Development of Public Sector Accounting

Project Description


The proposed development objective of the project is to develop a road map for public sector accrual accounting implementation and to support the early stages of this reform, including building essential technical skills.

Key Results

The proposed development objective is expected to achieve the following results (aligned to the Albania PFM Strategy (2014-2020).

  • Development of national guide, institutional arrangements and long term action plan for transition from the existing public sector accounting and financial reporting framework, in alignment with the development of treasury system (AGFIS) into AFMIS.
  • Presentation of financial statements in accordance with selected IPSAS standards.
  • Improved quality of accounting, statistical and financial reporting evidenced by the PEFA assessment; baseline: PEFA assessment 2016;
  • Improved technical capacity of the Financial Reporting Unit of the MFEF (in charge of;
  • Public Accounting rules implementation and Central Harmonization Unit (in charge of Public Accounting methodology) in improving the quality of public sector financial reporting in accordance with international standards;
  • Development of a sustainable public sector accounting qualification compatible with international good practices; and improved understanding and application of relevant accounting standards by practitioners and public sector auditors;
  • Greater awareness of the benefits of improved public sector accounting and financial;
  • Reporting by stakeholders (government officials, politicians, media and civil society organizations).


2. Program context

The project aims to support accounting and financial reporting reform actions presented in the Government’s PFM Reform Program 2014-2020 through a SECO financed and World Bank administered Trust Fund. The focus of the proposed project is on two levels: i) the strengthening of the legal, regulatory and professional development of public sector accounting and financial reporting by developing a system based on international standards, and ii) the relative capacity building for implementation. The approach used will be that of gradual introduction of the IPSAS, in line with IT and treasury system developments, whilst developing the professional capabilities of MFE and public sector finance professionals. The project is planned to be hybrid and will include a Recipient-Executed Trust Fund to finance project activities, and is envisaged to be implemented over a period of 5 years. It will also include a Bank Executed Trust Fund to both appraise and supervise project activities, and finance knowledge work for an assessment of the current situation on public accounting (Report on the Enhancement of Public Financial Reporting – REPF). Assessment of the current situation on public accounting (Bank Executed Activity). This activity is to conduct a gap analysis comparing national accounting standards against IPSAS using the World Bank’s standardized toolkit. The results of this gap analysis will incorporate a roadmap for the further development of national accounting legislation and guidance, taking account of the Albania’s needs and capacity constraints. While the REPF will not explicitly include a capacity assessment, it allows to gain an overall impression of the professional capacities of accounting staff in public entities and their capacity needs. The Bank Team will work with the Government to translate the assessment into a series of actionable activities over the rest of the Project


The proposed project comprises three (3) components or parts (recepient executed): (i) Development of public sector accounting and financial reporting in line with IPSAS; (ii) Development of MoF capacities and of professional accounting skills for public accounting practitioners; (iii) Project implementation support;

Component 1. Development of public sector accounting and financial reporting consistent with IPSAS (Recipient Executed).

This component is composed of the following activities:

(a) Development of the IPSAS implementation Strategy Plan. A detailed implementation plan needs to be elaborated by the relevant departments at the MFE, based on REPF results and key information requirements. The implementation strategy will aim to provide (i) details on the implementation methodology (direct vs. indirect), scope, and timing, as well as include (ii) a detailed, project and change management plans; (iii) communication and dissemination plan; and (iv) training plan. In the line of experience in other countries the project envisages a gradual implementation of the new accounting standards. The initial focus of the project is likely to address presentational and standards which address key fiscal priorities e.g. financial assets and liabilities. The plan will also address the implementation of other important second and third phase standards taking into priorities and evolving capacity within the Albanian public sector.

(b) Development of public sector accounting legal and regulatory framework.Under this activity, the project will support the development of public sector accounting standards in accordance with IPSAS in Albania. This component encompasses the following activities: i) translation of IPSAS into Albanian, ii) development and enactment of national accounting legislation, and iii) national level implementation guidance. The development of practical guidance materials, i.e. a “national guide/ handbook” has proven to be a key success factor in other countries and contexts

(c)        Review and amendment of the national chart of accounts. The chart of accounts is unified for all levels of government as well as fully harmonized between budgeting and accounting. It is also developed for accrual accounting, although these accounts are not used and may require some modifications. This component includes (i) the review and (ii) if needed the amendment of the national chart of accounts in order to be fully in line with accrual accounting/ budgeting and statistical needs.

(d)        Gradual implementation of public sector accounting standards consistent with IPSAS. This subcomponent will support (i) change management activities related to implementation of selected standards from IPSAS,consistent with the scope of the IPSAS implementation strategy plan; (ii) actual implementation of the “selected” IPSAS, which should have been previously identified in the implementation strategy; and (iii) focused training of finance officers on the application of the new standards. The implementation of the new accounting standards, based under the implementation strategy, comprises both, the technical roll-out as well as training in the use of the new standards, including the generation and interpretation of financial information produced by the new standards. Training needs will be identified at the outset of the program (cf. capacity gap analysis) and envisaged in the implementation strategy.  Support will also be provided to the MFE staff in leading the reform and address change management within the MFE and other budget institutions. The project will focus on the implementation of the selected set of standards at budget institutions at central government level and at least one pilot at a subnational government.

Component 2. Development of MOFE Capacities and Professional Accounting Skills for Selected Public Accounting Personnel.

This component is composed of the following activities:

(a)Technical capacity strengthening.Accounting and financial reporting is in the responsibility of the MFE. According to the current structure of the MFE, the CHU is in charge of the public accounting methodology while the Treasury will implement the standards in the Treasury System and for the financial reporting. Internal capacity at all units involved, Central Harmonization Unit (CHU) and Treausry/ Financial Reporting Unit needs to be strengthened. This activity includes (i) defining institutional responsibilities for public sector accounting methodology and implementation and (ii) setting up a work plan for the units within the MOF responsible for accounting and financial reporting.

(b)Development of professional accounting skills and a sustainable public sector accounting training mechanism.This part will develop professional accounting skills in Albania in a sustainable and ongoing manner. There is a need to develop the professional accounting skills of finance staff and internal auditors in budget entities, and external auditors, as there is no tradition of modern accounting profession and regular training in the public sector. Certification for public accounting does not exist on regular basis and is not a job requirement. As a result, professional capacities of financial officers in charge of accounting and reporting are weak within all public entities, i.e. at national and subnational level. Similarly, the knowledge of public sector accounting and scope of financial statements is weak among internal and external auditors. According to figures from the CHU, there are currently around 2700 public employees in about 1316 budget institutions, which should comply with the accounting rules and regulations and which need to be trained, in order to be ready for effectively applying IPSAS. In order to improve the professional accounting skills and develop local training capacities, the following activities are foreseen under this component: i) training of a selected number of financial officers to obtain an internationally recognized professional qualification certificate, ii) training of a selected number of trainers on public sector accounting and financial reporting through the train of trainers approach (ToT), and iii) establishment of a training and certification program on public sector accounting and financial reporting at a local institution to ensure the sustainability of the development of public accounting skills in the long-run

Component 3. Project implementation support.

Provision of support to the MFE and the CFCU for: 

(a) Project implementation, including administration, audits, procurement, financial management, and monitoring and evaluation activities; and

(b) capacity-building activities for staff involved in Project implementation on topics directly related to Project implementation. In the context of the ongoing administrative and territorial reform, the number of local governments are reduced in number and local governments are being rearranged and reorganized. Subsequently, new laws on local government and local public finance will be drafted. It is not expected that the new laws will change the currently centralized system of accounting (i.e. all relevant competences will remain with the MoF). In contrast to this, for the category of public internal auditors for instance the training is done by CHU and is mandatory by the Law on Internal Audit. According to CHU, there are currently 43 central budget central organizations with 1000 subordinate units, 72 autonomous units, 73 local government units and 173 budgetary subordinate units. In addition there are 3 special funds with 24 subordinate units