Accounting for emergency relief by the government of Malta

Abstract

Purpose: The purpose of this study is to gain an insight into the accounting for emergency relief. It identifies the different types of disasters and examines the proposals of the IPSASB in ED 67 on accounting for disaster relief. Finally, it analyses opinions of international and national stakeholders about this subject and how the Maltese Government will report the spending of local funds due to the COVID-19 pandemic of 2020. Design: A qualitative research approach was adopted to achieve the objectives of this study. Semi structured interviews were carried out with government officials and accounting practitioners. The research methodology also includes documentary analysis of the responses received by the IPSASB on ED 67 Findings: The COVID-19 pandemic is the most recent emergency, and the economic shock of this outbreak is having an unprecedented impact on public finances, hence why the guidelines on the accounting for emergency relief are currently even more relevant. The ED 67 guidance addresses the question of whether a public sector entity should recognize a provision for these transactions and proposes the accounting for emergency relief depending on the distinction between emergency action being provided on an ongoing basis or for a specific event. In light of several issues that were raised, the IPSASB took a decision not to continue with the guidance, however, this decision was not supported by neither the international nor the national stakeholders. The Government financial report for 2020 shall be on a cash basis and every expense which has to do with COVID-19 will be listed under expenditure and separately disclosed under this project. This is done so that transparency and accountability are maintained. It has also been noted that contingent liabilities relating to guarantees provided as COVID-19 measures shall be reported in the f/s of the Malta Development Bank. Conclusions: This study concludes that even though there were some issues raised against the proposals of emergency relief, guidelines on this subject are very much needed as not all governments have experience when it comes to emergencies. Also emergency situations require the use of significant amounts of public funding to be deployed, hence the need for transparent and comparable financial statements are more essential to users and citizens. Value: This study should encourage government officials to appreciate the implications of accounting for emergency relief in an accrual accounting system.