General Accounting of the Republic

PRESENTATION ON THE PREPARATION FOR THE IMPLEMENTATION OF ACCOUNTING INTERNATIONAL STANDARDS FOR THE PUBLIC SECTOR IN HONDURASHonduras

ICGFM Winter ConferenceDecember 6, 2010

MAIN ATTRIBUTIONS:

• Dictate Governmental Accounting Standards for all the Public Sector.

• Technically advice all entities of the Public Sector on the implementation of the standards and methodology established.

• Handle the General Accounting of the Centralized Public Administration consolidating data of the different entities, developing the adjustment and closing operations end develop the Financial Statements.

• Keep updated the recording of the permanent inventory values of movable and non movable assets.

• Keeping financial information, updated continuously, enabling the identification of budgetary management, cash and assets as well as operating, financial and economic results of the Public Administration.

General Accounting of the Republic

HondurasICGFM Winter ConferenceDecember 6, 2010

Implementing Cash IPSAS and Preparing for the Accrual IPSAS

Preparatory Steps Include requirements for IPSAS in the national

legislation.

Identify the controlled entities by applying the indicators of power and benefit of the 6 IPSAS and divide them into categories (budget entities, extra budgetary entities and Government Business Enterprises).

Schedule appropriate IPSAS training throughout the government.

Lessons Learned During Preparatory Steps

• Include requirements for IPSAS into national legislation.

Our law provides that government accounting should be in accordance with international standards and it is literally reflected in article 96 paragraph 1. It mentions that the Government Accounting subsystem will be in harmony with GAAP and accounting standards applicable to the public sector (IPSAS).

Therefore, some changes will be made in Article 100 related to accountability with the types of reports to be submitted to Congress through the Ministry of Finance.

Current

Balance of the government central administration that incorporates in its assets the net worth/heritage of the decentralized institutions.

Current revenues and expenditures statement.

Currently not developed .

Currently not developed.

Settlement of the General Budget of Revenues and Expenditures of the Republic.

Report on the consolidated financial situation.

Currently not developed.

IPSAS Proposed

Statement of the Financial Position for the public sector.

Statement of Financial Performance for the public sector.

Changes in the Net Assets/Net Heritage. Cash Flow Statement.

Budget to Actual Comparative Statement.

Consolidated financial statements for the public sector.

Comparison statements of the budgeted and developed amounts.

Identification of controlled entities, institutions of control, and State Enterprises

• During this process we have analyzed the laws and regulations of each state company and institutions taking into account the benefit and power indicators and conditions to determine its classification.

• The main controller of the entities classified as controlling

entities is the central government, which is one accounting entity that manages the accounting of the line ministries. At the same time, these ministries are the ones who manages and make decisions in the controlled institutions.

• The budgetary and non-budgetary entities are an intermediate step towards consolidation to help collect cash or goods received which had not been processed through the budgetary entities for reporting to the Ministry of Finance.

• Public state enterprises are classified according to the standards and within its analysis, they have met the features listed by the standard, although some have limited obligations of community service and provide their services at reduced rates/prices.

Training the governmental sector towards the IPSAS

The completion of this training must be done with suitable personnel in order to transmit the knowledge. For this task, the IPSAS material has been distributed to professionals of the accounting department for study and analysis with the support of the Treasury Department. Afterwards these personnel will make effective its training plan to the public sector taking into account the classification made earlier. State Public Enterprises will be excluded from the training since they will implement the full IFRS.

The General Accounting will prepare training sessions for accountants, auditors and administrative managers of the institutions because they are responsible for the registration and the applicable control in their respective sector.

The training sessions will be held in the training room of the General Accounting from June to December 2011 according to the program.

Future Challenges The development of a Cash Flow Statement on a cash basis is scheduled

for the accounts closing of the year 2010. The parameters for development have been identified along with its classification by activities.

Subsequently, a Cash Flow Statement will be developed based on the accrued.

Brindar las capacitaciones a las instituciones sobre NICSP para elaboración del estado de flujo de efectivo aportando el conocimiento obtenido en el EFE del gobierno central.

Debugging of account balances of financial statements 31/12/2010 for reliability of information and thus move towards accrual accounting.

Implementation of the Cash IPSAS

ADOPT CASH REPORTING IPSAS January1, 2011.

Apply Part 1 for preparing the Statement of Cash Flows for each controlled entity based on IPSAS 2 instead of the Statements of Cash Receipts and Payments as of December 31, 2010.

Prepare Comparative Statements of the Budget to Actual Amounts for each budgetary entity by IPSAS 24 and reconcile to the Cash Flow Statement as of December 31.

Prepare a Consolidated Statement of Cash Flows for the entire government by IPSAS 2 with all footnotes applicable from December 31, 2011.

Detailed Lists1. List of current assets specifically identifying inventories (IPSAS 12) and

capital/investment goods (IPSAS 14).

2. List of current liabilities including the short term benefits for employees (IPSAS 25) and the arrears.

3. List of Financial Instruments (IPSAS 15, 28, 29 and 30) specifically identifying accounts receivable, investments, and complex instruments such as derivatives and swaps.

4. List of Construction Contracts (IPSAS 11) including Loan Costs (IPSAS 5), if applicable.

5. List of Leases, specifically identifying the finance leases (IPSAS 13).

6. List of Property, Plant and Equipment per class (IPSAS 17) specifically including infrastructure assets, but excluding heritage assets.

Detailed Lists 7. List of grants specifically identifying those with restrictions and conditions (IPSAS 23).

8. List of Long Term Liabilities specifically identifying the public debt and the defined benefit plans (IPSAS 25).

9. List of Provisions, Contingent Liabilities and Contingent Assets (IPSAS 19) specifically including un liquidated obligations in the footnotes.

10. List of Agricultural Assets (IPSAS 27).

11. List of Intangible Assets (IPSAS 31).

12. List of Associates and Joint Ventures (IPSAS 7 and 8).

13. List of Service Concession Arrangements (future IPSAS).

14. The footnotes relevant for IPSAS 1-31.

Lessons Learned During the Implementation of the Cash IPSAS

Following the training schedule, General Accounting will apply the formats for the development of a Cash Flow Statement on a cash basis for the controlled entities.

Identify changes in the budget´s comparative report to aid in the reconciliation and

explanation of the differences in their Cash Flow Statement and disclosure notes to the financial statements.

Implementation of a new subsystem of national assets in the SIAFI (Integrated Financial Management System) area by January 2011.

Present the short-term benefits and future benefits to the relevant institutions, as well as collective agreements to be recognized and recorded in accounting by the accrual method.

Recognition of financial instruments and requests to the institutions on participations in joint ventures, investments in associates for analysis by the General Accounting of the Republic staff.

Lessons Learned During the Implementation of the Cash IPSAS

• Recognition of the types of construction contracts and the applicability of the standard to the costs and revenues, a task currently being undertaken by the General Accounting of the Republic.

• Identify the leases whether operating and financial and the cases where the government is a tenant or landlord and the cases where this rule does not apply.

• Request to the institutions that provide subsidies such as electricity, transportation and basic grains to determine the specifications, conditions and restrictions of these.

The welfare institutions that provide benefits to employees such as the pension institutes will submit information requested on the actuarial calculations and employee benefits.

The General Accounting of the Republic and the team assigned for the collection of

information is analyzing the standards and developing the requests sent to the institutions for agricultural and intangible assets as well as provisions for contingencies. Once obtained and analyzed, this information will be applied and the changes required by the scope of these standards will be made.

Challenges

Application of international standards and a move towards accrual accounting leads to a deeper analysis and makes accounting more accurate in order for government accounting reports to be reliable.

Identifying assets and liabilities of the government leads us to have better control over the state heritage.

Preparation for the Accrual IPSAS

• ADOPTOF THE ACCRUAL IPSAS January 1, 2014.

• Prepare Initial Statements of Financial Position for January 1, 2014 for each of the controlled entities, in compliance with IPSAS 1, using the information collected for the Lists of Assets and Liabilities mentioned above.

• Reconciling the Initial Statements of Financial Position with the Closing Balance Sheets for each of the controlled entities and identify the differences.

• Prepare a set of General Purpose Financial Statements (GPFS) to December 31, 2014 for each of the controlled entities in accordance with IPSAS 1 based on recognition and measurement criteria in IPSAS 1-31.

• Develop a consolidated GPFS for the entire government based on the accrual IPSAS for December 31, 2017.

Future Challenges

Include the municipal governments in the financial statements.

Consolidating the financial statements based on the 31 IPSAS.

To have this information in one accounting system.