Making the change to IPSAS is much more than an accounting exercise. Explore below to how it will impact your entire organisation:
First, financial rules and regulations are affected. A comprehensive accounting manual, possibly supplemented with concise implementation rules, can help your staff quickly adhere to the new accounting principles and understand the concepts behind the IPSAS standards.
Second, introducing accrual accounting may also require you to revise your budgetary accounting policies, even if budgets remain on a cash, or some other, basis. Policies for other business processes (e.g. HR, procurement, asset management) may also be affected.
Depending on your organisation’s governance structure, introducing accrual accounting may additionally have an impact on the work done by your oversight bodies (e.g. the approval and control process surrounding use of public funding).
For this to be successful, you need to put in place change management processes that work, including training, project management, awareness campaigns and organisational reform.
In order to capture and analyse the increased accounting data and information, IT systems often need amending. Your public sector entity can use its IPSAS implementation as an opportunity to set up an enterprise-resource planning system or to upgrade your current system.
Having one organisation-wide system that can be used to manage and coordinate all information, resources and business processes means significant efficiency savings and productivity gains.
Where public sector entities already use local accrual-based financial reporting standards, the challenges of IPSAS implementation are fewer, but they still require careful consideration and management. For example, a number of the standards can lead to significant shifts away from locally defined accepted practices, especially in areas such as accounting for assets, investments and employee benefits.
Adopting IPSAS is a major undertaking for an organisation, and having a partner that has the necessary knowledge, experience and expertise to manage the change in all these areas is essential.
Our IPSAS conversion methodology involves a three-phase approach designed to add maximum value to your organisation. It ensures that IPSAS adoption does not inhibit the achievement of current operational and administrative goals and helps generate significant performance improvement once conversion is achieved.
The objective of a gap analysis is to gain a detailed understanding of the impact of IPSAS on the organisation, highlight key accounting and reporting issues that need to be addressed, understand which business processes may be impacted by IPSAS, and take an informed decision on how to proceed with the IPSAS conversion. The roadmap allows the organisation to design a detailed project plan, define its needs and estimate the cost of the entire conversion process, including from an information system point of view.
The second phase of the conversion methodology involves project set-up, component evaluation and issue resolution, plus the initial conversion. The project set-up is designed to enable the organisation to manage the IPSAS conversion project to a successful conclusion while continuing to run its business effectively. For this purpose, the project management structure is set down, conversion tools are tailored and the project strategy is communicated throughout the organisation.
Component evaluation and issue resolution encompasses establishing IPSAS accounting policies, developing the shell financial statements and implementing the conversion strategy at departmental level. Once IPSAS accounting policies have been documented, adjustments and data requirements identified and reporting-process solutions developed, the organisation is ready to undertake initial conversion.
The initial conversion enables preparation of the organisation’s first IPSAS-compliant financial statements and means that an informed decision can be taken on the ongoing conversion strategy. For this, IPSAS reporting process and systems need to be designed, built and tested, IPSAS adjustments need to be calculated, reporting packs completed for required disclosures, and IPSAS results consolidated and analysed. Once completed, the initial conversion provides the organisation with Year 1 IPSAS financial statements, an assessment of the business impacts and a gap analysis of the relevant processes, systems and organisational structure.
The final phase is designed to enable the organisation to move smoothly to a new “business-as-usual” operation, using its “new language” comfortably and authoritatively. Embedding the change involves continuing IPSAS training throughout the entity, finalising the accounting manual and chart of accounts, completing systems design, build and test, the design and rollout of new business processes and procedures including internal control and risk management, and modification of budgeting processes. In practice, depending on the needs and time constraints of the project, portions of the work relating to phases two and three may be carried out simultaneously.
Once conversion is completed, IPSAS will be embedded across your organisation, with modified systems, updated controls and procedural documentation, and fully trained staff.