Dr.

Jesse Hughes, CPA, COA, CGFM ICGFM Winter Conference 7 December 2010

Public Financial Management Improvements
y Support from the top y Increase capacity of all involved in PFM y Separate cash management from budgetary control y Implement Treasury Single Account structure y Implement IPSAS y Implement Integrated Financial Management

Information System

Dr. Jesse Hughes, CPA, COA, CGFM

2

Auditing Standards
y International Standards on Auditing (ISA)

sets standards for financial audits in private and public sectors y International Standards on Professional Practice of Internal Auditing sets standards for performance and compliance auditing in private and public sectors y International Organization of Supreme Audit Institution Guidelines identifies guidelines for application of ISA in the public sector
Dr. Jesse Hughes, CPA, COA, CGFM 3

Education Standards
y Work with university faculty to implement

International Accounting Education Standards for new recruits y Build capacity with existing staff through a Center for Excellence in Public Financial Management y Develop an accounting/auditing certification program with a rigorous exam to the extent possible

Dr. Jesse Hughes, CPA, COA, CGFM

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The Purpose of Accounting
y What Does Accounting Do? y Captures and measures financial data about transactions and events of an Organization. y Summarizes the information in reports that are used by persons interested in an Organization. y Why Does Accounting Matter? y Provides financial information to decision-makers for more effective and efficient decisions. y Supports evaluation of the performance of an organization.
Dr. Jesse Hughes, CPA, COA, CGFM 5

The Accounting System and Accounting Standards
y Accounting Standards order the functioning

of the Accounting System. Accounting Standards
y Establish guidelines on the types of organizational

activities that are captured by the accounting system. y Set ground rules on how the accounting system measures, records and processes economic transactions and events. y Guide the presentation and disclosure in the financial statements that are communicated to users for decision making.
Dr. Jesse Hughes, CPA, COA, CGFM 6

Benefits of Accrual Accounting
y Support better accountability and provide better

information for decisions on investments and management of assets and liabilities. y Provide more meaningful and comprehensive information to fully cost the goods and services provided by the organization. y Provide better information for choices between different options with respect to service delivery. y Reduce scope to report expenses that may never occur such as unliquidated obligations.
Dr. Jesse Hughes, CPA, COA, CGFM

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Benefits of Accrual Accounting (continued)
y Provide a better basis for evaluating an organization s

performance in terms of resource management. y Better support results based management. y Improve consistency, comparability and reliability of financial statements which strengthens overall confidence in the financial information for both external and internal users.

Dr. Jesse Hughes, CPA, COA, CGFM

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Applicability of IPSAS
y Applies to all controlled entities except

Government Business Enterprises (GBEs) y GBEs use the accounting standards that are used in the private sector (IAS/IFRS):
y Power to contract in own name; y Assigned authority to carry on a business; y Sells goods and services at a profit or full cost recovery; y Not reliant on continued government funding; and y Controlled by a public sector entity.
Dr. Jesse Hughes, CPA, COA, CGFM 9

Transition Steps for IPSAS Implementation
1. Develop organizational transition plan and coordinate with auditors. 2. Train staff. 3. Assess the information system changes required. 4. Prepare Policy and Procedures Manual for approved IPSAS policies. 5. Pilot test IPSAS policies and procedures in the new/upgraded information system. 6. Prepare IPSAS-compliant opening and closing Statements of Financial Position. 7. Prepare proforma Statement of Financial Performance. 8. Prepare proforma Statement of Net Assets/Equity. 9. Prepare proforma Statement of Cash Flows. 10. Prepare proforma Statement of Comparison of Budget to Actual Amounts. 11. Prepare proforma IPSAS-complaint statements for controlled entities. 12. Prepare proforma Consolidated Statements.
Dr. Jesse Hughes, CPA, COA, CGFM 10

Future IPSAS (?)
y Service Concessions (Public/Private Partnerships) y Fiscal Sustainability y Social Security y First-Time Adoption (IFRS 1) y Retirement Funds (IAS 26)

Dr. Jesse Hughes, CPA, COA, CGFM

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Key Indicators in Public Sector Financial Statements
y Fiscal Discipline (Budget Ratios) y Liquidity (Quick Asset and Current Ratios) y Solvency/Fiscal Sustainability (Total Liabilities to Net

Asset Ratio)

Dr. Jesse Hughes, CPA, CGFM

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Comparative Analysis of Quick Asset Ratios for Select Cities in the US
Government 3.5 3.3

3.0 2.8

2.9

2.5 2.2

Average 2.1
2.0 2.0 1.9 1.8 1.7

1.5 1.2 1.2

1.0

0.5

0.0 2009 Hampton 2008 2009 2008 2009 Norfolk 2008 2009 2008 2009 2008

Newport News

Portsmouth

Virginia Beach

Comparative Analysis of Current Asset Ratios for Select Cities in the US
Government 7.0

6.2 6.0

5.2 5.0

4.0 3.7 3.5 3.5

Average 3.17
3.0 2.4 2.0 2.0 1.9 2.0

1.3 1.0

0.0 2009 Hampton 2008 2009 2008 2009 Norfolk 2008 2009 2008 2009 2008

Newport News

Portsmouth

Virginia Beach

Comparative Analysis of Liabilities/Net Asset Ratios for Select Cities in the US
Government 4.0

3.5 3.5 3.3 3.0 3.0

2.5

2.0

average 1.68

1.9 1.7

1.5

1.4

1.0

0.5 0.5

0.5

0.5

0.5

0.0 2009 Hampton 2008 2009 2008 2009 Norfolk 2008 2009 2008 2009 2008

Newport News

Portsmouth

Virginia Beach

ICGFM Standards Committee
y New Committee established to respond to IPSAS

Board Preliminary Views and Exposure Drafts. y Please let me know if you would be willing to serve on that Committee. y Email jhughes@odu.edu

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