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

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

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United Nations System Accounting Standards

UNSAS – the current standards were … Developed in early 1990s by accounting

professionals within the UN System in consultation with the Panel of External Auditors

Approved by the ACC in 1993

Largely based on International Accounting Standards (IAS)

Developed on the basis of modified accrual.

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Why the Change to IPSASIPSAS was chosen as these standards are …

A set of independently developed accounting standards => enhanced transparency, accountability of the financial processes; better quality and credibility of financial reports

Based on full accrual accounting which has become the accepted best practice => better information on costs as input into results based management

Based on International Financial Reporting Standards (IFRS), with only public sector specific differences.

IPSAS will facilitate keeping abreast with best practices.

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The Structure of the IPSAS Project (I)

Two-level approach to IPSAS adoption …

Firstly, is the approach at the system-wide level: 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.

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The Structure of the IPSAS Project (II)

Secondly: the approach at the individual organization level

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.

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The Strategy for IPSAS Adoption

Strategy at the system-wide level: Phased Implementation:

“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.

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The Strategy for IPSAS Adoption (II)

Strategy at the United Nations: Phased Implementation: An IT systems change is

required => the UN is targeting IPSAS adoption by 2010.

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.

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IPSAS Adoption: The Challenges (I)

Major accounting and financial reporting challenges: From modified accrual to full accrual

Changed basis for expense recognition

Recognition of PP&E, inventories and intangible assets

Recognition of employee benefit liabilities

Recognition of liabilities for conditional funding agreements

Reconciliation of accrual based financial statements with cash based budget

Annual financial statements with significant increase in disclosures.

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IPSAS Adoption: The Challenges (II)

Wider challenges: IT systems: current systems (IMIS, Sun, Galileo, Procure+) do not

support IPSAS adoption

Budget: cash basis will continue to be used for foreseeable future

Work processes: significant re-engineering required; ERP implementation provides ideal opportunity to do this.

Detailed IPSAS compliant procedures required

Financial Regulation and Rules: must be updated

Training/re-education: large number of persons/places.

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IPSAS Adoption: Progress to Date (I)

The System-Wide Project: HLCM approved the UN system-wide project

System-wide Steering Committee formed

System-wide Project Team formed

System-wide policy adoption process put in place

30 policies adopted; additional guidance documented

Procurement of training products in progress.

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IPSAS Adoption: Progress to Date (II)

The United Nations Project: General Assembly approved IPSAS adoption

UN IPSAS adoption Steering Committee formed

UN Policy adoption process formulated

Interdepartmental working groups formed

UN IPSAS Project Team formed

IPSAS Project Plan outlined, including training and communication

UN position on system-wide policies detailed with implications.

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Policy Adoption Progress

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.

Guidance provided on the following:

Revenue, expenses, financial instruments, leases, foreign exchange transactions, model financial statements.

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IPSAS Adoption Communication (I)

The Objective:To provide stakeholders with the knowledge and information needed to understand the impact and benefits of IPSAS adoption.

The Approach => two pronged:Procedural: communicate the procedural aspect of the move to full accrual accountingStrategic: 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.

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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

Public information staff CFOs CAOs Property/inventory managers The ERP Project OIOS The BOA Other UN system entities UN system bodies Donors The Public

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IPSAS Adoption Communication (III)

The Communication Pathways include:

UN IPSAS Working Groups 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.

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IPSAS Adoption Training (I)

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.

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.

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IPSAS Adoption Training (II)

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.

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.

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IPSAS Adoption Training (III)

Training – the Delivery Methods: Awareness training – self study: CBT Conceptual training – instructor led using consultants

and “train the trainer” approach 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.

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2007

Organization Status Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Establish Steering Committee Completed

Appoint Project Team Leader Completed

Appoint team members In progress

Establish Working Groups Completed

Prepare/Update detailed work-plans In progress

Prepare/support funding requests In progress

AnalysisReview all IPSAS and relevant IFRS/IAS In progress

Review policy papers of system-wide project In progress

Decide on policy options In progress

Detailed analysis of UN specific issues In progress

Detailed analysis of major change areas In progress

Develop detailed procedures In progress

Validate procedures On schedule

Major Change AreasConsolidation In progress

Financial statement format In progress

Segment reporting In progress

Property, plant and equipment In progress

Inventories In progress

Intangible assets In progress

Conditional funding agreements In progress

Employee benefits In progress

Accruals and cut offs In progress

Presentation of budget information In progress

Investments In progress

The Road to Adoption - Implementation Timetable for the United Nations Adoption of IPSAS 2007-2009 (I)

2008 2009

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2007

Coordination Status Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4With IPSAS system-wide project In progress

With ERP project

High level requirements for procurement of ERP Completed

Evaluation of vendor scenario solution On schedule

Mapping of processes On schedule

Chart of Accounts On schedule

Data Model On schedule

Customization and development On schedule

Testing On schedule

Documentation On schedule

Training On schedule

Determination of opening balances On schedule

Conversion On schedule

With FR&R Project In progress

With Board of Auditors In progress

TrainingDevelop/update training plan In progress

Awareness training On schedule

Conceptual training On schedule

ERP training On schedule

CommunicationDevelop/update plan In progress

Communicate/discuss approved policies/guidance In progress

Establish/maintain i seek page In progress

Produce issue papers On schedule

Respond to queries In progress

ReportingPrepare reports to the GA as required In progress

Prepare ad hoc reports In progress

The Road to Adoption - Implementation Timetable for the United Nations Adoption of IPSAS 2007-2009 (II)

2008 2009

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The Road to IPSAS Adoption (III)

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.

Any delays in implementation of the new ERP will impact the timing of IPSAS tasks and the target date for adoption.

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.

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How you can support the change to IPSAS

Inform yourself: the IPSAS page coming to i-seek https://unsystemceb.org/reference/05 http://www.ifac.org/PublicSector.

Understand what changes IPSAS shall bring to your areas of work.

Communicate the change and its benefits.

Participate fully in upcoming training.