In Lithuania, almost 1000 public sector companies will have to switch to a common accounting program. Whether such a decision is sensible and rational is an open question. It seems to me that this initiative is more about the receipt and use of EU project funds, but not about prudent and logical institutional decisions.
This article has been prepared according to the request submitted to the Ministry of Finance of the Republic of Lithuania and the answer received.
The essence of the Resolution No. 1252 of the Government of the Republic of Lithuania of 11 December 2019 On Common Public Sector Financial Management Information Systems and Their Use - the transition of public sector companies to a common financial management information system. The Annex to the Resolution lists 981 public sector entities. The list is long, but it is worth noting that it includes a variety of public enterprises, such as: Chancellery of the Seimas, ministries, Lithuanian Armed Forces, courts, universities, kindergartens, agencies, security department, prison supervision institutions, customs, hospitals, museums, park directorates etc. Next to each company on the list, the accounting program1 used so far by that company is indicated.
Until now, each company2 has used an accounting program of its choice. Anyone who works with accounting or has at least a minimal understanding of accounting systems is very well aware what it means to implement any new program, master it, search for errors, fix errors, and so on. Mastering the program is a long process that requires many resources: time, financial, human, information technology. This is why changing the accounting program can be a very big challenge for any company.
Changing the accounting program is not just a financial issue. I think there are more of it in this situation:
The accounting programs used so far are serviced by different companies, which are either the developers or agents of those programs, or simply perform the maintenance of the programs. The transition to a common accounting program will eliminate many companies from the market servicing the programs.
Centralized accounting for public sector companies can be a very convenient target for hackers. Information from the army, prisons, hospitals and the Seimas Chancellery is in one place. Will GDPR issues be managed? Will information not be hacked and leaked? These questions remain open.
Who will be able to manage information technology loads in the clouds? Will the system not overheat, as now often happens on the 20th of every month - to provide information in the intelligent tax administration system i.MAS, you have to wait a long and tedious time while the system is buffering the documents trying to process the uploaded information.
PSARCIS is a Public Sector Accounting and Reporting Consolidation Information System. Up until now all public companies uploaded financial data in it, which was arranged according to the appropriate accounting programs of their choice. In short, PSARCIS is the result of the balance sheets of all public sector companies.
All companies have provided information on balance sheets and all related annexes to the PSARCIS system according to structured tables (forms). In other words, the accounting software used by all companies was - and is - capable of recording accounting records.
When making a request to the Ministry of Finance of the Republic of Lithuania, we asked the main question: “Is it prudent to abandon all 981 companies’ accounting programs used so far and move to one common system?”
In its reply, the Ministry of Finance of the Republic of Lithuania stated that, in their opinion, the transition to one system for everyone is justified and expedient. It was also emphasized that this amendment is made due to the changes in the provisions of Article 6 of the Law on Accounting of the Republic of Lithuania (LA). Article 6 of the LA Establishment and Selection of Accounting Paragraph 8 states: “Public sector entities shall maintain accounting using common public sector financial management information systems”. It is worth noting that the amendments to the LA, including Government Resolution No. 1252, are the area of supervision of the Ministry of Finance of the Republic of Lithuania.
Another noteworthy part of the response of the Ministry of Finance of the Republic of Lithuania is the following: “The use of a single, unified financial accounting solution in the public sector makes it possible to ensure management of PSE financial accounting based on uniform principles and compliance of PSE’s financial accounting with PSAFRS”.
Regarding accounting principles and compliance with PSAFRS3 (hereinafter – the Standards), I would like to emphasize several things:
The Standards are not just a product developed at the Lithuanian level.
The standards are approved internationally4, as there are public sector companies all over the world, and Lithuania is no exception.
I very much doubt whether the definitions of “assets” or “liabilities” and the accounting of other balance sheet items will change with the transition to the new (centralized) accounting program. Anyone who understands accounting is aware that changes in accounting principles (methods, rules) are not due to a change in the accounting program, but to changes in international practice, i. e. to changes in international accounting standards applicable to the public sector.
It is possible to imply that it is easy to change one or another article of the Law on Accounting of the Republic of Lithuania and (or) to adopt one or another resolution when everything is under one roof. However, for the insights already set out in the article, I would venture to believe that the purpose of such changes is to blindly seek to use EU project funds, not to improve compliance with accounting rules.
Looking at the current situation, a macabre vision is inadvertently emerging: five years later, a resolution is passed for all 981 public sector companies to switch to single-brand computers or single-color binders, assuming that these are the things that can improve the working atmosphere.
With such “necessary” changes in public sector accounting, I cannot help but remember that the commentary on tourism in the VAT Law is being waited for almost five years now. On the other hand, such priorities have a reason - after all, the preparation of a solid legal document requires significantly more time and effort than changes made in a hurry to absorb EU project funds.
Inquiry submitted to the Ministry of Finance of the Republic of Lithuania by Raimda auditas UAB on 10 July 2021
Answer received from the Ministry of Finance of the Republic of Lithuania on 19 July 2021