IPSAS Adoption at the United Nations Reform Progress

IPSAS Adoption at the United Nations Reform, Progress, Outlook Briefing at CFO Workshop, New York By Jayantilal M. Karia Director, Accounts Division, United Nations 11 December 2007

Contents l UNSAS: the Current Standards l Why the Change to IPSAS l The Structure of the IPSAS Project l The Strategy for IPSAS Adoption l IPSAS Adoption: The Challenges l IPSAS Adoption: Progress to date l Policy Adoption Progress l Communication and Training l The Road to IPSAS Adoption l How you can support the change 2 2

United Nations System Accounting Standards UNSAS – the current standards were … Ø Developed in early 1990 s by accounting professionals within the UN System in consultation with the Panel of External Auditors Ø Approved by the ACC in 1993 Ø Largely based on International Accounting Standards (IAS) Ø Developed on the basis of modified accrual. 3 3

Why the Change to IPSAS was chosen as these standards are … Ø A set of independently developed accounting standards => enhanced transparency, accountability of the financial processes; better quality and credibility of financial reports Ø Based on full accrual accounting which has become the accepted best practice => better information on costs as input into results based management Ø Based on International Financial Reporting Standards (IFRS), with only public sector specific differences. IPSAS will facilitate keeping abreast with best practices. 4 4

The Structure of the IPSAS Project (I) Two-level approach to IPSAS adoption … Firstly, is the approach at the system-wide level: Ø § § § The System-Wide Project : Manages the policy/guidance adoption process Addresses common implementation issues Develops policies/guidance to ensure consistency Develops system-wide training products Supports individual organizations. 5 5

The Structure of the IPSAS Project (II) Secondly: the approach at the individual organization level Ø § § § § Individual organizations: Gain governing body approval Establish internal project framework and plan Participate in development of harmonized policies Implement harmonized policies/guidance adopted Develop/implement detailed procedures Deploy training Initiate relevant IT and FR&R changes. 6 6

The Strategy for IPSAS Adoption Strategy at the system-wide level: Ø Phased Implementation: § § Ø “Early Adopters” => more advanced stage of IT readiness = adopt IPSAS by 2008 = WFP, ICAO, WHO “Fast Followers” => where significant IT changes are necessary, will benefit from the lessons learned = adopt IPSAS by 2010. Phased Rollout: § § UNSAS has been changed to allow adoption of IPSAS standard by standard Progressive implementation of detailed IPSAS requirements is encouraged if no conflict with UNSAS. 7 7

The Strategy for IPSAS Adoption (II) Strategy at the United Nations: Ø Phased Implementation: An IT systems change is required => the UN is targeting IPSAS adoption by 2010. Ø Phased Rollout: Current IT systems do not support adoption of individual standards. The strategy at the UN is to: § § move to IPSAS requirements to the extent that they do not conflict with UNSAS integrate IPSAS adoption into the project for the new ERP system. 8 8

IPSAS Adoption: The Challenges (I) Major accounting and financial reporting challenges: Ø From modified accrual to full accrual Ø Changed basis for expense recognition Ø Recognition of PP&E, inventories and intangible assets Ø Recognition of employee benefit liabilities Ø Recognition of liabilities for conditional funding agreements Ø Reconciliation of accrual based financial statements with cash based budget Ø Annual financial statements with significant increase in disclosures. 9 9

IPSAS Adoption: The Challenges (II) Wider challenges: Ø IT systems: current systems (IMIS, Sun, Galileo, Procure+) do not support IPSAS adoption Ø Budget: cash basis will continue to be used foreseeable future Ø Work processes: significant re-engineering required; ERP implementation provides ideal opportunity to do this. Ø Detailed IPSAS compliant procedures required Ø Financial Regulation and Rules: must be updated Ø Training/re-education: large number of persons/places. 10 10

IPSAS Adoption: Progress to Date (I) The System-Wide Project: Ø HLCM approved the UN system-wide project Ø System-wide Steering Committee formed Ø System-wide Project Team formed Ø System-wide policy adoption process put in place Ø 30 policies adopted; additional guidance documented Ø Procurement of training products in progress. 11 11

IPSAS Adoption: Progress to Date (II) The United Nations Project: Ø General Assembly approved IPSAS adoption Ø UN IPSAS adoption Steering Committee formed Ø UN Policy adoption process formulated Ø Interdepartmental working groups formed Ø UN IPSAS Project Team formed Ø IPSAS Project Plan outlined, including training and communication Ø UN position on system-wide policies detailed with implications. 12 12

Policy Adoption Progress Ø 30 system-wide accounting policies/recommended practices have been adopted, including: PP&E, inventories, intangibles, borrowing costs, actuarial gains/losses for employee benefits, transitional provisions, financial statement presentation, presentation of budget information, audit of financial statements. Ø Guidance provided on the following: Revenue, expenses, financial instruments, leases, foreign exchange transactions, model financial statements. 13 13

IPSAS Adoption Communication (I) Ø The Objective: To provide stakeholders with the knowledge and information needed to understand the impact and benefits of IPSAS adoption. Ø The Approach => two pronged: Procedural: communicate the procedural aspect of the move to full accrual accounting Strategic: aims to alter the perception of accounting information from being useful only for historic or control purposes to being employed as a decision making tool. 14 14

IPSAS Adoption Communication (II) The Target Audiences include: § § § The Member States Senior Management Accounts Staff Budget Staff Treasury Staff Executive Staff Procurement Staff Programme Staff OHRM Staff Central Support Staff Transportation and Logistics Staff § § § 15 Public information staff CFOs CAOs Property/inventory managers The ERP Project OIOS The BOA Other UN system entities UN system bodies Donors The Public 15

IPSAS Adoption Communication (III) The Communication Pathways include: Ø UN IPSAS Working Groups § § Ø cross-functional, OAH and DFS participation structured for full engagement in policy setting. UN IPSAS intranet page (coming 31 Dec 2007) § § § § Background information on the move to IPSAS The standards and guidance papers Details of the approved polices Project organization and timeline FAQ with answers Issue papers Useful links: CEB website, IFAC website. 16 16

IPSAS Adoption Training (I) Ø Training – the Structure: § Awareness training: get “buy in” for the change § Conceptual training: develop understanding of concepts § Systems/ERP training: transaction in-put, reporting, diagnostics. Ø Training - the Curriculum § § § Awareness training: Orientation to IPSAS, Accrual Accounting – The Basics. Conceptual training: By Standards, Accrual Accounting – The Basics and Beyond, Advanced Topics in Financial Reporting, Preparing Accrual Based Financial Statements Systems/ERP training: TBD. 17 17

IPSAS Adoption Training (II) Ø Training – the Approach: § System-wide Project – procures training products § UN IPSAS Project – details needs assessment § UN IPSAS Project – deploys IPSAS training § UN IPSAS & ERP projects – develop/deploy ERP training. Ø Training – the Target Audience: includes UN, ITC, UNITAR, UNU, UNEP, UN-HABITAT, UNODC, ICTR, ICTY, UNCC) § § § Awareness training – 4, 300 staff Conceptual training – 3, 000 staff (including 800 specialists) System/ERP training – TBD. 18 18

IPSAS Adoption Training (III) Ø Training – the Delivery Methods: § Awareness training – self study: CBT § Conceptual training – instructor led using consultants and “train the trainer” approach § Ø Systems/ERP training – TBD. Training - the Timing § § § Awareness training – begins mid 2008 Conceptual training – begins towards the end of 2008 Systems/ERP training – begins just prior to ERP rollout. 19 19

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The Road to IPSAS Adoption (III) Ø The timetable highlights that the major issue for IPSAS adoption is the information system requirements: § The minimum required modules of the ERP must be in place in time to support IPSAS-compliant financial statements as at 31 December 2010. Ø Any delays in implementation of the new ERP will impact the timing of IPSAS tasks and the target date for adoption. Ø ACABQ report A/60/870: noted that the timetable for IPSAS adoption would need to be synchronized with the introduction of the new ERP system. 22 22

How you can support the change to IPSAS Ø Inform yourself: § § § the IPSAS page coming to i-seek https: //unsystemceb. org/reference/05 http: //www. ifac. org/Public. Sector. Ø Understand what changes IPSAS shall bring to your areas of work. Ø Communicate the change and its benefits. Ø Participate fully in upcoming training. 23 23