Gap Analysis

1
Gap Analysis

• Public Sector
• Accounting and Auditing
• A Diagnostic Tool
• for Benchmarking National Standards to
  International Standards

2
Assessment Framework

• Developed in 2006 by the Financial Management
  Unit of the World Bank South Asia Region as a new
  diagnostic tool to assess how well public sector
  accounting and auditing practices accord with the
  IFAC and INTOSAI standards.
• It uses a set of self-assessment questionnaires
  focusing on identifying the gaps in the national
  standards implemented in each country.
• Tested and applied in the countries of South
  Asia. Subsequently modified and used in
  Azerbaijan and Colombia (in progress).

3
Developing the Framework

• The Gap Analysis Framework is based on the ROSC
  (Report on Observance of Standards and
  Codes)-Accounting and Auditing Framework which
  summarizes the extent to which countries observe
  certain internationally recognized standards and
  codes in the private sector. The tool has been
  suitably modified to the public sector.
• The development of the Public Financial
  Management Performance Measurement Framework
  opened the way for a more detailed accounting and
  auditing diagnostic based on IFAC and INTOSAI,
  especially when the ISSAI were promulgated.
• Pilots were conducted in two countries
  Bangladesh and Sri Lanka which helped refine the
  framework based on experience
• Later rolled out to the remaining countries in
  South Asia and reports have been completed and
  are available on the web. Work is in progress in
  India where the Government is doing a self
  assessment.

4
PFM Framework accounting and auditing indicators

• PI 10. Public access to key fiscal information.
• PI 22. Timeliness of accounts reconciliation.
• PI 23. Information on resources received.
• PI 24. Quality of budget reports.
• PI 25. Quality of annual financial statements.
• PI 26. Nature and follow-up of external audit.
• PI 28. Legislative scrutiny of audit reports.

5
Questionnaires on country accounting practices

• 1. The public sector accounting environment ?
  financial laws and standard-setting arrangements,
  educational requirements for accountants compared
  with IFAC IES, ethical requirements compared with
  the IFAC Code of Ethics.
• 2. Public sector accounting practices for the
  general budget sector if using the cash basis of
  accounting ? compared with the requirements of
  the Cash Basis IPSAS.
• 3. Public sector accounting practices for the
  general budget sector if using the accrual basis
  of accounting ? compared with the requirements
  that govern IPSAS accrual reporting for the
  public sector.

6
Questionnaires on country auditing practices

• 4. Public sector auditing environment ? compared
  with the provisions of the INTOSAI Code of Ethics
  and the general standards in the INTOSAI Auditing
  Standards.
• 5. Public sector auditing practices ? compared
  with the field and reporting standards in the
  INTOSAI Auditing Standards and the ISSAI.
• 6. Accounting and auditing practices for
  state-owned enterprises ? compared with the
  requirements of the IFAC International Financial
  Reporting Standards (IFRS) and the ISSAI.

7
Results for Accounting

• All the South Asia countries, except Sri Lanka,
  will adopt the IPSAS Cash Standard within the
  next few years. Sri Lanka has adopted the
  accrual basis of accounting.
• All the countries in South Asia have expressed a
  desire to move in the direction of accrual
  accounting in the long run.
• Each country is to establish an accounting
  standards committee to issue guidelines on how
  the IPSAS are to be implemented within their
  country.
• The IFAC Educational Standards are being
  considered as one of the criteria for staffing
  the accounting departments in the future.

8
Results for Auditing

• The SAIs will need to (a) modify their audit
  methodology to be consistent with the
  international standards (b) adopt the IFAC
  Educational Standards as the criteria to be
  followed for staffing (c) adopt the more
  detailed ISSAI auditing standards and (d)
  improve their laws to fully meet the independence
  standards set by INTOSAI.
• Programs for change and self improvement need
  stronger staff expertise to meet the increasing
  demands for certification of annual government
  financial statements at national, departmental
  and provincial levels.
• Most SAIs have little current capacity for
  handling environmental and forensic audit.
• There was a general problem of obtaining adequate
  implementation of recommendations included in
  audit reports and the systems of oversight by the
  Public Accounts Committees (PACs) require
  strengthening.
• Public reporting of audits needed to be much more
  timely and comprehensive.

9
Bank Strengthening Programs

• Used available model laws to develop suitable
  national audit laws.
• Provided capacity building through integrated
  accounting and audit system improvement programs.
• Proposed more rigorous staff appointment,
  training and advancement arrangements including
  adherence to IFAC Educational Standards for
  auditors.
• Provided manuals and training for broader themes
  of audit (e.g., performance auditing).
• Initiated support to PAC Secretariats in
  examining audit reports.

10
Results in other South Asia countries

• Afghanistan IPSAS cash basis accounts, SAI
  improvement program.
• Bangladesh assisting a broad PFM reform
  program.
• Bhutan - SAI improvement program.
• Maldives new financial audit methodology
  supporting a SAP implementation using IDEA and
  TeamMate.
• Nepal - SAI improvement program planned.
• Pakistan A stand alone project (Project to
  Improve Financial Reporting and Auditing called
  PIFRA) is under implementation for treasury
  computerization and SAI strengthening
• Sri Lanka IPSAS adopted and SAI improvement
  program planned.

11
Gap Analysis Reports

• Gap Analysis Framework document and Country
  Reports Afghanistan, Bangladesh, Maldives,
  Pakistan, Sri Lanka, Nepal, Bhutan are available
  on the World Bank web-site. http//www.worldbank.o
  rg/sarfm
• Report for Azerbaijan is also available
• The Framework is available for use by any country
  or institution