LOCAL GOVERNMENT

ACCOUNTING

TOPIC 2
GOVERNMENT ACCOUNTING
SYSTEM.
 Government accounting system
Government Accounting
 Is the process of recording, analyzing,
classifying, summarising, communicating and
interpreting financial information about
Government in aggregate and in details.
 Government accounting is guided by the
Constitution and financial regulations of a
Nation
 Government Accounting

• Is the system which was established by the

government for the purpose of preparing,
maintaining, and retaining, financial related
records of the government used by the
management in planning, controlling, and
organizing financial activities of the
government
 The existence of government
accounting system
• The system existence is due to exchequer and
audit system. The system was established in
1961 when exchequer and Audit ordinance
was passed by the parliament ordnance
No.21.
The ordinance provides the following;

 collection and issue of public money

 control and management of public finance
 audit and examination of public accounts

• Note; Exchequer is the system used in

government and not else where
• Treasury is the ministry of finance
 Definition of key terms used in Gvt
accounting
1.Appropriation Act
Refers as an act to apply the sum of money out of the
consolidated fund in order to meet services as shown
in the approved estimate of expenditure.

Money Bills when passed into laws become

Appropriation Acts. They regulate financial matters,
including the payment or withdrawal from the
Consolidated Revenue Fund. Appropriation Acts are
passed yearly, for the release of public money so as to
render services in the years to which they relate.
Definition of key terms used in Gvt
accounting
2.Civil contingencies fund,
• Is the emergency fund established under
constitutions of Tanzania for the aim of
solving urgent problems or service
3.Exchequer account
• Is an account operated at the Bank of
Tanzania as established under section 9 of the
exchequer and Audit ordinance
Definition of key terms used in Gvt
accounting
• 4.Statutory expenditure,
• This is an expenditure charged on the
consolidated fund but does not need the
approval of the parliament such expenditure is,
made on the following,
 Salaries and allowances, pensions and gratuity of
the president of the united republic of Tanzania
 Salaries and allowances, pensions and gratuity of
holders of office
Definition of key terms used in Gvt
accounting
5.Voted expenditure refers to payments out of
voted public funds and realized to accounting
officers on the basis of the annual budget.
Voted expenditure is divided into two
categories,
• Recurrent expenditure
• Development expenditure
Definition of key terms used in Gvt
accounting
6.Non vote or un voted expenditure
• These are payments made out of voted public
funds, but for purposes which are not
approved by the parliament. They are charged
temporarily on the recurrent expenditure vote
account subject to recovery, refund, and
retirement example advances or loans given
to employees of the government.
Definition of key terms used in Gvt
accounting
7.Nugatory expenditure
• sometimes it happen that payment may be made
but no goods or services received out of that
payment in case efforts to recover the amount
fails the accounting officers declares the payment
as nugatory
• nugatory expenditure example services or goods
paid for twice this may happen due to negligence
of the management, advances made to offers
 Definition of key terms used in Gvt
accounting
7.un vouched expenditure
• This is the payment which has been made but
the payment voucher is not supported by the
relevant supporting document, i.e. the
payment is not supported by invoices
Definition of key terms used in Gvt
accounting
8.Improperly vouched expenditure
• This payment has been made but the supporting
documents to the payment are improper, that is
the payment is supported by copies of the
original documents. effort to recovers the
original if fails the accounting officer if he is
satisfies that the document are true copies of the
original which are missing and therefore such
expenditure is treated as normal
 Process of Govt. Accounting
The processes of Government Accounting are further
discussed as follows:
1.Recording, involves the process of documenting the
financial transactions and activities in the necessary
books of accounts which are cash book, ledger
accounts and vote book.
Vote book is a book of account controlled by an officer of
the government used for monitoring govt. Expenditure
and ensuring that there is no extra budgetary
spending.
2. Analyzing , involves the process of separating
transactions according to their distinct nature and
posting them under appropriate heads and sub-heads.
 Conti..
3.Classifying ,has to do with the grouping of the
transactions into revenue and expense
descriptions and bringing them under major
classes as “Revenue Head” and “Sub-heads”,
with their relevant code numbers of accounts.
4.Summarizing, concerns the bringing together
of all the classes of accounts and preparing
them into reports periodically as are
statutorily or organizationally required.
 Conti..
5.Communicating, is about making available
financial reports on all the government financial
activities from the necessary accounting
summaries to various interested parties.
6.Interpreting, ends the process by giving
explanations on what has been reported in the
various financial statements and reports, as
regards the overall operations and performance
of the relevant government organisation(s).
 OBJECTIVES OF GOVERNMENT
ACCOUNTING

1.To fulfill legal requirement. The law requires that

government accounts are prepared and audited
annually. As the fiscal year ends govt. organs and
institutions are required to prepare financial
information.
This to provide evidence of the performance and
accountability of the financial records to the public
through the parliament.

2.To perform the stewardship function. The ruling

government is the steward of the resources and
finances of the Nation. Government has to give account
of how these finances/resources are used.
 OBJECTIVES OF GOVERNMENT
ACCOUNTING
3.To enable Government to plan well the
future activities and programmes of the
Nation i.e. Planning future operations.
 Conti..
4.To provide a process of controlling the use of the
financial resources, to provide the means by which
actual performance may be compared with the target
set. Providing useful information for the efficient
control and effective management of government
operations
5. To evaluate the economy, efficiency and effectiveness
with which governance is carried out.
6.Facilitating audit exercise to be carried out
Performance of audits ensure proper use of govt
resources.
 USERS OF GOVERNMENT
ACCOUNTING INFORMATION
There are two groups of users of Government
Accounting information which are internal
users and external users.
Internal Users
The Labour Unions in the public service which
will press for improved conditions of
employment and security of tenure for their
members.
 Conti..
 Top Management members such as Permanent Secretaries
of various Ministries and General Managers of Parastatals
 Planners are among the users of financial information
when planning for the future.

External Users
 Members of the Legislature at both National and Local
Government levels. Including the National Assembly
Committees such as LAAC and PAC
 The Members of the Public, to demonstrate accountability
and assist the people to appreciate the efforts of
Governments.
 Conti..
 Financial Institutions, such as the Commercial Banks,
World Bank and International Monetary Fund (IMF).
Accounting information assists them to evaluate the credit
rating of a borrowing government.
 Suppliers and Contractors. Suppliers and contractors are
eager to ascertain the ability of a Government to pay for
goods and services delivered.
 Financial journalists use accounting information to advise
existing and potential investors on various issues
concerning liquidity and opportunities available in entities.
 Auditors, when reviewing yearly financial information of
entities and in some cases the forensic auditors in case of
investigating frauds.
 QUALITIES OF GOOD GOVERNMENT
ACCOUNTING SYSTEM

• Proper recording of transactions

• The system must be designed in such a way
that transactions of receipts and payments of
public money are in proper books o accounts.
 QUALITIES OF GOOD GOVERNMENT
ACCOUNTING SYSTEM

• classification of data
• preparation, maintenance and retaining of
records should be in such a way that
transactions are grouped by nature and
purpose so as to identify one group of
transaction from the other e.g. A Salary
payment code is 1101, this money is restricted
to salary payment only
 QUALITIES OF GOOD GOVERNMENT
ACCOUNTING SYSTEM

• Adequacy of accounting
• The system must be in such a manner that
financial records maintained are sufficient in
design and contents to enable government
officers to prepare appropriate statement as
required under financial rules and regulations
 QUALITIES OF GOOD GOVERNMENT
ACCOUNTING SYSTEM

• Compliance with financial rules and

regulations; a good system must follow the
rules and regulations when preparing financial
records.
 TOPIC 3

• GOVERNMENT FINANCIAL MANAGEMENT

HIERARCHY
 Three levels of financial
management
• In Tanzania there are three levels of financial
management
 Upper level / strategic management
 The middle level
 Lower level
 Three levels of financial
management
 The upper level consists of the president of the
united Republic of Tanzania, the parliament,
the treasury and Central establishment,
 The middle level consist of Accounting officers
and receivers of revenue
 The lower level consists of Warrant holders and
collectors of revenue and sub warrant holders
and sub collectors of revenues.
• RESPONSIBILITIES OF EACH LEVEL
 1. Upper level / strategic
management
1. The president responsibilities
1.Is the top most authority on all matters
affect / or affected by the public funds
2. He signs financial bills to effect financial laws
That is he signs bills which has been discussed
and approved by the parliament to become
law
 Upper level / strategic
management
• The president responsibilities
3.He receives Audit report from the controller and
Auditor General and present it to the parliament
for discussion and for the public announcement
4.He has authority to withdraw funds from the
exchequer account in case the parliament has
not yet approved the budget at commencement
of financial year.
 Upper level / strategic
management
The president responsibilities
5.He has authority of establishing and abolishing
government posts and appointments of
certain officers into the public service. For
instance Regional Secretary, District
Commissioners etc.
 Upper level / strategic
management
2. The parliament
• To discuss and approve government plans
which in return uses financial resources
• To discuss and approve government budgets
• To ask any minister any question concerning
public affairs of his ministry so as make things
clearly understood.
• T o discuss and make recommendations on
CAG audited report
 The parliament
• To discuss and approve financial bills
• To make follow-up on government
expenditure by using its watch dog
committees such as LAAC
 Upper level / strategic
management
• The treasury is responsible for
1.Designing and approving necessary accounting
documents for example receipts, payment
vouchers and other documents
2.Formulating accounting principles, policies,
procedures and control techniques on the day
to day administration of public funds.
3.Managing exchequer account
 Upper level / strategic
management
• The treasury
4. To control issues of expenditure funds to
accounting officers
5.Has the authority of appointing accounting
officers and receivers of revenue
6.To issue financial instructions, directives and
regulations necessary for the administration
and control of public funds eg, MUSE
programme
 Upper level / strategic
management
• Central establishment
1. it is a department in the president’s office
responsible for manpower development in the
civil service.
2. To approve establishment of government
personnel
3. Fixation of salaries and salary scale
 Upper level / strategic
management
4. To issue staff circulars and standing orders
governing various aspects in the civil service,
appointment, promotions and confirmations
 2.The middle level

• Accounting officers and receivers of revenues

• These are principal secretaries in the case of
ministries, and administrative secretaries in
case of regional and head of departments that
is commissioners and in case of independent
departments accounting officers are the same
as receivers of revenue
 The middle level

• Accounting officers, means any officer appointed

by the Paymaster General and charged with
the duty of accounting for any service in
respect of which money have been
appropriated by the National Assembly.
 Accounting officers’
responsibilities
1) To ensure that public funds allocated to them
are well managed, controlled and safe guided
2) To ensure that funds allocated to them are
applied only for the purpose intended by the
national Assembly.
3) To seek approval when expenditure against
his vote exceeds the amount allocated.
4) To ensure that financial laws and regulations
are followed.
 Receivers of revenues’
responsibilities
1) Collecting and accounting of the government
revenue under their area of responsibility.
2) to ensure that all revenue collected are paid
in exchequer account and thereafter a report
is submitted to the treasury
3) To ensure that correct charge are levied and
that existing rules and regulation are
adhered
 3.The Lower level
1.Warrant holders’ responsibilities
• This is the head of department in a region
including the district officers holding authority
from accounting officers. He is appointed in
writing to disburse / to spend public funds in
writing under his jurisdiction
 3.The Lower level
2.Responsibilities of sub warrant holders and
sub collectors of revenue
• Sub warrant holders and sub collectors of
revenue are to perform the duties of
accounting officers and receivers of revenue
on their behalf as to warrant holders and
collectors of revenue.
 Review Questions. Round two
• 1.What is the relationship between
accounting officers and Treasury
• 2.What is the relationship between local
government and central government in
financial terms
• 3.What is the meaning of communicating as
applied in accounting process
• Mention three non political leaders at council
level, ward and street level in City council