A. Khan and M. Pessoa, 2010, Conceptual Design: A Critical Element of a Government Financial Management Information System Project, Technical Notes and Manuals (Washington: International Monetary Fund).
A. Khan and S. Mayes, 2009, Transition To Accrual Accounting, Technical Notes and Manuals (Washington: International Monetary Fund).
D. Jacobs, J. Helis and D. Bouley, 2009, Budget Classification, Technical Notes and Manuals, (Washington: International Monetary Fund).
L. Doe and S. Pattanayak, 2008, Financial Control in African Countries, Public Financial Management Technical Guidance Note, (Washington: International Monetary Fund).
S. Pattanayak and I. Fainboim, 2011 Treasury Single Account: An Essential Tool for Government Cash Management, Technical Notes and Manuals (Washington: International Monetary Fund).
Organization for Economic Cooperation and Development, 2001, Managing Public Expenditure: A Reference Book for Transition Countries, Chapter 11.
Ministry of Economy, Finance and Industry, 2003, La nomenclature budgétaro-comptable, Rapport d’étape sur l’avancement des travaux, France (June).
IFAC Public Sector Committee, 2003, The Modernization of Government Accounting in France: The Current Situation, the Issues, the Outlook (January).
Note: Sailendra Pattanayak is a Senior Economist in the Fiscal Affairs Department of the International Monetary Fund; Julie Cooper was a Technical Assistance Advisor in the Fiscal Affairs Department.
This TNM has benefited from review and comments by M. Cangiano, M. Lazare, F. Bessette, G. Blondy, S. Flynn, P. Khemani, and P. Murphy. Helpful comments were also received from other FAD/IMF colleagues and from M. Silins (CARTAC PFM Advisor).
In countries where accounting generally follows a rules-based approach, charts of accounts (COAs) have been a traditional feature of the accounting system, both in the private and public sectors. In some of these countries such as France, a uniform COA was developed for government entities before a “generalized COA” was developed for the private sector.
The GL has a control account for each subsidiary ledger which gives the balance on that ledger to ensure their mutual consistency and a clear link between them. For example, while the “accounts payable” subsidiary ledger records the amounts due to each individual creditor/supplier, the sum of postings (or total credit balance) on this subsidiary ledger is reflected in the respective control account in the GL. In a computer-based integrated financial management system (e.g., IFMIS), each transaction and its attributes can be recorded in a computerized ledger system to ensure the link and mutual consistency between the GL and subsidiary ledgers.
The accountability requirements typically involve (i) the imposition of controls around the financial transactions the managers of government agencies can enter into; and (ii) the reporting arrangements for evaluating the performance of managers (of government agencies) and the government as a whole. These accountability requirements are usually specified in the respective country’s Public Financial Management Law and further elaborated in secondary regulations.
For example, this may include tracking different stages of transaction authorization (e.g., authorization of expenditure commitment and/or payment) to ensure that these stages are not bypassed and the respective persons authorizing the transaction have the legal/regulatory mandate to do so.
Budgetary accounting is only one element of a government accounting system, but it is the most crucial for both formulating policy and supervising budget implementation.
In this case, one can derive the GFSM-based statistical report from the underlying accounting data.
A typical PFM system incorporates important features for enforcing accountability and allocating responsibility to key actors for the preparation, authorization/approval, budget management/control and reporting on the annual budget. The accounting system should be able to capture information at different stages of the budget cycle with the appropriate level of detail.
This is, for example, the case in a number of Latin American and French-speaking African countries.
The accounting/reporting system here means the budgetary and financial accounting systems taken together.
COFOG can be derived from the program classification, only to the extent that programs do not straddle functions and/or sub-functions. Although this is desirable, this is systematically not the case in all countries with a program classification.
There are different options to ensure a seamless tracking of the same transaction as it passes through different stages of the budget execution cycle, e.g., the same transaction code could be used at different stages, or the transaction codes used at different stages are linked through a clear parent-child relationship (e.g., a detailed transaction code used at the commitment stage is clearly linked to an aggregated code used by a centralized payment agency). This requires that all modules of the IFMIS such as the general ledger, accounts payable, accounts receivable and commitment modules are consistently configured. Although this may seem to be more of an IFMIS control issue, this has a bearing on the hierarchical structure of the COA and its various segments.
Most countries that have adopted cash-basis accounting also undertake supplementary reporting of some accrual information, e.g., additional disclosure (in full or partial) of financial assets and liabilities.
The stakeholders include the parliament, policy makers, government managers, the broader public, supreme audit institution, creditors/donors, and international organizations such as the IMF and the World Bank.
Also sometimes referred to as “leaf level.”
Such a mapping table remains hidden and is automatically applied in a computerized financial management information system/IFMIS to retrieve data classified according to the derived COA segment.
Using a simple but consistent numbering system and structure helps make the COA user friendly and will reduce the chance of coding/recording errors. For example, all asset accounts may begin with the number 1, all liability accounts with the number 2, all equity accounts with the number 3, all revenue accounts with the number 4, and all expenditure accounts with the number 5. Another basic logic is to assign account ranges for specific activity types. For example, short-term asset accounts could be in a numbering range from 100 to 150, and long-term assets could have a range from 151 to 200.
Appropriate subsidiary ledgers should be used to track detailed level of information for in-depth analysis and monitoring, while the GL being the central books for the government remains limited to meeting the broad reporting and analysis needs.
Normalization is the process of organizing data to ensure data integrity and efficient database management. There are two goals of the normalization process: eliminating redundant data (e.g., storing the same data in more than one table) and ensuring data dependencies make sense (only storing related data in a table). A redundant and complex data structure affects not only data integrity but also the efficiency of the reporting framework (e.g., it increases the time it takes to generate reports from the system).
This is not to say that customized reports will not be necessary as from time to time this will be the case.
When each unit uses its own classification/coding structure without reference to others, the result is a disparate accounting/reporting structure. Changes appear to be ad hoc and not communicated across all users.
This also involves taking account of data migration requirements in designing a new (or updating a) COA.
The functional users will be able to correctly identify which new codes the old ones should be mapped to and the technical support providers will be able to provide the technical solution.
If the new COA is to be implemented as part of an IFMIS, some of these steps might be partly reflected in the IFMIS implementation plan.