Back to TopBack to Top
 

Good Practices on Chart of Accounts Design

 

February 6, 2013

Doug Hadden, VP Products

We released a set of Public Financial Management (PFM) documents last week following on our mandate of sharing good practices for the community.

The fourth released document, embedded below, describes good practices in Multiple Year Chart of Accounts design. That might seem a bit odd that we produced something of a “technical” nature that may not seem material to the running of public finances. Yet, the Chart of Accounts (COA) or “budget classification” is arguably the most critical part of effective PFM design.

The number of times that I have showed that the answer to a complex question is in the COA is almost innumerable. Why? The COA contains the meta data for the government. It encapsulates the organizational structure including regions, source of funds, programs and objectives and accounting concepts like capital and recurrent budgets. It is used to create and control budgets. To support international public sector accounting standards. To provide management information. To aid in decision-making.

That’s why getting the COA right is important.

But, it’s not about a COA “best practice.” It’s about a COA good practice – where the budget classification is structured to what is important and the capacity of the public service. That’s why the COA needs to be multi-year: to easily enable changes over time to reflect reform in organization, capacity and objectives. This is a requirement in all countries and we have seen numerous material changes to the COA from Canada to Timor-Leste.

And, this means that governments should have the ability to compare across structures and years. Look at last year information by different COA structures.

This is difficult to do in software. Users of ERP packages in government have told me that significant changes to the COA are difficult. Frequent changes over time, more so.

Public Financial Management Good Practices Multiple Year Chart of Accounts by FreeBalanceGRP

The following two tabs change content below.
Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

Leave a Reply