TRANSITION TO THE ACCRUAL BASIS OF ACCOUNTING
8.22
(e)
Manual entries are required only for goods and services purchased outside the system;
(f)
Employees purchasing items require less training on accruals; and
(g)
Coding systems can be used to automatically allocate the cost of purchases to budgets. Where individuals with budget responsibilities have on-line access to their financial information they can then track actual spending against budgets during the reporting period.
These advantages would need to be considered against the need within the entity for flexibility in selecting and changing suppliers.
Allocation/Costing Systems 8.23
Where an entity is required to report revenue and expenses for particular locations, branches, programs, outputs etc, it will require systems to allocate revenues and expenses. This topic is not specifically addressed within this Study. Guidance on allocation issues facing public sector entities from various jurisdictions is noted in the references to this Chapter.
8.24
Because employee-related costs are one of the key expenses for many public sector entities, time recording is often required to support such systems. In some cases, this can involve significant cultural change. Where new time recording systems are introduced, care should be taken in trying to keep requirements simple (at least at first) so that information can be collected in a timely manner. Complex requirements can result in noncompliance, delays in processing (and preparation of financial statements) and inaccurate information.
Internal Controls 8.25
Examples of internal controls required to support the accruing of revenues and expenses include: (a)
Clear identification of authorities for setting charges and fees;
(b)
Clear identification of the authority to charge other government organizations;
(c)
Regular reviews of charges and fees;
(d)
The establishment of guidelines for providing credit;
(e)
Regular reconciliations between subsidiary and control ledgers;
(f)
Active management of amounts owed to the entity;
(g)
Regular review of debtors to identify bad debts and other indicators of impairment;
(h)
Accurate and complete records of debtors;
(i)
Periodic reviews of costs (against charges where relevant);
(j)
Active management of creditors to ensure payments are made in accordance with the policy on payment (for example, on or by due date);
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