Public-Private Partnerships

PPPs

Brett Kaufmann, Robin Lynch,

Christoph Maier, and
John Pitzer

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

 Government and a private corporation

combine to provide a public service
through the creation and use of new
assets for a set time period

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 Public Private Partnerships
 Why PPPs?

 PPPs can bring private sector best

practice to government service delivery, to
achieve best value for money. The
financial arrangements allow raising
money in the market free from fiscal policy
and public finance constraints.

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 Public Private Partnerships
 Prison example – usual arrangements

 Government borrows money, pays to get a

prison built, runs the prison service

 PPP

 Private firm borrows money, builds prison,

government pays firm to run prison service for
government, hands over after 20 years
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 Public Private Partnerships
 Accounting issues

 who is the economic owner of the asset?

 How do we score the payments from

government to private operator, and how
do we record the transfer of the asset back
to government at the end of the
agreement?
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 Public Private Partnerships
 Who is the economic owner of the asset?

 Who bears the risks?

 Who reaps the rewards?

 Who is in control?

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 Public Private Partnerships
 Economic ownership issues

 The private unit is the legal owner and

user of the assets

 The government unit prescribes use of the

asset, and takes it over at the end

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 Public Private Partnerships
 What are the best criteria to apply to
determine
 A. who is the economic owner of the
assets?

 B. is a lease financial or operating?

 Which criteria are the clearest and most

observable?
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 Public Private Partnerships
Determine the economic owner using the
same principles as for any other asset.

Must be general. What are the

principles?

Depends on the final agreed treatment of

leases and the definition of an asset
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 Public Private Partnerships

 The Canberra Group did not come to a

conclusion on a single best way to
determine economic ownership

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 Public Private Partnerships
 Given we have decided who owns the
asset:

 how should we score the payments from

government to private unit over the term of
the partnership?

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 Accounting Standards
 The Interpretations Committee (IFRIC) of
the International Accounting Standards
Board is developing financial accounting
standards for PPPs.

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 Accounting Standards (2)
 The complexity of PPPs and the
dependence of national accountants on
government financial accounting data
makes it highly desirable to have a
common treatment of PPPs in the SNA
and in the accounting standards.

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 Accounting Standards (3)
 IFRIC has not reached a decision about
either major PPP problem.

 The disagreement is sufficiently sharp that

the project may be referred to the parent
International Accounting Standards Board.

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 Public Private Partnerships
Statistical offices may not have the
resources to evaluate each PPP.

Recognize dependence on financial

accountants, but be sure SNA principles
are followed.

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 Public Private Partnerships
5. Evaluate IASB/IFRIC standards for
consistency with SNA principles.

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 Public Private Partnerships
6. Detailed rules for the transactions
resulting from a PPP are not possible.

Consider all of the facts and

circumstances.

Use a treatment that brings out the

underlying economic relationships.
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 PPP questions for the AEG
 Should PPPs be in the updated SNA?

 Is the list of criteria to help decide

economic ownership OK? Should we
include them?

 Given the continuing debate in accounting,

is it OK to keep the description general?
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