Progress on implementing accounting reforms in Senegal over the last decade could be said to mirror wider economic progress, with recent advances tempered by awareness that much work remains to be done. Paul Golden reports

For most of the decade following the World Bank’s first Report on the Observance of Standards and Codes (ROSC) in Senegal, the second largest economy in the West African Economic and Monetary Union (WAEMU) zone struggled to keep pace with its neighbours in Sub-Saharan Africa.

Average GDP growth from 2006 to 2015 was 3.6%, little more than half the regional average. This weak growth can be explained by the economy’s vulnerability to domestic and external shocks and structural weaknesses related in particular to the high costs of transport and energy, as well as an insufficiently attractive business climate.

Reforms undertaken to improve both the business climate and public investment have started to yield positive results, though. A report published by the IMF in January of this year describes Senegal’s macroeconomic situation as stable. Growth was expected to exceed 6% in 2016 and the fiscal deficit was projected at 4.2%, while the current account deficit was forecast at 6.5% of GDP.

In the first half of 2016, tax revenues were just short (by 0.02% of GDP) of the IMF’s indicative target due to lower than projected customs revenues, although a combination of good performance of tax administration and efforts to improve customs tax collection in the second half of the year were expected to enable end-year fiscal targets to be met.

Public investment to boost further agricultural productivity, improve infrastructure and lower energy costs is expected to allow growth to increase above 7% over the medium term, assuming it is accompanied by reforms for SMEs and foreign direct investment geared to globally competitive production.

In terms of tax administration, the Senegalese authorities have benefited from IMF funding to help address core weaknesses, including ineffective audit and enforcement. The main emphasis has been to modernise the organisational structure, improve and simplify procedures, develop a compliance enforcement programme and ensure robust IT support.

The reform landscape

Major reforms to date include the creation of a large taxpayer unit and a medium-sized taxpayer office,as well as the introduction of electronic return filing procedures. Other measures implemented by the Senegalese government include the modernisation of the Direction Générale des Impôts et Domaines (DGID) via a number of measures including a programme of hiring tax inspectors and auditors.

However, progress on expanding e-filing and e-payment procedures, strengthening the exchange of information between the tax and customs administrations, deploying enforcement actions to collect assessed taxes and expanding the number and coverage of audit and intelligence activities has been slow.

The second phase of the government’s structural reform plan to improve the business environment (Programme de réforme de l’environnement des affaires et de la compétitivité – PREAC II 2016-18) includes measures to simplify tax administration. Yet Senegal’s business environment is still considered relatively poor and significant reform is needed, especially as other countries are moving steadily to improve their business climate.

Could do better

In the World Bank’s 2017 Doing Business Index report, Senegal ranked 174 out of 190 in the ‘paying taxes’ category, which measures the administrative burden of paying taxes and how much firms pay. The current system is deemed to be particularly unattractive to small and medium-sized businesses, as well as foreign investors, and does not provide the appropriate incentives for the informal sector to join the formal sector. In order to address this issue, the government has made a commitment to conducting a study on the tax treatment of SMEs with a view to encouraging and facilitating their entry into the formal sector.

In its 2015 ROSC, the World Bank accepts that Senegal has made significant progress in improving the quality of financial information since 2005. The National Association of Accountants and Chartered Accountants of Senegal (ONECCA) joined IFAC in 2013, thus increasing its credibility and enabling its members to gain the confidence of international investors. ONECCA is now playing a key role within the African and francophone accounting profession.
The country has also benefitted from reforms undertaken by WAEMU. The Uniform Act on the Law of Commercial Companies of the Organisation for the Harmonisation of Business Law in Africa has been amended, particularly with regard to auditors and good corporate governance practices, enhancing transparency and supervision, particularly for companies making public offerings.

An Achilles’ heel

But despite these advances, the World Bank also identified weaknesses linked to the partial or non-implementation of the 2005 recommendations, often due to weaknesses in the functioning of regional institutions of WAEMU or OHADA. Of the 18 recommendations made in 2005, nine have been fully or partially implemented.

OHADA or Organisation pour l’Harmonisation en Afrique du Droit des Affaires was created in 1993 and is made up of 17 African states. The Treaty is open to all states, whether or not they are members of the Organisation of African Unity, and its stated purpose is to facilitate and encourage domestic and foreign investment in member states.

There are two accounting systems in the WAEMU zone: SYSCOA, which has already been modified, and SYSCOHADA, the revised version of which has been adopted by OHADA’s Council of Ministers. According to the World Bank, adoption of the revised SYSCOHADA and effective co-operation between OHADA and the WAEMU is essential to ensure that there is just one accounting system in force in the OHADA area.

This is one area where progress has been made, says Marie Ba, president of ONECCA Senegal. “The process of revising SYSCOHADA is underway and the revised system will probably become the unique accounting system not only for Senegal, but for the WAEMU region.”

Grant Thornton’s Senegal senior audit manager, Abdoulaye Ndoye, observes that the uniform act on the harmonisation of the accounts of enterprises is the result of a desire from the member countries of the WAEMU area to establish a legal system common to all members.

“Regarding the accounting standard in the WAEMU area, there are two commissions – the first at OHADA (CNC OHADA) level and the second at the level of the West African Accounting Council,” he explains. “With the creation of the CNC OHADA, two standardisation structures coexist in the WAEMU area, one applicable to the members of OHADA and the other common to WAEMU countries, with no co-ordination mechanism for research.”

Sharing experience

According to the World Bank, the CNC or National Accounting Council is not properly fulfilling its function of accounting standardisation at national level and its organisation and functioning need to be revised. The World Bank suggests Senegal could benefit from the experience of the CNC of Côte d’Ivoire, which is considered to be functioning well.

Ousseynou Diouf, director at Diouf & Partners, the Alliott Group member firm in Senegal, says ONECCA Senegal has made significant progress in improving the performance of the CNC and gathering support for making quality assurance mandatory.

“A quality assurance committee has been created that has surveyed all the accounting firms in Senegal and ONECCA Senegal is also increasing its level of communication with accountants in order to educate these firms on quality assurance,” he says. “Of course this cannot be done overnight but change is in process.”

Ndoye offers a more circumspect assessment, however, suggesting that the current approach to implementing a single accounting system for Senegal appears to be impracticable. “Since the existing accounting system in Senegal is that of the WAEMU area, it will be difficult to create a single accounting system for Senegal as long as it is a member of both WAEMU and OHADA,” he says.

As the CNC is a representative of the West African Accounting Council (CCOA) at national level, Ndoye believes it has limited opportunity to effect change. “In addition, there is a problem of availability of the human and technical resources required to address the difficulties encountered by professional accountants,” he continues. “For example, the council is headed by the chief executive of the Tax Department, who is not readily available.”

The 2015 ROSC recommended that quality assurance be made mandatory in the profession, with a two-year transition period before the imposition of sanctions to assist supervised firms. It also suggested that quality assurance in the WAEMU zone could be improved through greater input from the Permanent Council of the Accounting Profession (CPPC), with cross-checks between countries strengthening the confidentiality of firms’ information.

ONECCA Senegal has a quality control commission whose objective is to monitor compliance with the auditing standards and ethics mechanisms set up at national level. Ndoye explains that while the last quality control carried out by ONECCA Senegal took place in 2013 and was voluntary for audit firms, that situation has since changed – a situation confirmed by Ba.

“Quality assurance is now mandatory in Senegal and we maintain the obligation of performing the quality assurance system we implemented,” she says.

It is widely acknowledged that the governance and supervision of public enterprises is a major issue for Senegal and that greater use of auditing of state owned enterprises and compilation and publication of consolidated general government fiscal data could reduce fiscal risks and lay the foundations for state owned enterprise reform.

The World Bank has recommended that to make the governance and supervisory process more effective, the Parastatal Sector Directorate, the Audit Office and ONECCA Senegal could develop a working framework for the purpose of revising Law No. 90-07, which governs public enterprises and making recommendations to the competent authorities regarding the appointment of competent directors, the definition of their roles and responsibilities, the strengthening of internal control and the duties of the auditor.

It says the accounting profession’s contribution to the implementation of these recommendations could include building the capacities of the members of boards of directors to help them make better use of financial statements and auditing techniques, as well as conducting joint external audit missions with the Supreme Audit Institutions (SAI).

The road ahead 

When asked what could be done in Senegal to improve management and supervision of the country’s public enterprises, Ba refers to the possibility of performance contracts between the state and the public enterprise that could be submitted to periodic audit.

Ndoye explains that all national, parapublic (bodies that have capital in both the public and private sectors) and development agencies have an external auditor who is a member of ONECCA Senegal and also come under the review of the state control bodies, namely the State Audit Office and the State Inspectorate.

“On the other hand, ministries and local authorities do not have an external auditor but are controlled by the State Audit Office and the State Inspectorate,” he continues. “There is a process in place to certify public accounts (state and local authorities). To improve the control of public finances, the State Audit Office and the State Inspectorate must sign memorandums of understanding with ONECCA Senegal.”

The ARMP (l’Autorité de Régulation des Marchés Publics du Sénégal) entrusts part of the audit of market compliance to accounting firms. Ndoye says that a tendering process is necessary in order to improve the management of public companies.