How to Overcome IPSAS Implementation Challenges
Nithin Kumar Reddy
Public Sector Accounting, PFM Consultant & Trainer, IPSAS/IFRS Expert| FCA, CIPFA, CPFA, CFE, PFM, Dip IFRS, IFRS S1 & S2
What are IPSASs?
The International Public Sector Accounting Standards (IPSAS) issued by the International Public Sector Accounting Standards Board (IPSASB). IPSAS strings together government, professional accounting bodies, and international organizations to represent the best practices and high-quality accounting standards to provide guidance and transparency.
?IPSAS are Two Types i.e., Cash Basis IPSAS and Accrual Basis IPSAS.
IPSAS brings with it the following benefits.
Despite the benefits of IPSAS, many countries have been hesitant to adopt them. Public sector organizations are reluctant to accept these reforms and are choosing to stick to previous reporting systems. Such constant delays in implementing IPSAS have undermined the realization of benefits like accountability and transparency. The purpose of this study is to investigate these matters and present a clearer picture of impeding factors of IPSAS implementation and the countermeasure to overcome them:
1.Inadequate Professional Capacity
The preparation of financial statements in the public sector requires professional expertise. It requires the availability of specific professional accounting and auditing skills. Several studies show that there are only a limited number knowledgeable public sector accountants in the world. With this shortage of people, it is difficult to aim of changing accounting system.
Inadequate Professional Capacity can be overcome by improving one's skills and knowledge in the relevant field. This can be done through training, education, or experience. First, assess the situation and figure out what areas you are lacking in, is there any need of more education or train them accordingly.
2.High implementation costs
Research have shown that cost was a big factor that acted as an obstacle in all related discussions. Moreover, most users of these statements such as decision makers and politicians, are not accountants. They would require to be convinced about the benefits of IPSAS and be given extensive training. Such education and training of government officials and accountants would prove to be a deterring factor in creating a favourable environment for IPSAS implementation.?
One way to reduce the high implementation costs of a project is to use a cost-benefit analysis to determine if the benefits of the project outweigh the costs. In order to utilize it maximum and reduce the high implementation costs, proper planning is required. And also, proper monitoring and control of the project should be carried out.
3.Skepticism about IPSAS's relevance and perceived benefits
Some key players are usually sceptical about the perceived benefits of IPSAS versus the actual benefits. There is also a perception that just developed countries have or are fully capable of implementing IPSAS. However, some respondents have remarked that even in the countries that have declared successful implementation, no single government has fully implemented all the core requirements of IPSAS. This has emphasized on the fact that IPSAS implementation is work in progress. There have also been doubts about the relevance of accrual IPSAS and if the information in financial reports truly adds value. Users of financial statements are usually finding the information presented under accruals IPSAS very complicated to understand.
?????????The use of accrual-based information can be strengthened only if the value of accrual-based data is shown clearly. In order to address these concerns, it is important to communicate the practical benefits of IPSAS and how they can be applied in. To convey about IPSAS's implementation relevance and perceived benefits to others, Firstly, we can explain our concerns and reasoning behind them in a clear and concise manner. Secondly, we can highlight examples of where IPSAS has been successful in the past, or where its benefits have been as great as anticipated. Finally, way to convey the benefits of IPSAS is to discuss how IPSAS can help organizations to achieve their goals.
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4.Lack of proper implementation strategy
Lack of a clear road map has been one of the major factors to have led to the slow adoption rate of IPSAS. Lack of a well-documented plan with timely outputs and clear guidelines has made it next to impossible to monitor the implementation progress.?Lack of proper implementation strategy can lead to a number of problems, including poor project execution, unrealistic expectations, lack of clarity about roles and responsibilities, a change management program.
A good implementation strategy helps to ensure that a project is well planned and executed, and that all stakeholders are on the same page. A good implementation strategy ensures that all of the necessary resources are available and that the project is well coordinated. To get a proper implementation strategy, it is important to consult with experts and to carefully plan and prepare for the project.
5.Varying budgeting and accounting?
IPSASB favours the accrual basis of accounting even if it has issued a comprehensive set of cash basis standards. In the absence of an appropriate accounting system, the implementation of performance budgets might get widely undermined. This lays additional emphasis on integrating the real accounting system base and the budgeting system. Therefore, the basis using which the budget is prepared and the real time accounting is done should be kept as consistent as possible.?
There are a few ways to minimize budgeting and accounting variance:
?6.Unstructured administrative structure
An unstructured administrative structure is a type of organizational structure in which there is little or no formalization and coordination between levels and departments. Unstructured administrative structure is a type of organizational structure that does not have a clear-cut hierarchy or set of instructions for decision-making. This can lead to problems with communication and coordination which results project failure.
There is no one-size-fits-all answer to this question, as the best way to structure an administrative organization depends on the specific context and needs of the organization. However, some benefits of creating a more structured administrative organization include improved efficiency, greater clarity and accountability, reduced conflict, clarity of roles and responsibilities, and improved communication. However, some tips on how to make an administrative organization more structured and efficient include designing clear and concise organizational charts, creating standard operating procedures, establishing clear lines of communication between different departments, streamlining process and procedures, establishing clear lines of authority and responsibility, and creating measurable performance standards.
?Some other challenges that are faced are change management, resistance to change, struggling to achieve an ideal combination of staffing and skills, inadequate information, and communication of technology, and sustaining the program's pace to achieve complete implementation. If the key concerns are identified and resolved clearly and swiftly, IPSAS implementation can be made efficient. This would encourage more countries to adopt IPSAS and smoothen the implementation.
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