1. UNDP Lebanon Workshop March 2012 Management Support Center
IPSAS Introduction
UNDP Lebanon Workshop
March 2012
Management Support Center

2. IPSAS Overview What are IPSAS? Adopting, Benefits and Impact?
IPSAS: Management of Expenses
IPSAS Overview
What are IPSAS? Adopting, Benefits and Impact?
What are the different accounting methods?
What is the difference between UNSAS &IPSAS?
What are the Key Accounting Changes?
Impact of Fund Availability and Budget?
Procure to Pay (P2P) Changes?
Management and Project Reporting?

3. What are IPSAS? IPSAS: What are IPSAS IPSAS: Management of Expenses
International Public Sector Accounting Standards are independently- developed financial reporting standards widely considered best practice for public sector organizations. They:
Are or will be used by more than 50 Governments, NATO, UN, OECD, NGOs, etc.
Impose clarity and transparency
Are based on Full Accrual Accounting
Were mandated by the UN General Assembly in 2006 to replace the current United Nations System Accounting Standards.

4. Beyond the basics: decision of adopting IPSAS
While everyone in this room knows that as a part of the UN reform agenda, the General Assembly agreed that all UN entities should adopt IPSAS, it may be useful to reflect on some of the important triggers that may have guided this decision:
Increasing complexity in the way in which business is conducted in the real world.
Increasing focus on the quest for better accountability and transparency, particularly in a difficult world economic climate.
Influence and impact of IFRS (private sector) to many countries, and accounting standard convergence.
Partners’ sentiment, donors and programme countries alike, for the UN to keep up to these changes.

5. What are the benefits of IPSAS?
Good financial management underpins sound decision-making, drives accountability, improves understanding, and enables UNDP to manage risk. IPSAS achieves this by providing:
Accountability & transparency of financial and donor reporting
Consistent, reliable, comparable, quality information
Comprehensive cost information
Clear presentation of assets and liabilities
Strong internal oversight and control
To illustrate this statement talk through the TV sales example
I sell TVs… ask the group to provide the ways in which I could take payment for the TVs I sell.
Draw up the various timelines on a flip chart – this will illustrate the problem with cash accounting - results would be different

6. IPSAS Impact on UNDP IPSAS: Impact on UNDP
Establishment of new accounting policies, practices and guidance on main impacted areas – revenue management, expense management, asset management, employee benefits and financial reporting.
Enhancement of IT Systems – changes to Atlas, including new modules and new processes
Creation of the electronic document management system (DMS)
Improving Internal Controls – new and revised controls
Timeliness – real time processing necessary
Financial performance/reporting - will look different

7. How does IPSAS Impact UNDP staff?
IPSAS: Impact on UNDP staff
How does IPSAS Impact UNDP staff?
Mastering IPSAS’s policies and processes, UNDP staff effectively and efficiently meets and exceeds stakeholders expectations by:
Closely monitoring collection of contributions
Effectively planning procurement activities
Timely receipting all goods and services
Carefully managing assets, leases, inventory, pre-payments and annual leave
Keeping pace with independent accounting standards

8. How does IPSAS Impact Donors?
IPSAS: Impact on Donors
How does IPSAS Impact Donors?
There are no programme delivery changes, but…
Donors must understand reporting changes:
UNDP now records all revenue due in reporting period, not just the cash actually received
Obligations (POs) are excluded in expenditures
Donors encouraged to use standard contribution agreements
Timely Donors should adhere to payment schedules and report changes in timely manner (revenue and accounts receivables reflected in UNDP’s financial statements)
Carefully Donor Report offers comprehensive view of how contribution revenue is used and recorded for expenses, assets, and commitments

9. IPSAS: GSSC
Recognizing that IPSAS increases workload and complexity in accounting globally, the UNDP Senior Management decided to establish the Global Shared Service Centre (GSSC).
The GSSC will support COs and HQ units in detailed IPSAS accounting processes for:
Revenue management
Expenses management
Property, Plant and Equipment
Reduces the burden of IPSAS on COs and HQ units, and provides for greater business process standardization.
With clearly defined Service Level Agreements, the GSSC to ensure timely processing and responses.
GSSC started to be operational on 1 January 2012.

10. IPSAS: Accounting Methods
Cash Basis Accounting: Is an accounting method in which income is recorded when cash is received, and expenses are recorded when cash is paid out.
Accrual Accounting: Is an accounting method that measures the performance and financial position of an organization by recognizing revenue when earned and expense when incurred rather than when cash is received or paid.
Modified Cash: Is an accounting method that UNDP adopted that combine cash accounting with accrual accounting. Revenue is recognized when cash is received and expenses are recognized in full when commitments (POs) are created.
To illustrate this statement talk through the TV sales example
I sell TVs… ask the group to provide the ways in which I could take payment for the TVs I sell.
Draw up the various timelines on a flip chart – this will illustrate the problem with cash accounting - results would be different

11. Definition of Accrual Basis in IPSAS 1
IPSAS: Accrual Basis
Definition of Accrual Basis in IPSAS 1
“Accrual basis means a basis of accounting under which transactions and other events are recognised when they occur (and not only when cash or its equivalent is received or paid). Therefore, the transactions and events are recorded in the accounting records and recognised in the financial statements of the periods to which they relate. The elements recognised under accrual accounting are assets, liabilities, net assets/equity, revenue and expenses”.
To illustrate this statement talk through the TV sales example
I sell TVs… ask the group to provide the ways in which I could take payment for the TVs I sell.
Draw up the various timelines on a flip chart – this will illustrate the problem with cash accounting - results would be different

12. Expense Recognition: Contracting Services
IPSAS: UNSAS vs. IPSAS
Expense Recognition: Contracting Services
Modified Cash (UNSAS) Q1 Q2 Q3 Q4
Obligation/Expense
$20,000 -
Period of Contract
Accrual Basis (IPSAS) Q1 Q2 Q3 Q4
Obligation/Expense
$5,000
Period of Contract

13. Liability Recognition: Employee Benefit
IPSAS: UNSAS vs. IPSAS
Liability Recognition: Employee Benefit
Modified Cash (UNSAS) Y1 Y2 Y3 Y4
Employee Benefit -
$20,000
Period of Contract
Accrual Basis (IPSAS) Y1 Y2 Y3 Y4
Employee Benefit
$5,000
Period of Contract

14. IPSAS: Key Accounting Changes
Key Accounting Changes under IPSAS
Expenses are reported in the period in which they occur rather than in the period in which:
The cash is paid or,
The purchase order is approved and dispatched.
Specifically, an expense is reported when UNDP receives goods or services have been rendered. This is the point at which UNDP is required to make a payment. This is at a later point than when the purchase order is approved and dispatched.  
Expenses will only be accurate if goods and services are timely receipted.
This change in accounting policy will impact when UNDP reports programme expenses. Better planning and coordination will be required to achieve delivery targets.

15. Budget management in Atlas:
Impact of IPSAS on Budget and Resource Availability
Budget management in Atlas:
No change to ‘the basics’ as consequence of IPSAS implementation:
Realistic planning and budgeting
Finalizing full budgets of total expected resources per recognized revenue and multi-year ASLs (Multi-year budgeting)
Funds available only upon receipt of cash
Purchase orders reduce budget availability for full amount of purchase (including purchase of capital assets)

16. GL Account Code Description
IPSAS: Budget Changes
In light of the change in accounting for capital assets due to the introduction of IPSAS in 2012, there will also be a change in how budgets need to be set up for the full purchase costs of capital assets. See below table with an overview of the new set of budgetary accounts for capital assets, with corresponding detailed asset account codes
Budget Account Code
Budget Account Description
GL Asset Account Code
GL Account Code Description
BA001
Land
18088
Land - Contra Asset
BA002
Building
18089
Building - Contra Asset
BA003
Leasehold Improvement
18090
Leasehold Impr-Contra Asset
BA004
Vehicles
18091
Vehicles - Contra Asset
BA005
Furniture
18092
Furniture - Contra Asset
BA006
Heavy Equipment
18093
Hvy Equip Contra Asset
BA007
IT&C
18094
IT&C - Contra Asset
BA008
Security Equipment
18095
Security Equip - Contra
BA009
Intangibles
18096
Intangibles - Contra
BA010
Construct Fixed Asset
18097
Construct Fixed Asset - Contra
BA011
Construct Intangible
18098
Construct Intangible - Contra
BA012
Asset Transfer
18099

17. Impact of IPSAS on Budget and Resource Availability
The Table below shows the impact of key transactions on resources and budget availability:

18. Procure to Pay Life Cycle - IPSAS Changes
Procurement Catalog
UNDP vs. Non-UNDP
Attach supporting documentation 
Prepayment Offset Against A/P Voucher
A/P Voucher Approval   
Incoterms
Physical Receipt Date
Prepayments
Attach supporting documentation  
Timely Receipting
Incoterms
Attach supporting documentation
Receipt Accrual Process
Physical Receipt Verification 
Reporting and Monitoring 

19. Management and Project Reporting
Regional Resource Overview
Office Resource Overview
Fund Resource Overview
Project Resource Overview
Project Transactions Detail
Project Budget Balance
OTHER MANAGEMENT REPORTS
Combined Delivery Report
ExtraBudgetary Status Report
Interim Donor Report

20. How does IPSAS impact donor reports?
New
IPSAS “revenue” represents the total value of contributions in the signed contribution agreement. UNSAS “income” represented only the cash received.
The IPSAS opening balance represents revenue minus expenses; the UNSAS opening balance represented income minus expenditure
Old

21. How does IPSAS impact donor reports?
New
The new report includes legally binding vendor contracts for goods or services that have yet to be delivered or received. The old report showed disbursements and committed expenditure, as a single figure.
The new report includes goods delivered, services rendered, total employee benefits and depreciation of assets.
The old report merely showed disbursements and committed expenditure as a single figure.
Old

22. How does IPSAS affect CDR reports?
Key Changes  
New design provides comprehensive information related to programme delivery in accordance with IPSAS.
UNDP Expenses column includes receipts and disbursements, and excludes obligations.
Encumbrances column—between UN Agencies and Total Expenses columns—is removed; only goods and services are recognized as expense under IPSAS.
(Page 1)

23. B A How does IPSAS affect CDR reports? Fund Utilization
This is a newly introduced section of the CDR report, which discloses utilization of project funds as of the reporting period. B
This section reflects
the expenses that are not categorized as delivery but projects funds have been utilized for it.

24. Questions:

25. Thank you…