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Secretariat for Administration and Finance – Department of Financial Services – March 25, 2019

International Public Sector Accounting Standards (IPSAS ) Update as Related to the Implementation of the ERP. Secretariat for Administration and Finance – Department of Financial Services – March 25, 2019. IPSAS – Brief Background.

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Secretariat for Administration and Finance – Department of Financial Services – March 25, 2019

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  1. International Public Sector Accounting Standards (IPSAS) Update as Related to the Implementation of the ERP Secretariat for Administration and Finance – Department of Financial Services – March 25, 2019

  2. IPSAS – Brief Background • Since 1997, the International Public Sector Accounting Standards Board (IPSASB), supported by the International Federation of Accountants (IFAC), has been developing and issuing accounting standards for the public sector. • The IPSASB issues IPSAS (thus far 41), guidance, and other resources for use by the public sector around the world. • The development of the IPSAS has its origins in the accounting profession as a way to improve the transparency and accountability of governments by improving and standardizing financial reporting. • An increasing number of governments and intergovernmental organizations produce financial statements on the accrual-basis of accounting in accordance with IPSAS or IPSAS-similar standards.

  3. IPSAS – Benefits • The information contained in accrual accounting IPSAS financial statements is considered useful, both for accountability and for decision-making purposes. • Financial reports prepared in accordance with IPSAS allow users to assess the financial position, financial performance, and cash flows of the entity and make decisions. • Continuous fiscal constraints being experienced by many public sector entities has underscored the need to transparently report all assets and liabilities. IPSAS facilitates the alignment with best accounting practices through the application of credible, independent accounting standards on a full accrual basis. • It improves consistency and comparability of financial statements as a result of the detailed requirements and guidance provided in each standard. • Accounting for all assets and liabilities improves internal control and provides more comprehensive information about costs.

  4. IPSAS – Few examples of requirements • Accrual basis - When and how are income and expenses recorded. • Presentation of financial statements (5 statements: position, performance, net assets/equity, cash flow, budget versus accrual) and notes. • Property, plant and equipment (recognition, carrying amount, depreciation, impairment, and revaluation). • Employee benefits (recording and disclosure: leave, pensions, post-employment, termination, disability, long-term leave). • Financial Instruments (recognition and measurement of financial instruments / short – long term amortized).

  5. IPSAS – UPDATE • The current ERP system is no longer supported by ORACLE, and will not support modifications in the accounting basis. • The new ERP system under implementation, can be implemented either under the cash or the accrual basis of accounting. • The new ERP system is IPSAS ready but implementation will require further investment and time. • As explained by the firm currently implementing the ERP at the OAS, the new system has a feature where a secondary ledger can be used to allow an additional codification of all transactions under the accrual basis. • This secondary ledger, once activated, would facilitate the preparation of financial statements under the accrual basis of accounting; therefore, current processes would need to be modified to an accrual basis. • Once the accrual basis of accounting is available, the preparation of annual financial reports following IPSAS requirements becomes possible. With the adequate funding for IPSAS implementation, the first set of IPSAS compliant annual financial statements would be for the year ending 2021.

  6. IPSAS – STEPS REQUIRED Finalize on-going implementation of Oracle Cloud. Projected to finalize during the first semester of 2020. Implement Secondary Ledger to map accrual transactions Day-to-day processes must be mapped for accrual. Will require a system implementer and IPSAS experts. Identify and implement business processes modifications Many business processes will have to be modified for accrual requirements. Modify OAS Accounting Rules Will require modification of General Standards and overall administrative and financial rules and regulations. Identify and earmark additional annual recurring costs IPSAS requires annual recurring costs not currently budgeted (e.g., annual valuation of buildings, investments, employee benefits, and many others). Current staff training Training will be required to record transactions and prepare financial statements under IPSAS requirements.

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