Public-Private Partnerships
PPPs
Brett Kaufmann, Robin Lynch,
Christoph Maier, and
John Pitzer
1
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.
3
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
 who
issues
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?
5
Public Private Partnerships
 Who
is the economic owner of the asset?
 Who
bears the risks?
 Who
reaps the rewards?
 Who
is in control?
6
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.
15
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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