Hal Le, Director of International Products
Many government organizations are looking to support the International Public Sector Accounting Standards (IPSAS). IPSAS support is an important criteria in Public Expenditure and Financial Accountability (PEFA) assessments. How do FreeBalance customers leverage the FreeBalance Accountability Suite to support this standard?
FreeBalance Software Setup
The FreeBalance Accountability Suite requires no code customization to support cash or accrual IPSAS. Configuration is required for:
1) The combination of the Chart of Accounts (COA) setup
The COA must include the relevant ledger codes for supporting various standards (e.g. AP / AR accounts if under accrual must be specified; depreciation accounts for Assets)
ex 1: IPSAS 9 (Rev for Exchange Transactions) must have the corresponding GL accounts set up. Currency codes and forex rates must be configured as controls.
ex 2: IPSAS 12 (Inventories) requires inventory GL accounts to be setup. In inventory module, the GL codes can be assigned by inventory.
ex 3: IPSAS 17 (Property/Plant/Equipment) requires asset GL accounts to be setup.
The need to support IPSAS reporting means that the COA can be configured to be intuitive for data entry while rolling up to the standard through side tables. Data entry personnel require very little understanding of IPSAS.
2) The modules that are activated and configured
At the module level, the module configuration needs to be set up to support IPSAS data collection and reporting:
ex 1: IPSAS 12, 17 requires the inventory/asset items to have the proper COA coding block to report asset transactions (depreciation, leases) as well as inventory transactions (expense)
ex 2: IPSAS 1, 13 (Leases) etc require the modules to be set up for AP and Liability accounts (e.g. Purchasing set up requires identification of the AP line object for modified accrual/accrual)
3) The accounting standard used
The system configuration for Cash/Accrual (or modified) tells the system how to collect and report the data (e.g. if Cash no AP/AR accounts are maintained nor carried over during FYE operations)
IPSAS and Full IPSAS
It should be recognized that full IPSAS compliance means reporting on all government financial activity included sub-national governments and State-Owned Enterprises (SOEs). National governments may follow all IPSAS standards but may not have sub-national information in federal countries and may not have all the information on SOEs. The International Consortium on Governmental Financial Management (ICGFM) has a certification program for IPSAS. We expect to be reporting, in the near future, on some of our customers that have achieved IPSAS compliance.
Phasing for Accrual IPSAS
Many governments leverage modified cash or modified accrual accounting. This can generate problems with IPSAS compliance. Governments are not advised to implement fixed assets with depreciation) in a phased manner across different organizations over time because that makes the financial reports unreliable. For example, if you roll out fixed assets in phase 1 to 3 ministries, then 3 more ministries the following year, then your financial reports will be completely out of whack and cannot be compared year over year. Because one year you have three ministries reporting assets (in the government’s Balance Sheet) and then the following year the asset balance may double. Financial statements will make it appear that many fixed assets were purchased over the year.
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Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.
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