Public +Private+Partnerships

8/8/2019 Public +Private+Partnerships

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PublicPublic--Private PartnershipsPrivate Partnerships

PPPsPPPs

Brett Kaufmann, Robin Lynch,Brett Kaufmann, Robin Lynch,Christoph Maier, andChristoph Maier, and

John PitzerJohn Pitzer


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Public Private PartnershipsPublic Private Partnerships

What is a Public Private Partnership PPP?What is a Public Private Partnership PPP?

Government and a private corporationGovernment and a private corporationcombine to provide a public servicecombine to provide a public service

through the creation and use of newthrough the creation and use of new

assets for a set time periodassets for a set time period


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Why PPPs?Why PPPs?

PPPs can bring private sector bestPPPs can bring private sector bestpractice to government service delivery, topractice to government service delivery, to

achieve best value for money. Theachieve best value for money. The

financial arrangements allow raisingfinancial arrangements allow raising

money in the market free from fiscal policymoney in the market free from fiscal policy

and public finance constraints.and public finance constraints.


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Prison examplePrison example usual arrangementsusual arrangements

Government borrows money, pays to get aGovernment borrows money, pays to get a

prison built, runs the prison serviceprison built, runs the prison service

PPPPPP

Private firm borrows money, builds prison,Private firm borrows money, builds prison,government pays firm to run prison service forgovernment pays firm to run prison service forgovernment, hands over after20 yearsgovernment, hands over after20 years


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Accounting issuesAccounting issues

who is the economic owner of the asset?who is the economic owner of the asset?

How do we score the payments fromHow do we score the payments fromgovernment to private operator, and howgovernment to private operator, and how

do we record the transfer of the asset backdo we record the transfer of the asset backto government at the end of theto government at the end of theagreement?agreement?


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Who is the economic owner of the asset?Who is the economic owner of the asset?

Who bears the risks?Who bears the risks?

Who reaps the rewards?Who reaps the rewards?

Who is in control?Who is in control?


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Economic ownership issuesEconomic ownership issues

The private unit is the legal owner andThe private unit is the legal owner anduser of the assetsuser of the assets

The government unit prescribes use of theThe government unit prescribes use of theasset, and takes it over at the endasset, and takes it over at the end


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What are the best criteria to apply toWhat are the best criteria to apply todeterminedetermine

A. who is the economic owner of theA. who is the economic owner of theassets?assets?

B. is a lease financial or operating?B. is a lease financial or operating?

Which criteria are the clearest and mostWhich criteria are the clearest and mostobservable?observable?


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Determine the economic owner using theDetermine the economic owner using the

same principles as for any other asset.same principles as for any other asset.

Must be general. What are theMust be general. What are the

principles?principles?

Depends on the final agreed treatment ofDepends on the final agreed treatment of

leases and the definition of an assetleases and the definition of an asset


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The Canberra Group did not come to aThe Canberra Group did not come to aconclusion on a single best way toconclusion on a single best way to

determine economic ownershipdetermine economic ownership


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Given we have decided who owns theGiven we have decided who owns the

asset:asset:

how should we score the payments fromhow should we score the payments from

government to private unit over the term ofgovernment to private unit over the term of

the partnership?the partnership?


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Accounting StandardsAccounting Standards

The Interpretations Committee (IFRIC) ofThe Interpretations Committee (IFRIC) of

the International Accounting Standardsthe International Accounting Standards

Board is developing financial accountingBoard is developing financial accounting

standards for PPPs.standards for PPPs.


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Accounting Standards (2)Accounting Standards (2)

The complexity of PPPs and theThe complexity of PPPs and the

dependence of national accountants ondependence of national accountants on

government financial accounting datagovernment financial accounting data

makes it highly desirable to have amakes it highly desirable to have a

common treatment of PPPs in the SNAcommon treatment of PPPs in the SNA

and in the accounting standards.and in the accounting standards.


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Accounting Standards (3)Accounting Standards (3)

IFRIC has not reached a decision aboutIFRIC has not reached a decision about

either major PPP problem.either major PPP problem.

The disagreement is sufficiently sharp thatThe disagreement is sufficiently sharp that

the project may be referred to the parentthe project may be referred to the parent

International Accounting Standards Board.International Accounting Standards Board.


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Statistical offices may not have theStatistical offices may not have the

resources to evaluate each PPP.resources to evaluate each PPP.

Recognize dependence on financialRecognize dependence on financial

accountants, but be sure SNA principlesaccountants, but be sure SNA principles

are followed.are followed.


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5.5. Evaluate IASB/IFRIC standards forEvaluate IASB/IFRIC standards for

consistency with SNA principles.consistency with SNA principles.


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6.6. Detailed rules for the transactionsDetailed rules for the transactions

resulting from a PPP are not possible.resulting from a PPP are not possible.

Consider all of the facts andConsider all of the facts and

circumstances.circumstances.

Use a treatment that brings out theUse a treatment that brings out the

underlying economic relationships.underlying economic relationships.


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PPP questions for the AEGPPP questions for the AEG

Should PPPs be in the updated SNA?Should PPPs be in the updated SNA?

Is the list of criteria to help decideIs the list of criteria to help decideeconomic ownership OK? Should weeconomic ownership OK? Should we

include them?include them?

Given the continuing debate in accounting,Given the continuing debate in accounting,

is it OK to keep the description general?is it OK to keep the description general?

Public +Private+Partnerships

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