IPSAS Case Study in Republic of Georgia

Nino Tchelishvili, Deputy Head, Treasury Service of the Republic of Georgia described the government adoption of the International Public Sector Accounting Standards (IPSAS) at the ICGFM Winter Conference. She described the challenges of moving from a planned to a market economy. The public financial management functions were designed on the socialist model and did not meet international standards. She described how assets were not properly defined in the old system.

Georgia is a top reformer during according to the World Bank. Ms. Tchelishvili described some of the initiatives taken by the government since 2003 such as the adoption of the Treasury Single Account (TSA). She described the difficulties of accounting for government businesses and local service providers like hospital. Government entities operated on a cash basis, but parastatal organizations operated on accrual accounting. Consolidation is almost impossible to achieve given so many different systems and accounting methods.

Ms. Tchelishvili described some limitations including the lack of an Integrated Financial Management Information System.

Ms. Tchelishvili described the six phase strategy implementation strategy in Georgia:

1. 2010 Initiation
   Strategy agreed; Georgian Public Sector Accounting Standards Board formed; translation IPSAS initiated


2. 2012 Pilot
   Pilot financial statements under modified cash basis IPSAS


3. 2015 Modified Cash IPSAS
   Gov’t consolidated financial statements (excluding GBEs) under modified cash IPSAS (cash IPSAS + additional information)


4. 2017 Some accrual
   Simple accrual information provided under modified cash IPSAS Part II (GBEs not consolidated)


5. 2020 Accrual IPSAS
   Financial statements in full compliance accrual IPSAS


6. Ongoing
   Programme for ongoing adoption of new IPSAS
   

Ms. Tchelishvili described the capacity building process in Georgia using a certification process that professionalizing public accountants.

Ms. Tchelishvili described the differences in GFS and IPSAS definitions of government entity and government sector. She pointed out the reform in Georgia will cover all aspects of the public sector. She provided a decision-tree to define whether an organization is a government-owned business or a non-profit organization controlled by the government.

The modified cash approach to be used by the Government of Georgia in phase 3 using IPSAS 2 format cash flow statements. Ms. Tchelishvili described the mandatory and encouraged portions of the standard.

Ms. Tchelishvili described the current status in the Republic of Georgia:

• IPSAS Strategy adopted and approved by Ministerial Decree in 2009


• Georgian Public Sector Accounting Standards Board (GPSASB) established as permanent consultative body under the Government of Georgia in 2010


• 11 different pilot organizations selected for implementing modified cash basis IPSAS.

Lessons learned from the IPSAS project include:

• If supporting GFS 2001, not that difficult to support IPSAS modified cash accounting


• IPSAS implementation needs to be phased over a decade or longer


• Fully implementing the Cash Basis IPSAS at national government level is not feasible for any country


• A country is not compliant with accrual IPSAS until all implemented and is not feasible except in very long term

Georgia ipsas strategy for ipsas implementation

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Géorgie stratégie de mise en œuvre des normes ipsas

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Georgia estrategia para la implementación de los ipsas

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Ms. Tchelishvili conducting a survey of attendees about IPSAS:

• 44% same Chart of Accounts for cash and accrual accounting, 40% plan to implement, 16% no plans


• 26% Permanent independent body for IPSAS, 22% consultative body under the government, no board 52%


• 82% agreed that IPSAS requires an Integrated Financial Management System (IPSAS) to succeed


• Most important success factor for IPSAS adoption: 61% political leadership, 21% IFMIS, 18% skilled staff, 0% dedicated staff

The Transparency Portal of Brazil

Mário Vinícius Claussen Spinelli, Secretary of Corruption Prevention and Strategic Information, Brazilian Office of the Comptroller General described the “Transparency Portal” in Brazil, He began his presentation by describing the institutional framework and audit and anti-corruption mandate of the CGU unit. The CGU unit has been able to investigate and dismiss over 2,000 public servants changed with fraud and corruption.

Mr. Spinelli described the preventative actions taken by the CGU unit including:

• Increased Transparency


• Incentive to Social Control


• Management Strengthening


• Implementation of International Conventions


• Improved Legal Framework


• Studies and research on corruption


• Education for Ethics and Citizenship

The CGU unit has developed on-line games that teach the advantage of ethics to children. Mr. Spinelli pointed out that transparency and "right to know" goes beyond publicity, because it involves the delivery of understandable information and public access to official documents.

Mr. Spinelli described the timeline for the creation of the Brazil Transparency Portal. Procurement and budget execution information is available on the portal. Companies found to have engaged in corrupt practices are listed on the portal. Brazil is now moving to support IFRS and IPSAS standards. Full information about public servants are provided on the portal. Full information on the 2014 World Cup and 2016 Olympic games contracts and expenditures are provided.

Mr. Spinelli described how the transparency portal provides easy access without passwords and accessible information. He emphasized that the information and navigation needs to be simple.

The Brazil Transparency Portal has disclosed $4.4T in total amounts since 2005, with over 1 Billion in registered payments with almost 250,000 monthly accesses and over 30,000 paid subscribers to push services.

The Brazil Transparency Portal has won numerous international awards. It takes approximately 4 1/2 hours for daily document updates.

The Transparency Portal in Brazil is compliant with many international standards:

• International Public Sector Accounting Standards


• XBRL


• IMF Good Practices on Fiscal Transparency Code


• OECD Best Transparency Budget Practices


• Open Government;

Mr. Spinelli described the Three Laws of Open Government Data

1. If it can’t be spidered or indexed, it doesn’t exist


2. If it isn’t available in open and machine readable format, it can’t
   engage


3. If a legal framework doesn’t allow it to be repurposed, it doesn’t empower

Surveys at the conference agreed with Mr. Spinelli

• 95% agree that transparency required for social participation and preventing transparency


• 67% agree that citizens have interest in social control and transparency


• 86% agree that citizens can be encouraged to participate in social control transparency


• 74% agree that Transparency portal best way for public sector transparency

According to the web site:

“The Transparency Portal was created in November 2004 for the purpose of making it possible for public managers and citizens at large to follow up on the financial execution of all programs and actions of the Federal Government more easily. The information available in it includes: funds transferred by the Federal Government to states, municipalities and the Federal District; funds directly transferred to citizens; direct spending of the Federal Government with procurement or contracts for projects and services, including the spending of each agency with per diems, office supplies, equipment, projects and services; as well as spending through Payment Cards of the Federal Government.

The Portal shows all data on the SIAFI's (Federal Government Integrated System for Financial Management) financial execution, as well as data provided by the National Health Fund, by Caixa Econômica Federal ( Brazil 's federal savings bank), by the National Treasury Secretariat and by Banco do Brasil . Apart from publishing all these data and information, the Transparency Portal makes a communication channel available: the Talk to Us link. Through this channel, users of the Portal can clear any doubts regarding accessibility or its contents, as well as post congratulations or suggestions.”

Spinelli transparencia para los ciudadanos la experiencia brasileña del portal de la transparencia

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Spinelli transparence pour les citoyens l'expérience brésilienne du portail de transparence

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Spinelli transparency for citizens the brazilian experience of transparency portal

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IPSAS Implementation at the OAS

Heather Alsopp of the Organization of American States presented a case showing how the OAS adopted IPSAS standards. suggested that the move to IPSAS was somewhat of a baptism of fire.

The OAS used different accounting methods for operating, voluntary, special reserve, fiduciary and internal service funds. Ms. Alsopp pointed out that the adoption of IPSAS typically happens in the context of wider management reforms. She suggested that the move to a common language through IPSAS enables improved transparency, accountability and manage for results.

The OAS project was primarily funded by a grant from the Canadian International Development Agency (CIDA).

The OAS experienced some challenges when adopting IPSAS including:

• Difficulty of moving to accrual accounting
• Resistance to change
• Competition for IPSAS experts

Ms. Alsopp suggested that the benefits of accrual accounting need to be articulated rather than the theoretic differences between cash and accrual. One major lesson learned is having dedicated qualified expertise to move to accrual accounting.

Ms. Alsopp described how IPSAS impacted:

• Consolidation of controlled entities
• Revenue recognition
• Expense recognition
• Employee benefits
• Property plant and equipment

She said that there is a lot of qualitative and legal assessments required for accrual based IPSAS. Ms. Alsopp pointed out that there was a concern that the move to accrual accounting loses important information. She recommended that budget variance reports based on cash basis can provide this information.

Although the move to accrual accounting and support of IPSAS has been a major project, Ms. Alsopp believes that the benefits in transparency and accountability will help improve decision making.

Alsopp ipsas a case for accounting reform at the oas

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Alsopp ipsas ipsas un cas pour la réforme comptable à l'oea

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Alsopp ipsas ipsas en favor de una reforma contable en la oea

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Supporting IPSAS in the Government of Honduras

Carlos Castejon, Deputy Minister of Finance, Jose Romero, Accountant General and Angel Moncada, Deputy Accountant General of the Government of Honduras described the implementation of cash-based IPSAS (International Public Sector Accounting Standards) planned by the Government of Honduras. Legal reform was required in order to adopt IPSAS into national standards. The IPSAS cash standard for reporting will be adopted on January 1, 2011.

The Government of Honduras faced serious macroeconomic challenges because of the financial crisis. Minister Castejon pointed out that the financial management system was not able to report effectively on the financial situation of the government.

Sr. Romero described legal reform in Honduras and the move towards supporting international standards. Sr. Moncado described the plan of action to implement IPSAS. Lessons learned included:

• Legislation enabling support of international standards
• Training is critical to the successful implementation of IPSAS
• Numerous changes in reports are necessary to support IPSAS

The application of international standards and a move towards accrual accounting leads to a deeper analysis and makes accounting more accurate in order for government accounting reports to be reliable according to Sr. Moncado. Identifying assets and liabilities of the government has lead theGovernment of Honduras to have better control over the state heritage.
The Government of Honduras plans to adopt the IPSAS accrual accounting standards by January 2014. The Government of Honduras is is currently cataloging all government assets. Sr. Moncado believes that the challanges for the future include rolling out to municipal governments, consolidating financial statements and supporting information in a single accounting system.

Honduras implementing cash ipsas and preparing for the accrual ipsas

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Honduras presentacion sobre la preparacion para implementacion de normas internacionales de contabilidad para el sector publico en

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Honduras mise en œuvre de la norme ipsas relative à la comptabilité de caisse et préparation à la norme ipsas relative à la comptabilité d’exercice

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IPSAS Lessons Learned

Jesse Hughes, Professor Emeritus, Old Dominion University provided lessons learned on the adoption of IPSAS standards. He commented that people speak many languages around the world, but accounting is the language of management. He emphasized that we can't speak of improved public financial management without improving accounting system. "It is the glue that pulls everything together to see what the whole of government is doing."

Dr. Hughes sees IPSAS as one the strategies to improve public financial management. He also recommended that cash management should be separate from budgetary controls, that the Treasury Single Account (TSA) be used and Integrated Financial Management Information Systems (IFMIS) adopted by governments.

Dr. Hughes emphasized the need for improved education in public financial management. He described the benefits of accrual accounting in government. These benefits include:

• Better accountability and better decisions


• More meaningful understanding of costs for goods and services


• Basis for performance management

Dr. Hughes stated that if we get nothing else about accrual accounting, it ensures that you don't pass along your debt to children and grandchildren.

12 steps for transition to IPSAS was described by Dr. Hughes:

1. Develop organizational transition plan and coordinate with auditors


2. Train staff


3. Assess the information system changes required


4. Prepare Policy and Procedures Manual for approved IPSAS policies


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


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


7. Prepare proforma Statement of Financial Performance.


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

Dr. Hughes suggests that IPSAS may tackle public private partnerships, fiscal sustainability and social security reporting standards. He showed the difference in size between the cash and accrual version of IPSAS.

Hughes implementing ipsas to improve public financial management

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Hughes implementando las ipsas para mejorar la gestión de las finanzas publicas

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Hughes implementing ipsas to improve public financial management

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Materiality in Government Auditing

Frans van Schaik considers the issue of materiality in government auditing in the context of the development of public sector specific guidance on this subject by INTOSAI, the international body for public sector external auditors, based on the private sector standard. The paper finds significant evidence for the materiality level in the public sector to be different to that in the private sector, despite this evidence, such differences are not clearly documented in the auditing standard. In the process, van Schaik reviews the key considerations for materiality for public sector auditors.

Abstract
There is a striking difference in the approach taken in the preparation of public sector specific guidance on accounting and auditing. While the International Public Sector Accounting Standards Board (IPSASB) issues stand-alone public sector accounting standards, the International Organization of Supreme Audit Institutions (INTOSAI) issues practice notes, which provide supplementary guidance for the public sector, in addition to the considerations specific to the public sector contained in the International Standards on Auditing. There is a similarity in that both IPSASB and INTOSAI fly in the jet stream of private sector standard setters. IPSASB only deviates from the International Financial Reporting Standards (IFRS), issued by the IFRS Board, for public sector specific reasons. INTOSAI adds guidance to the International Standards on Auditing, issued by the International Auditing and Assurance Standards Board (IAASB). These public sector specific practice not es are called International Standards of Supreme Audit Institutions (ISSAI).

Materiality in Government Auditing

Project Management Perspective on the Adoption of Accrual-Based IPSAS

Caroline Aggestam considers the need to adopt a project management perspective with the adoption of accrual based IPSAS.
Moving from cash or modified accrual based accounting to full accrual accounting under International Public Sector Accounting Standards (IPSAS) can be a challenging endeavor. Ensuring proper convergence to accrual based IPSAS entails not only a vast amount of work in the accounting arena of any given public sector entity or government but also often major changes in business processes and practices. By using a project management approach in adopting IPSAS an organization/government can make certain that, for example: the project gets necessary support from top management; a sound governance structure is put in place; communication and training plans are developed and managed; new accounting policies are written; and necessary alignment of business processes will take place in a timely manner.

Abstract
Moving from cash or modified accrual-based accounting to full accrual accounting under International Public Sector Accounting Standards (IPSAS) can be a challenging endeavor. Ensuring proper convergence to accrual based IPSAS entails not only a vast amount of work in the accounting arena of any given public sector entity or government but also often major changes in business processes and practices. By using a project management approach in adopting IPSAS an organization/government can make certain that, for example: the project gets necessary support from top management; a sound governance structure is put in place; communication and training plans are developed and managed; new accounting policies are written; and necessary alignment of business processes will take place in a timely manner. Sound project management may facilitate cost-effective adoption of IPSAS and a broader strengthening of business practices across the implementing organization/government.

Aggestam a Project Management Perspective on the Adoption of Accrual Based IPSAS

Recent Public Financial Management Publications and Other Resources

As usual, we end this issue with a section reviewing recent public financial management publications and other resources which we hope will be of interest to readers of the Journal. We would be pleased to receive reviews and suggestions of other resources which we should refer to in future issues.

• Pre-requisites for a Medium Term Expenditure Framework
• “Reference Guide to Modern Trends and Best Practices in Public Financial” – for the Arabic World
• Public Financial Management Reform in the Middle East and North Africa
• How Far Have Public Financial Management Reforms Come in Africa?
• Gestion des dépenses publiques dans les pays en voie de développement
• Review of the Cash Basis International Public Sector Accounting Standard – Report of the Task Force
• Open Budget Survey 2010
• Global Auction of Public Assets: Public sector alternatives to the
• infrastructure market & Public Private Partnerships
• The basics of integrity in procurement: A guidebook
• Expanding Tax Bases is Key to Development and Democracy in Africa
• Domestic Resources Mobilization in Sub-Saharan Africa
• The Experience of Medium Term Expenditure Framework & Integrated
• Financial Management Information System Reforms In Sub-Saharan
  Africa – What Is The Balance Sheet?
  
  

Recent Public Financial Management Publications and Other Resources

1. A Science-Based Approach to the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities

The first paper of this issue, by Petri Vehmanen of the University of Tampere, Finland provides an insightful critique of the draft conceptual framework recently issued by the International Public Sector Accounting Standard Board. Petri observes that whilst the prime aim of private sector financial statements is to provide information for investors to make decisions about the entity, the prime purpose of public sector financial statements is to enhance accountability. This should be recognised and would result in the definitions of such prime elements as assets and liabilities being revised. His paper also recasts the qualitative characteristics of public sector financial statements. Petri concludes by saying that his proposals “are by no means radical”. However, they do provide a comprehensive and damming critique of the work of the International Public Sector Accounting Standard Board and so it is re-assuring that so few countries have yet to adopt their approaches to accrual accounting or indeed the cash basis of accounting.

A Science-Based Approach to the Conceptual Framework for General Purpose Financial Reporting by Public Sect...

Public Sector Accounting: Democratic control of public money by using administrative cameralistics

Our second paper is a further part of the series of articles in which Norvald Monsen has outlined a uniquely public sector approach to accounting and book keeping – cameral accounting. This was developed in German speaking counties and, until now, has remained largely unknown to English readers. Norvald provides an overview of the main tasks of traditional public sector accounting, followed by a detailed exposition of administrative cameralistics, focusing on the closing of the accounts and budgetary comparisons. A commentary section then explains how the four tasks of traditional public sector accounting are taken care of within cameral accounting. This is finally compared with both traditional commercial accounting and the new public sector accounting outlined in the International Public Sector Accounting Standards.

Public Sector Accounting Democratic Control of Public Money by Using Administrative Cameralistics

Last Day of 24th Annual ICGFM Conference

Conference Co-Chair David Nummy introduced the final day of the 24th Annual Conference with additional surveys about public financial management. An ICGFM attendee survey found the following:

• 92% of attendees say their countries have embarked on improving transparency
• 82% of attendees say that their countries have adopted international public sector standards to improve transparency
• IPSAS and GFS are the 2 most adopted international standards for #transparency
• 14% of countries represented have adopted XBRL
• Of those from countries that have not adopted XBRL 21% expect to adopt it, 2/3 interested

The International Consortium on Governmental Financial Management conducts numerous surveys to identify the state of public financial management and transparency around the world.

The Cash Basis IPSAS – An Alternative View

In our next contribution Mike Parry and Andy Wynne provide an alternative view on the approach to be taken when reviewing the Cash Basis IPSAS. They say there are three main issues which should be addressed: the requirement for consolidated accounts to be produced at the government level, the suggestion that the modified cash basis be given official recognition, and the suggestion that the Standard take full account of the IMF Government Finance Statistics (GFS) Manual.
The Cash Basis IPSAS an Alternative View

International Public Sector Accounting Standards Board Review the Cash Basis IPSAS: An Opportunity to Influence Developments

In our second article, Paul Sutcliffe from the International Public Sector Accounting Standards Board provides an introduction to the major review of the Cash Basis Standard which is currently underway. Although this Standard is applicable to the vast majority of governments across the world, which adopt the cash (or more strictly the modified cash) basis for their annual financial statements, the actual level of adoption has been disappointingly low. The primary objectives of the review are to identify major technical issues in implementing the Standard and suggest to the Board any amendments which should be made. These will be subject to the IPSASB’s due process and so there will be plenty of opportunities for interested parties to comment at a later stage, probably next year.

International Public Sector Accounting Standards Board

Volume 2 of International Journal on Governmental Financial Management Available

Volume 2 in now available. Articles in the Journal include:

• The State of Budget Transparency Worldwide, Vivek Ramkumar
• International Public Sector Accounting Standards Board Review the Cash Basis IPSAS: An Opportunity to Influence Developments, Paul Sutcliffe
• The Cash Basis IPSAS – An Alternative View, Michael Parry and Andy Wynne
• Using Periodic Audits to Prevent Catastrophic Project Failure, Paul Dorsey
• Framework for Evaluating Internal Controls over Financial Reporting in Sovereign Governments, Jawahar Thakur and Nalin Kumar Srivastava
• Short-Comings of Government Financial Management: A Generational Accounting Critique, Liyan Tang and Paul J M Klumpes
• Investigating the Governmental Accounting Reform of Greek National Health System: Some Preliminary Evidence, Filippos Stamatiadis
• Nigeria’s Economic Competitiveness in the African Context, John C Anyanwu and Andrew E O Erhijakpor
• Literature Review

2009 Vol 2 IJGFM

James Chan - A Comparison of Government Accounting and Business Accounting

Business accounting has always been considered by some people to be the model for government accounting. In 1802, Thomas Jefferson, the author of the American Declaration of Independence, wished to “see the finances of the Union as clear and intelligible as a merchant’s book,…” In the 1970s, Arthur Andersen & Co., an innovative accounting firm, tried to realize Jefferson’s dream by challenging the U.S. Government itself to render its accounts according to Generally Accepted Accounting Principles (GAAP), since it required business firms to follow GAAP, apparently believing that business GAAP was applicable to the U.S. Government. In the 1980s, the late Professor Robert Anthony of Harvard University was similarly convinced that American state and local governments should use business accounting principles, so that it would not be necessary to have a separate Governmental Accounting Standards Board. (It fell on the author as a young academic in 1980 to inform the Financial Accounting Standards Board how government differed from business.) In the 1990s, opinion leaders from several countries adhering to the “business accounting for government” approach successfully elevated this viewpoint to the international level. International Public Sector Accounting Standards (IPSAS) patterned after international (business) accounting standards were developed, with exceptions only when government differed from business. The purpose of this brief essay is to answer three questions: What is so appealing about business accounting that it is urged upon government? How is government viewed differently by public budgeting specialists? When these two groups hold conflicting views on government financial presentation, how should those conflicts be resolved?

Chan -A Comparison of Government Accounting and Business Accounting

Publish at Scribd or explore others: Business & Economics Research budget execution government financial

Norvald Monsen - Enterprise Cameralistics

Cameral accounting (CAM, see Monsen, 2008a) was developed for use in government organizations in the German speaking countries in continental Europe. It consists of two main versions, namely administrative cameralistics (ACAM, see Monsen, 2008b) and enter¬prise cameralistics (ECAM). The purpose of the latter version is to allow for reporting precisely the same type of information as the one reported within commercial accrual accounting. While the merchant’s double-entry bookkeeping method is used in com¬mercial accounting, a developed version of systematic single-entry bookkeeping is used in enterprise cameralistics. In this way, it is possible to continue to use cameral single-entry bookkeeping for all parts of a government organization, namely the single-entry bookkeeping method of administrative cameralistics (see Monsen, 2008b, for further details, including numerical examples) and the systematic single-entry bookkeeping method of enterprise cameralistics for government enterprises. The purpose of this paper is to explain the latter bookkeeping method to a non-German speaking audience.

Monsen - Enterprise Cameralistics

Publish at Scribd or explore others: Business & Economics Research cameral accounting norvald monsen