PracticeAccounting FirmsAccountants prepare to board UN gravy train

Accountants prepare to board UN gravy train

Keith Nuthall reports on the hugely complex – and expensive – accounting reform at the United Nations

There can be few larger accountancy jobs than a complete overhaul of the
accounting systems of all United Nations organisations, but such a project is
under way and – some would say true to form – the UN is splashing the cash on
external accounting consultants.

All the UN’s agencies, departments, committees and headquarters must adopt
international public sector accounting standards (IPSAS) no later than 1 January
2010, with UN peacekeeping operations having a little longer to comply – by 1
July of the same year.

The immense range of this work is determined by the complexity of the UN and
its phalanx of specialist organisations. They are based all around the world,
including Britain – home of the International Maritime Organization (IMO). Many
of them are also very large: the World Health Organization (WHO) in Geneva, the
UN Environment Programme in Nairobi, and the UN Office on Drugs and Crime in
Vienna, to mention just a few.

A central UN unit, the Task Force on Accounting Standards, is co-ordinating
the overhaul. It had to consider whether it was practical for the UN to
standardise on one accounting system, and if so, which.

The obvious accounting standards choice for a global body is IPSAS, which has
already been adopted by other international organisations, such as the European
Commission, Nato and the Organisation for Economic Co-operation and Development

As a result, in 2005 the taskforce recommended IPSAS adoption, and last year
the UN General Assembly made it official UN policy.

IPSAS, said a UN briefing note, ‘addresses the international and
not-for-profit nature of United Nations system organisations and is consistent
with current financial reporting best practice and future financial reporting

The new system will replace the existing UN system accounting standards
(UNSAS), which, according to a UN report, ‘can no longer be considered to meet
the needs of modern financial reporting’. It stressed the many benefits of IPSAS
and said the ‘reporting of assets, liabilities, revenue and expenses in
accordance with independent international standards will support improved
financial management’.

It added: ‘The resulting more comprehensive information about costs will
better support results-based management… with consequential improvements
anticipated with respect to accountability, transparency and governance.’

It’s all pretty hot stuff in accounting terms. But given this is the UN, the
transformation will be expensive. The general assembly has concluded that
between 2006 and 2010, the total estimated costs for the project to be borne by
the UN would amount to around $23m (£11.5m).

While that is just a drop in the ocean of the UN’s regular budget of around
$1.9bn, and its $4.8bn peacekeeping budget, it is not the full cost.

The move to IPSAS is coming at the same time as a revamp of the UN’s IT and
management systems that will cost $120m.

Most UN agencies are separate accounting entities and control their own
budgets, so they also will be spending tens of millions of dollars on this
administrative and accounting revamp.

That said, the UN Board of Auditors concluded that ‘the benefits of adopting
IPSAS would by far outweigh its costs’. But what some accountants may find
particularly interesting – especially those who specialise in international
public sector accounting – is that the UN is already preparing to hire a lot of
external consultants.

One of the first UN agencies out of the IPSAS trap was the World Food
Programme (WFP), which is one of three UN bodies planning to adopt IPSAS by 2008
(the others being the WHO and the International Civil Aviation Organization in
Montreal, Canada).

The WFP is budgeting $3.7m for a two-year IPSAS implementation project, which
includes $500,000 for consultants, $800,000 for travel and $800,000 for

Unesco is also well ahead. It is planning to spend $2.3m on this process, and
its external consultant budget will be $280,000.

The World Intellectual Property Organization (WIPO), in Geneva, recently
advertised for ‘a highly qualified consultant to prepare and present an impact
analysis for the implementation of IPSAS’. It’s paying 13,000 Swiss francs
(£5,383) a month. Not bad, eh?

And the process is just gathering steam. There will doubtless be many more
jobs on offer such as this.

Stephenie Fox, technical director of the IPSAS board, said from her office in
Toronto that qualified and experienced accountants should take note. ‘Anybody
who has international public sector experience which is specific to IPSAS –
there could be potential opportunity there.’

One key issue here is that IPSAS has built-in flexibility allowing
organisations to hone accounting systems to match their needs exactly, and the
UN accounting standards taskforce is keen for its various arms and agencies to
do so. UN accounts division director Jayantilal Karia said: ‘We want a
harmonised implementation of IPSAS. They are principle-based standards and we
want to make sure financial statements are the same and comparable.’

The website makes clear the magnitude of the task and begs an obvious
question: can this job, even with the help of external expertise, be achieved by
2010? The UN high level committee on management accepted it would be ‘a major
exercise that would require changes to financial regulations and rules and a
significant investment in the management of their introduction in each
organisation, including staff training, development of relevant guidelines,
resolution of accounting issues and information systems development’.

Fox added: ‘It’s a daunting task. There’s no question, it’s definitely
ambitious. I’m betting they are running up right against it and wondering how to
do it.’

But in Fox’s experience, deadlines can work in public sector organisations.
Faced with no real option, they adopt the ‘Nike rule’ and ‘just do it’, adding
that ‘anything is achievable with resources’. Only time will tell whether enough
money has been earmarked for this most gargantuan of accounting tasks.

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