1. Page 1 IPSASs and Performance Reporting Andreas Bergmann, Former Chair IPSASB (2010-15) 2 May 2016 Islamabad, Pakistan

2. Page 2 IPSAS Update 38 accrual standards issued since 2001, thereof 4 withdrawn/replaced  34 accrual standards, 1 standard for the cash basis as “stepping stone” to accruals Accruals provide Cash und Non-Cash-Information! First ever Conceptual Framework for Public Sector Accounting issued in 2014

3. Page 3 Public Sector Conceptual Framework Preface – Key Characteristics of Public Sector Phase 2 Elements and Recognition Phase 3 Measurement Phase 4 Presentation Phase 1 Role Objectives and Users QCs Rep Entity Conceptual Framework (September 2014) IPSAS Update

4. Page 4 Characteristics of the Public Sector that influence Public Sector Accounting Non-exchange Transactions Role of the approved Budget Longevity Characteristics of Assets/Liabs Role as Regulator Government Finance Statistics Conceptual Framework IPSAS Update

5. Page 5 IPSAS 33, First-time Adoption of Accrual Basis IPSASs (January 2015) IPSAS 34-38, Interests in Other Entities (replacing IPSAS 6-8) (January 2015) RPG 3, Reporting Service Performance Information (March 2015) IPSAS Update

6. Page 6 Social Benefits: CP 2015 Public Sector Combinations: ED 2015 Update of IPSAS 25 Employee Benefits: ED 2015 Update of Cash Basis IPSAS: ED 2015 –Consolidation: No longer required, but encouraged –Foreign assistance: No longer required, but encouraged –“Housekeeping”: Updating in order to alling with Conceptual Framework and Accrual Stanards IPSAS Update

7. Page 7 First two meetings in 2015 IMF, World Bank (current Chair), OECD, INTOSAI Initial focus on IPSASB Terms of Reference; nomination procedures, standard setting; work program and budget Public Interest Committee Terms of Reference: Focus on stakeholder involvement Composition: Focus on areas underrepresented on IPSASB Chair elected Consultative Advisory Group IPSAS Update

8. Page 8 IPSAS Adoption Plus most international organizations (UN, EC, NATO, ASEAN, AU …)

9. Page 9 Level of adoption and implementation expected to be achieved in 2020 Source: PWC Global Survey on Accounting and Reporting by Central Governments (2013) IPSAS Implementation – the future

10. Page 10 Normative change: Legislative basis, endorsement of standards, development of operational guidance («manual») Configuration of IT/ERP-Systems Collection and verification of data, especially in areas not accounted for previously (e.g. asset register) Verification/audit Cross cutting: Training Implementation of IPSASs requires Implementation cost is substantial

11. Page 11 Normative change: 5% IT/ERP-Systems: 75% Collection and verification of data: 10% Verification/audit: pro memo Cross cutting: Training 10% The need to implement a new IT/ERP (or not!) largely determines the total cost and explains the substantial variance observed Cost of Implementation Implementation cost is substantial

12. Page 12 IMF: Transparency is relevant Less debt and lower interest rates

13. Page 13 Fiscal risks and key implementation issues same Fiscal risks (IMF 2012) –Consolidation of SOE –Fiscal returns –Budget vs. actual –Financial guarantees Key issues implementing IPSAS (feedback to IPSASB) –Consolidation: IPSAS 6-8 –Non-Exchange Revenues (Transfers/Taxes): IPSAS 23 –Budget information: IPSAS 24 –Financial instruments: IPSAS 28-30 –Asset register: IPSAS 17  not difficult, but high workload

14. Page 14 BudgetingAccountingAudit Government Finance Statistics What’s needed: an integrated system

15. Page 15 Service Performance Reporting GPFR = General Purpose Financial Reporting GPFS = General Purpose Financial Statements GPFS e.g. Balance, Financial Performance, etc. Other GPFR: e.g. Service Performance Reports Non-financial reports e.g. Educational Reports (such as PISA) GPFR Financial Non-Financial

16. Page 16 Service Performance Reporting GPFR = General Purpose Financial Reporting –Necessary for accountability and decision making –GPFS alone are insufficient to fulfill user needs Other GPFR supplement Financial Statements –Reporting on the Long-Term Sustainability of an Entity’s Finances (RPG 1) –Financial Statement Discussion and Analysis (RPG 2) –Reporting Service Performance Information (RPG 3)

17. Page 17 Service Performance Reporting Service performance information –is information on the services that the entity provides, –an entity’s service performance objectives, and –the extent of its achievement of those objectives. Service performance information assists users of GPFRs to assess the entity’s service efficiency and effectiveness

18. Page 18 Service Performance Reporting Types of performance indicators: –Inputs: Resources used by an entity to provide outputs –Outputs: Services provided by an entity to recipients external to the entity; –Outcomes: Impacts on society, which occur as a result of, or are reasonably attributable to, the entity’s outputs. –Efficiency: Relationship between (a) inputs and outputs, or (b) inputs and outcomes; –Effectiveness: Relationship between actual results and service performance objectives.

19. Page 19 Service Performance Reporting Principles for the presentation of service performance information: –An entity should present service performance information that is useful for accountability and decision making. –Presentation should enable users to assess the extent, efficiency and effectiveness of the entity’s service performance.

20. Page 20 Service Performance Reporting Principles for the presentation of service performance information: –An entity should present service performance information that is useful for accountability and decision making. –Presentation should enable users to assess the extent, efficiency and effectiveness of the entity’s service performance. Location, either –As part of a GPFR that includes the financial statements; or, –In a separately issued GPFR.

21. Page 21 Service Performance Reporting Information for Display –Service performance objectives; –Performance indicators; –Total costs of the services. Information for Disclosure: So that users: –Understand the basis of the displayed service performance information; –Receive a concise overview of the entity’s service performance, which highlights the main issues relevant to their assessment of that service performance.

22. Page 22 The role of Audit Types of Audit in Public Sector Financial Statement Audit Historically 0-10% In future 33% Performance Audit Historically 10-20% In future 33% Compliance Audit Historically 70-90% In future 33%

23. Page 23 Service Performance Reporting Personal Experience: State of Zurich in Switzerland –Introduced Service Performance Reporting in 1997 –Together with Performance Budgeting –Financial Reportings and Performance Reporting in one volume, including Budget Reporting

24. Page 24 Service Performance Reporting Positive effects: –Shift towards key issues, rather than details (e.g. intervention time of police, drop outs of schools) –Efficiency becomes scrutinized, rather than allocation (e.g. large cost differences for same services become unacceptable) Negative effects: –Only initially: Some non-valid performance indicators (e.g. university success rate of high school graduates; effect of high schools unfortunately statistically not significant)

25. Page 25 Questions Discussion & Further Information Visit our webpage http://www.ipsasb.org/ Or contact us by e-mail : Chair IPSASB: iancarruthers@ipsasb.org Former Chair IPSASB: andreas.bergmann@zhaw.ch Technical Director: johnstanford@ipsasb.orgiancarruthers@ipsasb.organdreas.bergmann@zhaw.chjohnstanford@ipsasb.org