Hughes implementing ipsas to improve public financial management

Dr. Jesse Hughes, CPA, COA, CGFMICGFM Winter Conference

7 December 2010

Public Financial Management ImprovementsSupport from the topIncrease capacity of all involved in PFMSeparate cash management from budgetary

controlImplement Treasury Single Account structureImplement IPSASImplement Integrated Financial Management

Information System

Dr. Jesse Hughes, CPA, COA, CGFM 2

Auditing StandardsInternational Standards on Auditing (ISA)—

sets standards for financial audits in private and public sectors

International Standards on Professional Practice of Internal Auditing—sets standards for performance and compliance auditing in private and public sectors

International Organization of Supreme Audit Institution Guidelines—identifies guidelines for application of ISA in the public sector


Education StandardsWork with university faculty to implement

International Accounting Education Standards for new recruits

Build capacity with existing staff through a Center for Excellence in Public Financial Management

Develop an accounting/auditing certification program with a rigorous exam to the extent possible


The Purpose of AccountingWhat Does Accounting Do?

Captures and measures financial data about transactions and events of an Organization.

Summarizes the information in reports that are used by persons interested in an Organization.

Why Does Accounting Matter?Provides financial information to decision-

makers for more effective and efficient decisions.

Supports evaluation of the performance of an organization.


The Accounting System and Accounting StandardsAccounting Standards order the

functioning of the Accounting System. Accounting Standards…Establish guidelines on the types of

organizational activities that are captured by the accounting system.

Set “ground rules” on how the accounting system measures, records and processes economic transactions and events.

Guide the presentation and disclosure in the financial statements that are communicated to users for decision making.


Benefits of Accrual AccountingSupport better accountability and provide

better information for decisions on investments and management of assets and liabilities.

Provide more meaningful and comprehensive information to fully cost the goods and services provided by the organization.

Provide better information for choices between different options with respect to service delivery.

Reduce scope to report expenses that may never occur such as unliquidated obligations.


Benefits of Accrual Accounting (continued)Provide a better basis for evaluating an

organization’s performance in terms of resource management.

Better support results based management.Improve consistency, comparability and

reliability of financial statements which strengthens overall confidence in the financial information for both external and internal users.


Applicability of IPSASApplies to all controlled entities except

Government Business Enterprises (GBEs)GBEs use the accounting standards that are

used in the private sector (IAS/IFRS):Power to contract in own name;Assigned authority to carry on a business;Sells goods and services at a profit or full cost

recovery; Not reliant on continued government funding; andControlled by a public sector entity.


Transition Steps for IPSAS Implementation

7. Prepare proforma Statement of Financial Performance.

6. Prepare IPSAS-compliant opening and closing Statements of Financial Position.

5. Pilot test IPSAS policies and procedures in the new/upgraded information system.

4. Prepare Policy and Procedures Manual for approved IPSAS policies.

3. Assess the information system changes required.

2. Train staff.

1. Develop organizational transition plan and coordinate with auditors.

8. Prepare proforma Statement of Net Assets/Equity.

9. Prepare proforma Statement of Cash Flows.

10. Prepare proforma Statement of Comparison of Budget to Actual Amounts.

11. Prepare proforma IPSAS-complaint statements for controlled entities.

12. Prepare proforma Consolidated Statements.


Future IPSAS (?)Service Concessions (Public/Private

Partnerships)Fiscal SustainabilitySocial SecurityFirst-Time Adoption (IFRS 1)Retirement Funds (IAS 26)

11Dr. Jesse Hughes, CPA, COA, CGFM

Key Indicators in Public Sector Financial StatementsFiscal Discipline (Budget Ratios)Liquidity (Quick Asset and Current Ratios)Solvency/Fiscal Sustainability (Total

Liabilities to Net Asset Ratio)

12Dr. Jesse Hughes, CPA, CGFM

ICGFM Standards CommitteeNew Committee established to respond to

IPSAS Board Preliminary Views and Exposure Drafts.

Please let me know if you would be willing to serve on that Committee.

Email “[email protected]”