Challenge
In Colombia, state-owned enterprises account for a significant portion of public sector spending. Since 2007, Colombia’s Public Accounting Regime has been based on accrual accounting. In addition, each state-owned enterprise reports to an oversight entity that issues its own accounting requirements. Moreover, the largest state-owned enterprises, which receive financing from international markets, prepare their financial statements under national accounting standards and then convert them to International Financial Reporting Standards or U.S. Generally Accepted Accounting Principles, depending on the market where the enterprise is listed. These multiple financial report- ing compliance requirements result in different sets of accounting books and additional resources.
Solution
Thanks to reform efforts by the Colombian Government, supported by the Bank, by the end of 2014, Colombia will use only two accounting models: one for state-owned enterprises and one for general government entities. The Bank is assisting the Government through:
- Expert reviews.
- Analysis of financial statements and various documents prepared by Colombia’s National General Accounting Office.
- Advice on strategy and reform implementation
- Learning and training activities.
- A South-South exchange with the Ministry of Finance of Peru, which has successfully undertaken an accounting reform process.
- Facilitating contacts with international standards-setting organizations.
The activities supported under this knowledge service were planned in accordance with Colombia’s priorities and project timetable.
Results
The immediate objective of the Bank’s knowledge services was to support the Government in its effort to improve Government accounting fiscal and financial reporting systems through the adoption of international accounting and report- ing standards. The larger goals were to foster transparency, efficiency, and accountability of state-owned enterprises (reducing transaction costs and improving delivery of social services) and help the Government make better-informed public expenditure and debt management decisions. Strengthened coordination with other Government entities was consolidated. A more realistic reform timetable was adopted in view of the complexities involved in implementation. The main results of the Bank’s engagement are:
- Decision-makers will be better informed about the use of public funds.
- Public sector expenditure efficiency and institutional efficacy will be strengthened.
- More resources will be freed up by streamlin- ing accounting and reporting requirements.
World Bank Group Contribution
Between 2011 and 2013, the Bank has provided US$146,000 for a wide range of knowledge and convening services. These include: (i) advice on strategy and implementation issues, (ii) technical reviews, (iii) training workshops on international standards, (iv) a South-South exchange visit, and (v) facilitation of dialogue with international standards-setting organizations.
Partners
The National General Accounting Office (CGN) and the Ministry of Economy and Finance (MHCP) are collaborating with the Bank during implementation of the reform agenda.
Moving Forward
The Government has expressed interest in contin- ued Bank support for the rollout, dissemination, and implementation of the new public accounting regime. In phase II of implementation, key tasks would include:
- Establish monitoring indicators to measure progress on milestones to complete and issue the new accounting regime.
- Strengthen stakeholder coordination to ensure that regulators, oversight agencies, the National General Accounting Office, line ministries, and others fulfill their implementation roles effectively.
- Conduct an education and training campaign.
- Establish a robust quality assurance mechanism to ensure the quality of the financial reports and consolidated accounts once the new accounting regime is adopted.
Beneficiaries
Beneficiaries include the state-owned enterprises which will benefit from lower staff costs and clearer accounting rules, and National General Accounting Office and Ministry of Economy and Finance which will be better informed about the use of public funds. Ultimately, the Colombian people will benefit from improved services and more comprehensive and transparent information on the use of public funds.
“We have made important advances in public accounting reform in Colombia, benefitting from collaboration with the World Bank financial management team. For us, it will be vital to rely on the Bank’s continued support in the next reform phases.”
Dr. Pedro Luis Bohorquez, Accountant General
