The implementation of IPSAS in the Maltese public administration : a discussion of the institutional and operational arrangements required for the successful change from cash to accrual

Abstract

The essay focuses on the implementation of accrual accounting and IPSAS within the Maltese Public Sector. It discusses what has been done thus far and also what could possibly be done in the future. It acknowledges that IPSAS adoption and implementation is a complex project that necessitates not only strong institutional arrangements but also diligence in the management of change that it brings about. The first Chapter of the essay is an introductory one which explains the main differences between cash and accrual based accounting. !t elaborates on the benefits and shortcomings of each reaching the conclusion that accrual accounting gives a 'better understanding of the overall financial health of the Government thereby providing the basis for good long term financial projections and planning'. Chapter Two deals with the prevailing situation in the Maltese Public Sector. It goes into a detailed explanation of the roles played by the major stakeholders, their responsibilities and also their input in the Accrual Accounting Project. It highlights the shortcomings of legislation in view of it still being based on cash accounting. Moreover this chapter also makes reference to the progress made in the area of Accounting and Finance especially due to the developments arising from Malta's accession to the European Union. The third chapter deals exclusively with IPSAS. It explains the scope of IPSAS and their conceptual framework. It also discusses the benefits of IPSAS adoption as part of a wider Public Finance reform and the importance of treating IPSAS implementation as a change management project. Chapter Four ties up with Chapter Three but deals with the practical aspects of IPSAS implementation. This is the chapter were most institutional and operational issues are brought to discussion. Answers to the following questions are all discussed in this Chapter. What are the challenges in implementing IPSAS? What are the main steps in the process? Who will carry out the various stages of the project? What needs to be done by the Maltese Administration to be well equipped to implement IPSAS? How will decisions be communicated? Who will issue instructions/guidelines regarding the treatment of certain transactions? Who will be in charge of changing accounting and financial policies? Who will be conducting the necessary training across Departments and Ministries? How? Finally the essay is brought to a close by summarizing the main conclusions and putting forward a number of recommendations which the author thinks that the Maltese administration could possibly tackle before moving further to the next steps in the IPSAS adoption process.