Your challenges
Making the change to IPSAS is much more than an accounting exercise. Explore below to how it will impact your entire organisation:
One of the inevitable consequences your organisation faces while adopting accrual accounting is the need to review and amend your policies, governance and control structures.
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).
Accrual accounting is based on the occurrence of economic events, and not merely on cash receipts and payments. So moving towards IPSAS as your basis for accrual accounting, accrual budgeting or performance-based management requires a significant cultural shift in the mindset of management, staff, regulators, funds providers and other organisational stakeholders.
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.
Accrual accounting also requires you to develop new ways of reporting and communicating financial information. Since the focus for public sector bodies has traditionally been on budgetary execution rather than wider financial reporting, new data needs might crop up when accrual accounting is adopted under IPSAS.
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.
Beyond people and systems, IPSAS adoption will also have an impact on your entity’s processes. You will have to enhance existing processes, create new ones and re-examine internal control frameworks to ensure that internal control and risk management are effective under the new accounting standards.
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.
How PwC can help you
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.
