Transition from Cash to Accrual Accounting by Governments

1. Transition from Cash to Accrual Accounting by Governments Dr. Jesse Hughes, CPA, CIA, CGFM

2. Suggested Work Plan • Monitor application for IFAC membership • Officially translate the IPSAS • Provide training for implementation of the work plan: • Develop training plan with an emphasis on training of the trainers • Work with training function to provide set of training material for program implementation • Work with universities to incorporate training on IPSAS in their degree programs • Coordinate with ACCA and CIPFA to determine if there can be linkage to certification programs

3. Suggested Work Plan (continued) • Identify all government entities • Define which entities are Government Business Entities (GBEs) using following criteria: • Has power to contract in own name • Is assigned financial and operational authority to carry on a business • Sells goods and services to other entities at a profit or full cost recovery • Not reliant on continuing government funding to be a going concern • Is controlled by a public sector entity as defined in IPSAS 6

4. Suggested Work Plan (continued) • Review and assess the following for each GBE: • Determine degree of compliance with IASs by review of Auditor’s Opinion and Management Letter from external auditor • Correct deficiencies noted in order to obtain an unqualified auditor’s opinion • Prepare Consolidated Financial Statements for all GBEs

5. Suggested Work Plan (continued) • Review and assess the following requirements per Part 1 of the Cash Basis IPSAS for each governmental entity other than a GBE • Prepare Cash Receipts and Payments Statement for own revenues • Contact donors to obtain third party settlements and include in Cash Receipts and Payments Statement • Prepare Consolidated Cash Receipts and Payments Statement • Incorporate disclosure requirements for recipients of external assistance (IPSAS ED)

6. Suggested Work Plan (continued) • Review and assess additional disclosures as encouraged by Part 2 of the Cash Basis IPSAS for each governmental entity other than a GBE: • Budget to Actual Comparison (Draft ED) • Cash Flow Statement in format prescribed by IPSAS 2 • Investments in Associates as Defined in IPSAS 7 • Interests in Joint Ventures as Defined in IPSAS 8 • Value of Inventories as Defined in IPSAS 12

7. Suggested Work Plan (continued) • Value of Leases as Defined in IPSAS 13 • Value of Financial Instruments (includes all financial assets and financial liabilities) as defined in IPSAS 15 • Value of Investment Property as Defined in IPSAS 16 • Value of Provisions as Defined in IPSAS 19 • Amount of Administered Transactions as an agent • Related Parties as Defined in IPSAS 20 • Value of Property, Plant, and Equipment as Defined in IPSAS 17

8. Suggested Work Plan (continued) • Implement system of accrual accounting by adopting all IPSASs in effect, and prepare Consolidated Financial Statements as prescribed in IPSAS 6 • Extract data from accounting system for presentation in the statistical reporting system prescribed by the GFS Manual

9. Suggested Work Plan (continued) • Review organizational structure to determine changes that might be necessary. Particularly important would be consideration of an Accounting organization headed by a Chief Accountant. Functions for such a department are: • Maintain Accounting Policy and Procedures Manual • Provide Quality Assurance program for financial statements • Maintain library of pertinent accounting standards • Coordinate training needs with training function

10. Suggested Work Plan (continued) • Work with line ministries to improve the Corruption Perception Index through implementation of good internal control procedures • Design and implement an integrated government financial management system • Change laws and regulations as necessary to implement this work plan • Coordinate with internal and external auditors on work plan