Haiti’s corporate sector accounting and auditing practices require significant strengthening to improve the country’s investment climate and foster private sector development and governance. The statutory framework governing corporate accounting and auditing is incomplete and loosely enforced. The legally mandated National Accounting System is outdated and seldom applied.
The pool of trained local accountants needs to be significantly expanded. Although a member of the International Federation of Accountants (IFAC), the Institute of Licensed Professional Accountants in Haiti (OCPAH) does not comply with several of IFAC’s Statements of Membership Obligations, including those regarding quality assurance, entry requirements, continuing professional education, and code of ethics. These weaknesses are exacerbated by a severe “brain drain,” a poor image in the business community, divisions within the profession, and a severe lack of resources.
The Strengthening Accounting and Audit Practices Project begins to address the identified institu- tional and professional weaknesses. Given Haiti’s poverty and limited institutional development, carefully calibrated innovations were required to address capacity and absorptive constraints. First, it was necessary to design a gradual and multi-tier adoption of International Financial Reporting Standards (IFRS) to cater to a business sector characterized by a few medium or large firms and many small ones.
A progressive simplification of IFRS for small and medium-size enterprises had to be designed. Second, an innovative balance sheet database will feed financial information into busi- ness statistics and a national accounts framework. Finally, close interaction with the tax administration was critical in developing this initiative given the need to measure any fiscal impact that the introduction of IFRS might have.
Over the course of the project, a clear roadmap to strengthen Haiti’s accounting and accounting practices was developed and endorsed by OCPAH, the Ministry of Finance, and the Prime Minister’s Office; the chart of accounts was updated; and a modern statutory and regulatory framework was drafted, including amendments to the Tax Decree of 2005 and the Companies Law, to strengthen transparency and timely reporting.
The new legal framework enables OCPAH to associate with IFAC, the International Accounting Education Standards Board, and the Caribbean Community, and it reduces barriers to entry of foreign accounting firms—measures that will foster higher accounting standards, a stronger accounting profession, and greater investor confidence in financial reporting. All of this is a necessary foundation to enable foreign direct investment and to expand Haiti’s private sector, which is the cornerstone for local employment and income in a country still recovering from a decade of crisis and natural disasters.
World Bank Group Contribution
The Bank provided US$245,000 for a wide range of advisory and design services from August 2010 through October 2012, to improve internal controls, identify and mitigate risks (information leaks, operational interruptions, unauthorized access to systems, and inaccuracy of information), establish a Risk Management Committee, design new policies and guidelines, and develop a business contingency plan.
The World Bank partnered with the Institute of Licensed Professional Accountants in Haiti and the Ministry of Finance.
A steering committee of representatives from the Ministry of Finance, the Central Bank, and OCPAH met beginning July 2013 to guide implementation of the accounting and auditing reform roadmap (26 activities to be undertaken over five years at a cost of US$2.175 million). The Bank is financing follow- on activities through an additional financing of an emergency project that became effective February 2013. This will include a training program to better acquaint private- and public-sector accountants with IFRS. Haiti’s Central Bank has agreed to partially fund the training initiative and to make available its training facilities at no charge.
The primary beneficiaries are the financial accounting and auditing institutions and their members, who will improve their performance and reputations. As Joseph Paillant, former OCPAH president, noted, “Haitian professional accountants could be in great demand in the Caribbean if they make the right choice today of reforming the organization of the profession and converging toward international accounting standards to produce reliable financial information.” Improved accounting standards and performance will strengthen investor confidence, leading to greater growth in Haiti’s private sector.