Various challenges have faced countries in the Caribbean and Central America that adopted IPSAS, or have tried so far unsuccessfully to do so. Those challenges have been identified in national audit reports and other publicly available documents, including presentations, articles and research reports. Other documents reviewed include annual reports of supreme audit institutions and finance ministries/treasuries.
Barbados has been engaged in public financial management reform since 1993 (Alleyne, 2014). In 2005 it began moving towards implementation of full accrual accounting, effective from 2010. Early stage reforms included multi-year budgeting; computerisation of accounting and reporting systems; improved reporting and management of public debt; and establishing a central revenue authority to collect income tax, VAT, licence income and land tax. Barbados is currently in the second phase of its reform, which is aimed at consolidating the accounts of all state-owned enterprises and producing a Barbados annual financial statement.
Barbados has adopted IPSAS, but there are ongoing issues which need attention and intervention. A qualified opinion was issued by the Auditor-General of Barbados on the financial statements for 2016. The accounts did not fully comply with IPSAS in terms of presenting a true and fair view and several misstatements were identified. Not all entities were consolidated, which meant that government guarantees and liabilities were understated. Financial instruments and infrastructure assets were not properly accounted for in terms of impairment and depreciation; pension liabilities were not accounted for; and not all revenue was recognised and recorded (Barbados Audit Office, 2017).
During the IPSAS implementation process, a number of challenges were identified. Management of the change process was difficult, including getting buy-in from staff and stakeholders and developing an effective communication strategy. Significant investments of money and human resources were required to support the introduction of accrual based computerised systems. The need for training of staff on the standards and systems use was greater than expected and a lack of relevant expertise and skills within the public sector was found, meaning manuals had to be prepared. Accounting for fixed assets was a specific challenge as fixed asset registers had not been kept under the old cash basis accounting system (Alleyne, 2014).
A number of lessons were learnt from the process. It was best to adopt a phased approach, with specified deadlines and milestones. Programme management was critical during the process to ensure that deadlines were met. Here, pilot schemes are useful to help overcome challenges when full implementation takes place. The appointment of project ‘champions’ – both political and administrative – is also a crucial success factor.
Guatemala began the reform of its public sector financial management through the Organic Budget Law, 1997 (IPSASB, n.d.). The process of implementing IPSAS started in 2005 as part of an integrated financial management system project, but a lack of government resources and commitment put a halt to IPSAS implementation. A US Treasury advisor persuaded the government in 2011 that IPSAS implementation was important and this led to the MOF focusing on IPSAS implementation, forming an IPSAS steering committing with the Controller-General’s office. An external consultant developed a projected timeline for adoption for central government by 2014, with all entities – except municipalities – adopting accrual based IPSAS by 2020. Implementation problems led to central government adoption slipping to 2020. The US Treasury and the World Bank have provided support for the strengthening of Guatemala’s public sector financial management (IPSASB, 2013; World Bank, 2014).
A number of lessons have been learnt, and challenges identified, from the process so far (IPSASB, 2013). Legacy accounts contained errors, some of which were from many years earlier. A policy was needed to deal with these past errors and new technologies required to enable ministries to correct accounts. The integrated financial system could not accommodate the detailed chart of accounts necessary to implement IPSAS. A new computer system was required.
Staff were already overloaded and could not devote the necessary time for IPSAS implementation, while low wages and slow hiring processes made specialist recruitment difficult. Even with implementation delay, the timetable remains difficult to achieve. Additional legislation was required as the Organic Budget Law related to budget processes as opposed to accounting processes. The implementation of an interim cash basis IPSAS was abandoned and regarded as a waste of time and resources. Frequent changes in the political leadership of Guatemala caused problems too, with not all leaders equally committed to IPSAS implementation. A task force for IPSAS 17 issues (property, plant and equipment) should have been formed earlier in the process as there were specific implementation issues. Project work away from the office was a positive experience, which enabled greater project focus and team building.
Jamaica uses a modified cash basis of accounting for its ministries, but recording and reporting is hampered by significant delays. Jamaica had intended to implement accrual accounting over a 10-year period from 2002-12, but this did not happen because of major challenges (ICIJ, 2014). There was a lack of stakeholder engagement and buy-in, which meant that key stakeholders did not participate. There was no political support from parliament, the MOF, or the financial secretary. There was a lack of capacity, expertise and skills within the Accountant-General’s office, resulting in the office not regulating accounting policy or guidelines. Other problems included a lack of project management and defined milestones, absence of a legislative framework for the implementation of IPSAS and a shortage of resources and investment in the process.
Jamaica’s government revised its approach and expects its 10-year strategy to reform the public sector, with accrual accounting playing a pivotal role in the five years beginning 2016. IPSAS implementation is part of a broader public financial management reform programme, which includes: the adoption of policy-based planning and budgeting; improved tax and customs administration; upgrades to the financial management systems; and improved accounting data management and budget execution. Reform priorities include the adoption of a results-based approach, improving programme governance and allocating sufficient staff and other resources to achieve implementation (Monroe-Ellis, n.d.).
The Auditor-General of Jamaica’s 2015 audit report underlines the need for continued improvement. The audit found asset management recording errors and a failure to maintain records of transactions (Auditor General, 2015).
Several audits were completed very late because of delays in preparing annual financial statements. The audit backlog needs to be removed to ensure sustainable financial management improvement.
Mexico has been a leader in the adoption of IFRS. However, IPSAS have not been adopted and Mexico has no intention of doing so presently (IFAC Country Report, Mexico). State-owned enterprises are required to apply the Government Accounting Standards, which use accruals, in the preparation of their financial statements. Mexico has enacted constitutional reform since 2006, including through the passing of the Law on Budget and Fiscal Responsibility. Mexico’s accounting system was reformed in 2007 by the Government Accounting Act (LCG). The LCG was initiated in 2012 with the aims of building a link between budget and accounting to improve decision-making, to standardise content and disclosures in annual financial statements and to promote transparency and accountability in the public sector. The LCG has proposed that all assets and liabilities are presented in the same accounting format to enable states’ accounts to be compared. A National Accounting Harmonisation Council comprising of federal, state and local authorities was given the task of harmonising accounting practices for the three spheres of government to meet the requirements of the LCG (Sour, 2012).