Thesis (MBA)--Stellenbosch University, 2012. / Section 216 (1)(a) of the South African constitution of 1996, as amended, requires financial reporting of municipalities and municipal entities to be aligned with the GRAP (all three spheres of government are required to comply). The Municipal Finance Management Act No. 56 of 2003 (MFMA) also requires this principle. The main objective of this principle is to ensure the transparency and consistency of financial reporting in the public sector. The objective of the public Finance Management Act, Act 1 of 1999 (PFMA), as amended, is to improve the components of financial management and financial administration in government reforms since 1994, giving recognition to the need to improve the value for money that the public sector provides to the citizens of South Africa.
Government is increasing its interest in measuring and reporting on programme performance. The ability to obtain maximum benefit from increasingly limited resources can be enhanced by an understanding of the results of the programmes for which budget resources have been expended. The objective of government is to provide services, in contrast to the objective of private sector organisations, which is to earn profits and enhance return on investment, both of which are monetary objectives. The report on programme performance measures is not only an appropriate reporting statement, but is likely to be the most important statement for those persons interested in how the government entity is using the resources. (The Southern African Institute of Government Auditors, 2010)
The introduction of such reports is considered to be an urgent priority for accountability purposes. The “appropriation accounts” that were previously prepared on a cash basis of accounting focused on inputs side only. It did not measure the resources consumed during the period under review, thus the actual cost of programmes is not measured, controlled or reported. In the absence of accurate cost information, performance measures of efficiency and cost-effectiveness cannot be readily determined other than by performing expensive ad-hoc studies. In contrast, the accrual accounting basis of accounting more readily provides the true cost of resources consumed. The introduction of GRAP on an accrual basis of accounting is therefore an urgent priority (The Southern African Institute of Government Auditors, 2010).
In 2002, the Accounting Standards Board (ASB) was established. The main objective of the ASB was to develop the standards of GRAP. The GRAP standards are in line with International Public Sector Accounting Standards (IPSAS), which are in turn in line with International Financial Reporting Standards (IFRS).
The transformation from the IMFO and GAMAP accounting frameworks to GRAP is a very challenging task. This research report is an exploratory study to highlight challenges faced by municipalities when implementing GRAP standards. The main challenges faced in the implementation of the GRAP standards include the following:
• The identification, classification, and measurement of property, plant and equipment in line with GRAP 17 requirements;
• Complex standards that require accounting technical expertise which include the following:
o IFRS 9: financial instruments;
o GRAP 9: revenue from exchange transactions;
o GRAP 17: property, plant and equipment;
• Existing staff lacking necessary knowledge and skills to implement GRAP standards;
• Amending accounting policies and procedures to be in line with GRAP standards and where amended, difficulty in accounting for changes in accounting policies; and
• The actual preparation of financial statements.
Despite these challenges, the benefits of GRAP standards, which are on accrual accounting basis, include those listed below.
• An assessment can be made of the stewardship or accountability of management.
• The true cost of goods and services rendered can be determined.
• An assessment can be made of the levels of borrowings and other liabilities, as well as an extent of the guarantees provided by the government.
The author seeks to determine the challenges faced by municipalities when implementing GRAP standards. Once these challenges have been determined, recommendations on how to overcome the challenges will be made.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/95687 |
| Date | 12 1900 |
| Creators | Vilakazi, Siyakhula |
| Contributors | Sanangura, C., Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | xv, 90 p. |
| Rights | Stellenbosch University |
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