sector accruals in OECD member states: Major issues and challenges, Accounting Forum, Vol. 40, (2), pp. 125–142

2.2.        Anessi-Pessina, E., Barbera, C., Sicilia, M. &Steccolini, I. (2016). Public sector budgeting: a European review of accounting and public management journals, Accounting, Auditing & Accountability Journal, Vol. 29 Iss: 3, pp.491 - 519

2.3.        Biondi, Y. (2016). Accounting representations of public debt and deficits in European central government accounts: An exploration of anomalies and contradictions, Accounting Forum

2.4.        Bonollo, E., Lazzini, S. & Zuccardi Merli, M. (2016). Innovations in Accounting Information Systems in the Public Scetor: Evidences from Italian Public Universities, Strengthening Information and Control Systems, Lecture Notes in Information Systems and Organisation, Vol.14, pp 199-216

2.5.        Cohen, b.S., Rossi, F.M (n.d.). Public Sector Accounting and Auditing in Europe: The Challenge of Harmonization, springer

2.6.        Cordery, C.J. &Simpkins, K. (2016). Financial Reporting Standards for the Public Sector: New Zealand’s 21st century experience, Public Money and Management, Vol. 36(3), pp. 209-218

2.7.        Dasí, R.M. &Murgui, S. (2016). Government financial statistics and accounting in Europe: is ESA 2010 improving convergence?, Vol. 36(3), pp. 165-172

2.8.        Francesco, M. & Alford, J. (2016). Budget Rules and Flexibility in the Public Sector: towards a Taxonomy, Financial Accountability & Management, Vol. 32(2), pp.232-256

2.9.        Har Loke, C., Ismail, S.&Hamid, F.A. (2016). The perception of public sector auditors on performance audit in Malaysia: an exploratory study, Asian Review of Accounting, Vol. 24 Iss: 1, pp.90 – 104

2.10.      IFAC (2016). IPSASB Financial reporting under cash basis of accounting (ED), International Federation of Accountant

2.11.      IPASB (2015). Handbook of International Public Sector Accounting Pronouncements, Vol. 1 and Vol. 2, International Federation of Accountants.

2.12.      Krambia-Kapardis, M., Clark, C.&Zopiatis, A. (2016). Satisfaction gap in public sector financial reporting, Journal of Accounting in Emerging Economies, Vol. 6 Iss: 3, pp.232 – 253

2.13.      Ministry of Finance (2009). Procurement Rules and Regulations 2009” and “Property Management Manual”, Royal Government of Bhutan, Thimphu.

2.14.      Roy, C. (2016). Financial Reporting Irregularities in Indian Public Sector Units: An Analysis of Current Practices, South Asian Journal of Management, Vol. 23,(1), Pp 139-163

2.15.      Razak, A.A., Rowling, M., White, G. & Mason-Jones, R. (2016). Public Sector Supply Chain Management: A Triple Helix Approach to Aligning Innovative Environmental Initiatives, Foresight and STI Governance, Vol. 10(1).

2.16.      Wang, X. (2015). Financial Management in the Public Sector: Tools, Applications and Cases, McGraw-Hill

2.17.      Ministry of Finance (2001). Financial and Accounting Manual

2.18.      Ministry of Finance (2007). Public Finance Act

Date: July, 2017