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Challenges for ipsas_adoption_-_final_-_1_nov_2011


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Challenges for ipsas_adoption_-_final_-_1_nov_2011

  1. 1. Overcoming  the  Challenges  of   IPSAS  TransitionTransition  Strategies  for: Successful  IPSAS  Implementation
  2. 2. Agenda• Introductions• Overall  Planning  and  Project  Management – Transition  scoping – Methodology  for  implementation – What  is  driving  the  decision  to  adopt  IPSAS? – Choices  and  Their  Impacts  on  Implementation – Who  Should  be  part  of  the  IPSAS  transition  team?• High  Impact  Areas  for  IPSAS  Transition• Treatment  of  Presentation  of  Financial  Statements   Considerations• Treatment  of  Fixed  Assets  and  Considerations• Cash  versus  Accrual  Accounting• IPSAS  PARTNER  Demonstration• Closing  Remarks  and  Questions  and  Answers
  3. 3. Seminar  Materials  Disclaimer • Presenters  at  the  seminar  have  prepared  materials  for   the  interest  of  participants.  We  trust  that  you  will  find   the  materials  useful,  but  given  the  changing  nature  of  the   topic  matter  and  the  summary  level  of  today’s   presentation,  neither  presenters,  nor  Issues  Central,  Inc.,   can  warrant  that  the  use  of  the  materials  would  be   adequate  to  discharge  the  legal  or  professional  liability  of   participants  in  the  conduct  of  their  practice  or  business   operations.
  4. 4. About  Issues  Central,  Inc.• To  support  our  IPSAS  consulting  practice,  Issues  Central  introduced  IPSAS  PARTNER.  The  world’s  first  transition  product  for  IPSAS  conversion.  IPSAS  PARTNER  is  the  leading  software  solution  to  help  automate  and  streamline  the  transition  from  local  government  accounting  standards  to  IPSAS  with  ongoing  IPSAS  compliant  financial  reporting. •Global  website:•To  support  our  IFRS  consulting  practice  in  2008  Issues  Central  introduced  the  world’s  first  GAAP-­‐to-­‐IFRS  transition  product  -­‐ IFRS  PARTNER.  IFRS  PARTNER  is  the  leading  software  solution  worldwide  to  help  automate  and  streamline  the  transition  from  local  GAAP  to  IFRS  (and  then  provide  ongoing  IFRS  compliant  financial  reporting. • Global  website:
  5. 5. Seminar  Presenter:  Catherine  Connally,  CIA • Catherine  Connally  has  over  twenty-­‐five  years  experience  in  financial   management  and  compliance,  internal  audit  and  executive  management.  She   began  her  career  in  the  extractive  sector  with  internal  audit  responsibilities  in   both  the  mining  and  oil  &  gas  sectors  with  Atlantic  Richfield  and  British   Petroleum.   • She  is  a  well  known  technology  and  compliance  sector  entrepreneur  having   started  technology  businesses  in  both  the  United  States  and  Canada.   • She  has  provided  seminars  and  workshop  to  over  one  thousand  organizations  Catherine  Connally around  the  world  on  IFRS  transition  and  related  financial  compliance  activities.CIA • Catherine  is  a  co-­‐author  and  primary  architect  of  industry  leading  financial  President  of  Issues   transition  and  compliance  products  including  IFRS  PARTNER  for  GAAP  to  IFRS  Central,  Inc and  CFO  PARTNER  for  Sarbanes-­‐Oxley  compliance.   • She  graduated  in  finance  with  honours  from  the  University  of  Colorado  at   Boulder  and  is  a  Certified  Internal  Auditor.   • She  has  extensive  knowledge  of  International  Financial  Reporting  Standards   (IFRS)  and  her  lead  role  in  the  development  of  the  IFRS  PARTNER  product  has   led  to  the  market  success  of  the  product  with  over  two  hundred  organizations   in  all  key  business  sectors.  Ms.  Connally  is  a  frequent  speaker  on  IFRS  transition   and  internal  controls.  
  6. 6. Seminar  Presenter:  Charley  Best,  MBA • Charley  Best  has  over  25  years  of  experience  in  executive  management  and   consulting  roles  across  the  manufacturing,  technology,  and  services  sectors.  He  is   an  authority  on  the  application  of  sound  project  management  techniques  to   complex  projects  such  as  the  transition  to  international  financial  reporting   standards  (IFRS)  in  various  national  settings.   • At  Issues  Central,  Inc.  (ICI)  Charley  has  organized  the  company’s  IFRS  campaigns   across  Canada,  the  United  States  and  abroad  to  bring  over  200  companies  to  the   new  IFRS  standards.  Charley  has  worked  extensively  with  companies  and   regulators  in  Canada,  the  United  States,  South  Africa,  and  recently  Nigeria,  to  Charley  Best develop  and  deliver  methodologies  and  tools  to  streamline  costs  and  time-­‐to-­‐MBA comply  for  areas  such  as  IFRS  transition,  Sarbanes-­‐Oxley  Act  of  2002, NI  52-­‐109,  Vice  President  of and  Executive  Compensation  Disclosure.  Issues  Central,  Inc. • He  is  in  charge  of  ICI’s  IFRS  activities  in  Nigeria  and  since  November  2010  he  and  (Toronto,  Canada)  and his  team  have  provided  IFRS  TRAINING  and  training  to  over  100  organizations   including  regulators,  NSE  listed  firms,  government  entities  and  external  auditors.   • He  is  also  the  main  project  architect  behind  the  IFRS  Transition  Program  series  for   Insurance,  Manufacturing  and  other  sectors  in  Nigeria.  Charley  is  a  best-­‐selling   author  of  the  Manufacturing  Systems  Implementation  Methodology  (MSIM)  first   published  in  1988.  He  has  a  BA  from  Queen’s  University  in  Kingston,  Ontario,   Canada  and  an  MBA  from  York  University  in  Toronto,  Canada.  
  7. 7. Seminar  Presenter:  Marc  Neal,  CMA • Marc  Neal  has  over  27  years  of  experience  in  accounting  and   executive  financial  and  project  management  roles.   • His  international  accounting  experience  includes  ad  Deputy   Director  Finance  for  the  Supply  Division  and  Agency  of  the  North   Atlantic  Treaty  Organization  (NATO).  In  that  role  he  successfully   transitioned  NATO  from  cash  accounting  to  full  accruals  accounting   using  IPSAS.    The  project  deliverables  included  application   standards  for  the  21  reporting  entities,  and  sample  disclosure  notes   that  would  be  adapted  to  individual  entity  reporting  requirements.  Marc  Neal, • This  four  year  implementation  of  IPSAS  also  involved  dealing  with   the  following  related  issues:  refining  and  implementation  of  new  CMAIPSAS  PARTNER  – projects  both  IT  and  construction  related;  handling  change  Product  Manager management  issues  related  to  internal  development  projects;   successful  implementation  Oracle  7  ERP  solutions;  establishment  of   Activity  Based  Costing  (ABC);  review  of  contracts,  MOUs  and   implementing  agreements;  oversaw  the  execution  of  operational   budgets  in  excess  of  1.5  billion  Euros;    providing  internal  financial   management  reports  for  the  use  of  the  board  of  directors  and   senior  management;  and  lastly  the  management  of  32  staff.   • Marc  is  a  graduate  of  the  University  of  Ottawa,  Ontario,  Canada   and  is  a  Certified  Management  Accountant  (CMA).
  8. 8. Planning  &  Project  ManagementBest  Practices
  9. 9. Overall  PlanningTransition  scoping  and  diagnostic:The  overall  steps  to  a  successful  IPSAS  transition   encompass  the  following: – Identification  of  an  appropriate  transition  team • All  individuals  who  will  participate  as  project  team   members  and  advisors – Identifying  the  optimal  implementation  criteria   across  the  entities  impacted  entities
  10. 10. Overall  Planning  (cont’d)Transition  scoping  and  DiagnosticThe  overall  steps  to  a  successful  IPSAS  transition   encompass  the  following: – Cross  functional  areas  to  be  evaluated  in  addition   to  the  finance  and  accounting  areas  such  as: • Business  processes,   • ITC  requirements,   • the  audit  function,   • stakeholder  management  and   • change  management  areas
  11. 11. Overall  Planning  (cont’d)The  overall  steps  to  a  successful  IPSAS  transition   encompass  the  following: – Engagement  of  the  External  Audit  Function: • Court  of  Auditors,   • internal  auditors,   • audit  committees,  and   • senior  financial  expert  body  
  12. 12. Methodology for implementation• The  choices  you  make  when  implementing   across  the  various  levels  and  entities    are   critical• There  are  many  potential  ways  to  approach   the  adoption  of  IPSAS.     – Careful  consideration  should  be  taken  to   evaluate  the  impact  in  the  following  areas: • What  is  the  time  line  for  implementation? • At  what  level  will  consolidation  take  place? • What  are  the  spheres  of  influence  between  entities? • Can  certain  parts  of  the  entity  implement  first  without   an  adverse  impact  on  other  areas?
  13. 13. Methodology for implementation (cont’d) – Careful  consideration  should  be  taken  to   evaluate  the  impact  in  the  following  areas: • What  are  the  future  chart  of  accounts  requirements? • How  will  future  changes  in  chart  of  accounts  be   accommodated? • What  is  the  level  of    IPSAS  competence  within  the   entities? • Will  a  phased  in  approach  be  utilised? • Will  a  phased-­‐in    approach    be  taken  to  accommodate   training  requirements?
  14. 14. Choices  and  Their  Impacts  on  ImplementationIPSAS  versus  a  custom  set  of  standards:• Developing  a  set  of  national  public  sector   custom  set  of  standards: – Takes  many  years  to  develop – Independence  from    international  influence – May  put  the  organisation  on  its  own  as  opposed   to  part  of  the  international  community• Very  costly  to  develop  in  terms  of  staff   availability  =  high  opportunity  cost
  15. 15. Choices  and  Their  Impacts  on  Implementation  (cont’d) • Adopting  IPSAS  has  many  benefits  which  include: – Reduced  time  to  implementation,   – Lower  opportunity  costs,   – Comprehensive  set  of  standards: • Developed  with  combined  world-­‐wide  expertise   • Benefit  of  evolving  over  many  years  and • Are  in  line  with  IFRS – IPSASB  is  comprised  of  experts  from  around  the  world • Board  has  very  good  process  for  evaluating  and  setting   standards – Standards  are  internationally  recognized • The  standards  address  most  situations  governments  and   public  sector  organizations  face – IPSAS  is  promoted  by  the  World  Bank
  16. 16. Choices  and  Their  Impacts  on  Implementation  (cont’d) Incremental  versus  “Big  Bang”  implementation: • A  decision  to  implement  IPSAS  incrementally   may  require  significantly  longer  than  a  “Big   Bang”  implementation   – but  often  provides  a  smoother  transition    and   does  spread  the  cost  over  a  longer  period  of  time • Incremental  implementation  will  have  an   impact  on  the  ability  to  consolidate  financials • Scheduling  IT  system  upgrade  requirements  is   difficult  with  an  incremental  approach
  17. 17. Who  Should  be  part  of  the  IPSAS  Transition  Team? • The  IPSAS  Transition  Team  should  be: – A  multidisciplinary  team  with  representation  from  budget,   accounting,  IT,  Business  functional  areas, • The  basic  team  should  have  reporting  lines  to  a   decision  making  committee – such  as  an  audit  committee  with  financial  Experts • The  team  will  need  access  to: – Audit  authority,  or   – external  auditors,   – to  ensure  that  decisions  can  be  supported  within  the  audit • The  team  will  need  to  provide  regular  updates  to  the   Executive  Board
  18. 18. What  are  Team  Responsibilities? • Team  responsibilities  include: – Responsibility  for  project  management,   – Accounting  policy  development   – Support  for  implementation – Change  management  activities,   – Communications  with  auditors  and  executive   committees – Training
  19. 19. High  Impact  Areas Issues  and  Considerations
  20. 20. High  Impact  Areas  for  IPSAS  Transition• Presentation  of  Financial  Statements• Property  plant  and  equipment• Intangible  assets• Inventory• Accruals  accounting• Cash  flow  statements• Investment  in  associates• Budgets• Consolidations
  21. 21. Treatment  of  Fixed  Assets Issues  and  Considerations
  22. 22. Fixed  Assets  Issues  and  Valuation• Within  many  public  sector  organizations,    fixed   assets  poses  a  great  deal  of  difficulty – Difficulties  arise  in  terms  of: – assessing  an  initial  value  for  assets,  particularly   for  large  assets  such  as  infrastructure,  heritage   assets,  artwork  and  so  on• Valuation  choices  and  options  include: – historical  cost,     – independent  evaluators/appraisers
  23. 23. Fixed  Assets  Issues  and  Valuation• There  are  choices  to  make – To  depreciate  the  asset  over  its  useful  life    or   – To  revalue  on  a  periodic  basis    • Within  IPSAS,  the  choice  to  amortize  or   revalue  are  made  for  each  class  of  assets• IPSAS  allows  for  a  5  year  transition  period  for   fixed  assets – from  the  first  year  of  presenting  IPSAS  compliant   financial  statements
  24. 24. Accrual  &  Cash  Basis  AccountingDiscussion  and  Advantages/Disadvantages
  25. 25. Reasons  for  Change  to  Accrual  Accounting • What  is  driving  the  decision  to  move  to   accruals  accounting?   – According  to  recent  studies,  there  is  an   increased  drive  towards  the  adoption  of   accrual  based  accounting  standards  for  the   public  sector.     • Top  reasons  cited  include: – Increased  transparency – Increased  insight  into  the  use  of  and  stewardship  of   the  public’s  tax  payments  and  the  assets  entrusted   to  the  government – Overall  better  information  for  decision  making   purposes
  26. 26. Cash  versus  Accrual  AccountingAdvantages  of  Cash  Accounting• Simpler  to  maintain• Data  can  be  taken  from  minimal  sources: – bank  statements – cheque  books – deposit  book• Preparation  of  financial  reports  requires  less  time   because  minimal  adjustments  are  required  when   prepared  from  cash  records• People  with  limited  accounting  knowledge  can  more   easily  understand  the  financial  reports• Finalized financial  reports  can  be  prepared  on  demand   without  the  need  for  adjusting  entries
  27. 27. Cash  versus  Accrual  Accounting  (cont’d)Advantages  of  Cash  Accounting• Simpler  to  maintain• Data  can  be  taken  from  minimal  sources: – bank  statements – cheque  books – deposit  book• Preparation  of  financial  reports  requires  less  time   because  minimal  adjustments  are  required  when   prepared  from  cash  records• People  with  limited  accounting  knowledge  can  more   easily  understand  the  financial  reports• Finalized financial  reports  can  be  prepared  on  demand   without  the  need  for  adjusting  entries
  28. 28. Cash  versus  Accrual  Accounting  (cont’d)Disadvantages  of  Cash  Accounting• Financial  reports  do  not  represent  the  true  financial   position  and performance of  the  business• This  method  does  not  comply  with  the  accounting   concept  of  the matching  principle• Financial  institutions  may  not  accept  this  accounting   method  when  making  loan  applications• It  is  an  unreliable  financial  analysis  and  decision   making  tool due  to  an  incomplete  picture  of  financial   commitments• Performance  comparisons  are  difficult: – With  previous  period  results  and – Other  organisational  benchmarks  
  29. 29. Cash  versus  Accrual  Accounting  (cont’d)Advantages  of  Accrual  Accounting• Provides  a  truer  and  fairer  representation  of  the   financial  position  and  performance  of  the  organization• Complies  with  accounting  standard  requirements• Financial  reports  have  more  credibility  with  financial   institutions  and  investors• More  reliable  financial  analysis  and  decision  making   tool  with  valid comparisons  with  prior  periods  and   benchmarks• Positions  the  organization  for  future  growth – Accrual  accounting  system  will  eventually  need  to  be   adopted
  30. 30. Cash  versus  Accrual  Accounting  (cont’d)Disadvantages  of  Accrual  Accounting• More  transactions  are  required  to  record  the  same   number  of  financial  events• More  complex  with  the  requirements  to  calculate   and  manage  the  end  of  period  adjustments  .• Often  requires  the  professional  accounting  training   to  assist  in  preparation  of  the financial  statements• Greater  requirement  to  retain  all  source  documents   to  help  identify  the  timing  and  scope  of  revenues   and  expenses• Financial  reports  take  longer  to  prepare  since   income/expense  adjustments  require  additional   investigation
  31. 31. Cash  versus  Accrual  Accounting  (cont’d)• The  benefits  of  accrual  accounting  are  to  ensure   transparency  to  stakeholders  • With  accrual  accounting,  there  is  greater  visibility   on  assets  and  liabilities,   – This  does  not  exist  with  a  cash  basis  presentation• In  other  words,  presentation  is  more  accurate   under  accrual  based  accounting  and  more   comparable  world-­‐wide• As  a  result  the  organization  has  a  greater  ability   to  develop  and  track  key  performance  metrics
  32. 32. The  IPSAS  PARTNER  approach  to  meeting  your  transition  requirementsA  step-­‐by-­‐step,  GAAP-­‐to-­‐IPSAS  methodology  delivered  as  an  easy-­‐to-­‐use  product  with  support  and  assistance  
  33. 33. Product  Benefits • Rapid  to  deploy • Cuts  through  the  IPSAS  fog  and  gets  you  working   immediately • Create  policies  quickly  and  accurately • Impact  Assessment  documentation  easily  customized • Reporting  will  help  you  to  substantiate  your  decision   making  for  audit  committees  and  external  auditors • Works  with  Microsoft  Office®  tools • Proven  product  and  very  affordable • Various  options  for  deployment
  34. 34. IPSAS  PARTNER  -­‐ GAAP  to  IPSAS  TransitionStep  5: Generate  IPSAS  policy   impact  assessment   Step  6: details  for  review Generate  IPSAS  policy  impact  assessment   details  documentation  for   measurement,  disclosures,  systems,   business  activities  and  internal  controls. Step  4: Step  7: Review  ‘Clean  Slate”   Document  policy   Draft  IPSAS  Policies decisions  for  review  and   generate  adjustments  and   Step  3: Generate  Scoping  &   IPSAS  elections. Diagnostic  Reports Step  8: Step  2: Prepare  opening  balance   Capacity   sheet,  notes  and  quarterly   Building   comparatives. on  IPSAS Step  1: START  HERE Develop   Project  Plan
  35. 35. Two  Options  for  IPSAS  PARTNER• Option  One:   – IPSAS  PARTNER  Software  +  Content  plus   – Training  and  Support
  36. 36. Two  Options  for  IPSAS  PARTNER• Option  Two:   – Tailored  workshops  with  experts  on  IPSAS   delivering  capacity  building    with  your  peers – As  part  of  the  workshops,  assistance  in   completion  of  project  deliverables   – IPSAS  PARTNER  software  +  Content – Training  and  Support
  37. 37. What  you  are  about  to  see Brief  product  demonstration: • Quick  overview  of  IPSAS  PARTNER  structure • Then  focus  on: – IPSAS  Draft  Policies  with  elections – Disclosure  checklists – Helpful  templates  for  calculations  and  analysis – Impact  Assessment  documentation – Graphical  reporting  for  project  management  and   auditors
  39. 39. IPSAS  PARTNER  Main  Menu
  40. 40. Special  Pricing  Available  until  31  December • For  the  first  25  organisations  who  become   IPSAS  PARTNER  customers – There  is  a  special  33%  discount  available  for   placing  an  IPSAS  PARTNER  software  order  by               31  December – If  this  is  of  interest  to  you,  please  contact  us  after   this  session  and  we  will  put  together  a  proposal   specially  tailored  to  your  organisation
  41. 41. Discussion  and  Questions Note:  you  can  use  the  chat  feature  to  ask  questions   or  email
  42. 42. Contact  Information• For  sales  and  pricing  information  please   contact: – Charley  Best  – Vice  President • E-­‐mail: • Tel:  +14169771496  ext  112• For  questions  about  today’s  seminar  materials   please  contact: – Marc  Neal  – IPSAS  Product  Manager • E-­‐mail: