Latin American Regional Conference Strengthening Public Sector Accounting & Auditing Stephenie Fox Technical Director, IPSASB

IFAC’s Mission To serve the public interest, IFAC will continue to strengthen the worldwide accountancy profession and contribute to the development of strong international economies IFAC IFAC

Government Reporting Fiscal accountability of governments enhances economic growth & development worldwideFiscal accountability of governments enhances economic growth & development worldwide Good financial reporting criticalGood financial reporting critical Need clear understandable & reliable information for those who elect, pay tax and investNeed clear understandable & reliable information for those who elect, pay tax and invest IFACIFAC

IPSASBIPSASB June 14, 2007Mexico City Government Financial Reporting Expect high quality reporting: Accountability – spending our money Accountability – spending our money Timely, accurate financial information – to monitor and manage performance Timely, accurate financial information – to monitor and manage performance Transparency – engages constituents in democratic process; engenders confidence Transparency – engages constituents in democratic process; engenders confidence IFAC IFAC

IPSASBIPSASB June 14, 2007Mexico City Current practice Widespread poor quality financial reportingWidespread poor quality financial reporting Imposes burden on economyImposes burden on economy Disconnect between government response to private sector failures and lack of urgency devoted to improving own financial reporting and managementDisconnect between government response to private sector failures and lack of urgency devoted to improving own financial reporting and management IFAC

IPSASBIPSASB June 14, 2007Mexico City Challenges IFAC Educating taxpayers – Have a right to information about use of their taxesEducating taxpayers – Have a right to information about use of their taxes Educating governments – Fiduciary obligation to be accountableEducating governments – Fiduciary obligation to be accountable Use of public funds - a higher obligation/level of accountability owedUse of public funds - a higher obligation/level of accountability owed Changing paradigms:

IPSASBIPSASB June 14, 2007Mexico City Strengthening Public Sector Accounting and Auditing IFAC contributes to governance in multiple ways: Public sector accounting standardsPublic sector accounting standards External auditExternal audit Ethic standardsEthic standards Independence standards for professional accountants in governmentIndependence standards for professional accountants in government

IPSASBIPSASB June 14, 2007Mexico City IPSASB’s Mission To serve the public interest by developing high- quality accounting standards for use by public sector entities around the world in the preparation of general purpose financial statements To serve the public interest by developing high- quality accounting standards for use by public sector entities around the world in the preparation of general purpose financial statements

IPSASBIPSASB June 14, 2007Mexico City IPSASB IPSASB Develops International Public Sector Accounting Standards (IPSASs) - cash and accrualDevelops International Public Sector Accounting Standards (IPSASs) - cash and accrual Supported/adopted by the UN, World Bank, OECD, NATO and othersSupported/adopted by the UN, World Bank, OECD, NATO and others Facilitates convergence of national and international public sector standardsFacilitates convergence of national and international public sector standards IPSASB

IPSASBIPSASB June 14, 2007Mexico City Rationale for IPSASs Standards -essential to high quality reportingStandards -essential to high quality reporting High quality reporting -essential to governmental performance and accountabilityHigh quality reporting -essential to governmental performance and accountability Governmental transparency - key element of quality of governanceGovernmental transparency - key element of quality of governance Quality of governance -leads to economic growth and all that goes with itQuality of governance -leads to economic growth and all that goes with it

IPSASBIPSASB June 14, 2007Mexico City IPSASs A foundation for better financial reporting by governments

IPSASBIPSASB June 14, 2007Mexico City IPSASB 3 meetings per year3 meetings per year Open to the publicOpen to the public All materials publicly available – posted on internetAll materials publicly available – posted on internet Transparent due processTransparent due process 15 from member bodies; 3 public members15 from member bodies; 3 public members

IPSASBIPSASB June 14, 2007Mexico City Developing Standards Accrual basis standards based on IFRSsAccrual basis standards based on IFRSs Convergence with IFRSs unless public sector specific reason for departureConvergence with IFRSs unless public sector specific reason for departure Current hierarchy – where no IPSAS exists consider IASB standards or national standardsCurrent hierarchy – where no IPSAS exists consider IASB standards or national standards Public sector specific standardsPublic sector specific standards Cash basis IPSASCash basis IPSAS

IPSASBIPSASB June 14, 2007Mexico City IPSASB Broad spectrum of practice internationallyBroad spectrum of practice internationally Availability of resources within jurisdictionsAvailability of resources within jurisdictions Previous limited resources for IPSASB has delayed full standard setting programPrevious limited resources for IPSASB has delayed full standard setting program Challenges

IPSASBIPSASB June 14, 2007Mexico City Conditions for IPSAS Implementation Acceptance by Government of need for comprehensive financial reportingAcceptance by Government of need for comprehensive financial reporting Effective external auditEffective external audit Independent interpretationIndependent interpretation Trained professionals – accountants, auditors, managersTrained professionals – accountants, auditors, managers Political will to be accountablePolitical will to be accountable

IPSASBIPSASB June 14, 2007Mexico City Financial Management Reform Main reason for adopting IPSASs: reform of public sector financial managementMain reason for adopting IPSASs: reform of public sector financial management Improve the use and management of all public sector resources – can’t manage that which you have no information aboutImprove the use and management of all public sector resources – can’t manage that which you have no information about

IPSASBIPSASB June 14, 2007Mexico City Benefits of Financial Management Reform Improved information for public sector managersImproved information for public sector managers Knowledge is powerKnowledge is power Better financial reporting:Better financial reporting: –Greater transparency in public sector finances builds trust with the constituency –Easier access to international capital markets –Cheaper access to capital markets

IPSASBIPSASB June 14, 2007Mexico City Financial Management Reform IPSASs fundamentalIPSASs fundamental Awareness of financial position leads to managing itAwareness of financial position leads to managing it Need high quality information systemsNeed high quality information systems Adoption of IPSASs and accrual basis of financial reporting is critical in financial management reform.

IPSASBIPSASB June 14, 2007Mexico City Implementing IPSASs Start with cash basisStart with cash basis Strong implementation of cash basis a solid first step toward accrual accountingStrong implementation of cash basis a solid first step toward accrual accounting Adopt cash basis and ensure that institutional framework supports this standardAdopt cash basis and ensure that institutional framework supports this standard Plan adequately for transition to accrualsPlan adequately for transition to accruals Role of external auditRole of external audit

IPSASBIPSASB June 14, 2007Mexico City IFAC and IPSASB help by: Assisting with development of accountancy professionAssisting with development of accountancy profession Developing public sector accounting standardsDeveloping public sector accounting standards Developing auditing standards – enhance trustDeveloping auditing standards – enhance trust Ethics & education standardsEthics & education standards Providing standards free of chargeProviding standards free of charge

IPSASBIPSASB June 14, 2007Mexico City How are we doing? UN System (28 bodies)UN System (28 bodies) OECD, NATO (21 bodies), EC, IFAC, INTERPOLOECD, NATO (21 bodies), EC, IFAC, INTERPOL 58 countries have agreed processes or have a project in place to adopt IPSASs or align with IPSASs58 countries have agreed processes or have a project in place to adopt IPSASs or align with IPSASs

International Federation of Accountants