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Adding Value Through Innovation

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Welcome to Periscope Consulting Limited’s Interactive IPSAS Study Pack – A document which sets out the principles of the International Public Sector Accounting Standard.

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Adding Value Through Innovation

This document details the results of our study of the experiences of certain countries and organisations in their IPSAS implementation journey. It was developed by Periscope Consulting Limited (PCL) to educate organisations in the process of implementing IPSAS about common pitfalls along the continum.

The purpose of this document is to:

Provide an overview of practical IPSAS implementation challenges;

Show an awareness of various issues and challenges of implementation in different jurisdictions;

Facilitate appreciation of the quantum of efforts required for a successful implementation;

Apply lessons learnt from other jurisdictions

The structure and format of this document allows for flexibility in the event that certain sections require modification.

Adding Value Through Innovation

Overview of Leading PFM Reforms & Fundamentals of IPSAS - Document Structure

1. Introduction

This chapter provides a refresher on IPSAS

2. Adoption to Date

This section details the countries/organisations

which have adopted IPSAS

4. Conclusion

This section elucidates the conclusions from studies and implementation experiences

3. Case Study – Implementation Challenges

This section provides overview of common snags to

implementation as well as specific country challenges

based on studies

Section Name

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Adding Value Through Innovation

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Adding Value Through Innovation

Contents

1 Introduction

2 Adoption to Date

3 Case Study – Implementation Challenges

4 Conclusion

Internal Audit FrameworkIntroduction

Prev Next

Adoption To Date

Introduction

IPSAS provisions detail the results of an interplay of policies and processes, systems and people. Thus, entities and Governments inherited the burden of harnessing the interrelationships of these critical factors of organisational existence to provide the end results required by the Standards. Accordingly, implementation of IPSAS is more than an accounting exercise. Rather, it entails the following:

Burden of IPSAS

What is Affected?

It is a Reform Exercise: From

Accounting to Financial

Reporting.

It has Great Impact on

countries and supranational organisations

Implementation will affect:

Policies, People, Systems and

Processes.

Enhance Accountability

and Transparency

Case Study

Conclusion

Internal Audit FrameworkIntroduction

Prev Next

Burden of IPSAS

What is Affected?

Policies Accounting policies, country legislations need to be changed

People Significant mindset shift

ProcessesIncreased internal controls for management of new effective accounting standards

Systems Amendment of IT system to cope with new requirements

Adoption To Date

Introduction

Case Study

Conclusion

Internal Audit FrameworkAdoption To Date

Prev Next

>80 countries have either adopted or are in the process.

The following countries have complied fully with IPSAS requirements

Fully Compliant

Countries Adopting

Organisations Adopting

Australia Canada New Zealand

UK US

Adoption To Date

Introduction

Case Study

Conclusion

Internal Audit FrameworkAdoption To Date

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Argentina Indonesia Romania Nigeria

Armenia Israel Russia China

Brazil Latvia South Africa Mexico

Cyprus Lithuania Spain Indonesia

France Malaysia Switzerland Turkey

Ghana Morocco Tanzania India

Guatemala Pakistan Ukraine Peru

Uruguay

MINT Others

Fully Compliant

Countries Adopting

Organisations Adopting

Introduction

Case Study

Conclusion

Adoption To Date

Internal Audit FrameworkAdoption To Date

Prev Next

Organisations Adopting

Adoption To Date

Introduction

Case Study

Conclusion

Fully Compliant

Countries Adopting

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

Practical Experiences

• Change Management: resistance to change

• Lack of enough skilled personnel

• Alignment of enabling legislation / regulations

• Revision / Update of current accounting manuals

• Training / retraining of accounting personnel

• Legislative backing

• Divergent views on accountability in the public sector

• Requires more complete and accurate records of: Assets Liabilities Expenses Revenue

Syndicate Session

Adoption To Date

Introduction

Case Study

Conclusion

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

Syndicate Session

Adoption To Date

Introduction

Case Study

Conclusion Practical Experiences

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

Practical Experiences

The Eurostat’s project report on the assessment of the suitability of IPSAS for EU Member States.• Assessment was based on a

wide range of considerations with substantial stakeholder involvement

• Task force of member states’ experts

• Public consultation• Time: 2010 - 2013• Huge cost

Adoption To Date

Introduction

Case Study

Conclusion

Syndicate Session

1 of 6

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

Whole of Government Account – Final stage of IPSAS adoption.• Time frame – 6 years: gradual

adoption of accruals requirements.• Reform fatigue – a risk to be

aware of• Accrual based budgeting –

necessary to establish a framework for IPSAS accrual basis

• Change in organisational culture – mind-set change, especially at the management level

UK

Adoption To Date

Introduction

Case Study

Conclusion Practical Experiences

Syndicate Session

2 of 6

Internal Audit FrameworkCase Study

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Common Challenges

• Accuracy of Accounts: Many inaccurate account balances for many years: - A commission was formed to look into the issue and develop specific policies and IT platform that would support the integrity of account balances.

• Lack of adequate resources – IPSAS budget $20m includes new IT systems

• Legal framework: Enacted the ‘Organic Budget Law’ (OBL) which authorises Ministry of Finance to implement IPSAS.

• Political environment: Frequent changing of leaders

Guatemala

Adoption To Date

Introduction

Case Study

Conclusion Practical Experiences

Syndicate Session

3 of 6

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

• Identification of Assets – who owns what?

• Assets classification – PPE, Investment Property, Inventories, Agriculture and Intangible assets.

• Non-availability of historical cost of assets. Entities have been allowed to determine a ‘deemed cost’

• A 3 year period given to comply with assets recognition and measurement requirements – not met by most entities.

• Exemption of segmental reporting – classified as exemption that does not affect fair presentation and IPSAS compliance. A potential risk??

South Africa

Adoption To Date

Introduction

Case Study

Conclusion Practical Experiences

Syndicate Session

4 of 6

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

• January 2007: Approved IPSAS Programme budget of $9 million for 2008–2009

• IPSAS adoption estimated at $19.8 million. Additional funding of $10.8 million required to address:

• Organizational impact analysis• Training, communication and in-country

support• IT cost for developing reports • Additional recurring cost to cover extra

workload anticipated.

UNDP

Adoption To Date

Introduction

Case Study

Conclusion Practical Experiences

Syndicate Session

5 of 6

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

• Most systems organisations did not prepare financial statements on an annual basis.

• Changing from ‘modified cash’ accounting under UNSAS – e.g. PPE is fully expensed.

• Process took much more time than estimated

• Costs of implementation – twice the estimated budget.

• Huge spend on staff training and IT upgrade to ERP

Adoption To Date

Introduction

Case Study

Conclusion Practical Experiences

Syndicate Session

6 of 6

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

Practical Experiences

Syndicate Session

Working in groups;

1) Identify and discuss potential risks and constraints for the implementation of IPSAS Financial Statements in your jurisdiction.

2) Present and discuss your group findings

1 of 2

Adoption To Date

Introduction

Case Study

Conclusion

Internal Audit FrameworkCase Study

Prev Next

Common Challenges

Practical Experiences

Discuss the progress made so far on IPSAS implementation in Nigeria and the general readiness of the MDAs for IPSAS cash and accruals adoption

2 of 2

Adoption To Date

Introduction

Case Study

Conclusion

Syndicate Session

Internal Audit FrameworkConclusion

Prev Next

Nigeria’s experience is not unique

IPSAS is not the end goal

Promotes Accountability and Transparency

Introduction is a challenge

Greatest news:

We can learn from others

Make use of expertise available to us

Be Champions of implementation of IPSAS

Support the move to Accruals Accounting

There will always be challenges in adopting a new reporting framework

Experiences across the globe demonstrate key potential issues and challenges

Success will largely depend on our willingness and preparedness to embrace the change.

Adoption To Date

Introduction

Case Study

Conclusion

Adding Value Through Innovation

Questions & Answer