Mastering Matrix-Style Reporting in Public Sector Accounts

September 13, 2022 | 6 minute read
Dallas Petry
Master Principal Solution Consultant
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Challenge and Opportunity

The multi-faceted nature of public sector accounting leads to some of the most complex challenges in recording and reporting of financial activity. Traditional accounting tools disconnect multiple views of data, leading to inconsistent accounting procedures, risks of inaccuracy, and time-consuming report production.

A modern public sector accounting system supports complex, matrix-style tracking of ever-evolving reporting requirements and does so with consistency via rules-based policy application. Faced with reporting under IPSAB or IFRS, or new requirements under ESG, Oracle Cloud Applications provide the flexibility to adapt and master complex public sector accounting.

The Drivers of Matrix-style Reporting in Public Sector

How many ways does a dollar of expenditure get tracked inside a public sector organization?

Accounting in public sector starts with basic measures which qualify the accountability and description of spending. Some commonly used dimensions include:

  • Entity
  • Department
  • Natural account

Entity is used to represent business units in the organization, and usually are represented by a complete trial balance, and due-to/due-from accounts to keep all entities in balance.  Department is the smallest unit of management accountability, often linked to security and workflow. Natural account represents the measure of what activity is being accounted for and spans the range of financial statement requirements found in the International Public Sector Accounting Standards (IPSAS). Natural account usage for concurrent reporting which differs from IPSAS creates the requirement to either account dually or to translate financial results between standards. These dimensions are very generic and can be found in the charts of account for organizations as widely varied as governments, higher-education, healthcare and government-owned corporations.

Globalization makes two other commonly used dimensions a challenge for public accounting.  Specifically;

  • Calendar
  • Currency

Some reporting frameworks may use different year end dates (i.e., March 31 versus December 31), or even periodicity such as 13 period accounting or bi-weekly accounting periods, in lieu of standard-month accounting calendars. This leads to the need to translate financial results between calendar frameworks, adjusting even by the effective dates of the transactions being accounted for. Currency may require translation and revaluation for compliant reporting, particularly where reporting is provided in multiple jurisdictions.

Core governments may add these segments to their analysis:

  • Legislative vote
  • Electoral region

Legislative vote is a standard dimension of reporting within core government organizations, aligning with spending authority, and usually directly corresponding with the departmental structure of the organization.  Incorporating electoral region into a public sector accounting framework can provide elected officials greater visibility into how spending aligns with populations and constituencies, but this may conflict with the alignment of spending with legislative vote and department structures, leading to matrix-reporting. 

  • Program

Further challenges can emerge with the addition of program reporting, which often crosses departmental lines of authority, ensuring a true matrix-style accounting framework. The matrix combination of department and program in the accounting code structure is also prevalent in higher education and many healthcare organizations which seek to track spending through both accountability and service models simultaneously.

Program accounting adoption usually heralds a requirement to account for the following dimensions:

  • Fund
  • Grant
  • Project

From the revenue perspective, the use of fund and grant dimensions in public sector is critical for tracking money designated for specific streams of expenditures, operating programs, and projects. A key usage is the reporting of accountable grants and balanced-fund streams. Grants themselves can be considered an additional accounting dimension, or even a separate ledger, as they often cross the programs, projects, and departments for which the grant provides funding, and require status-reporting to the granting body. 

From the expenditure perspective, projects for capital and operating are generally tracked on a different timeline than the calendar defined in the operating ledger and are outcome-based rather than calendar-based.  Projects and their related funds and grants are often tracked on an inception-to-date basis instead of a year-end close basis as is the case with a traditional operating ledger. Concurrently, the specific timing of cash flows remains important to support the treasury function of the finance department.

Next, capital projects lead to assets, so the same expenditure is counted yet again, in yet another ledger dedicated to assets, which then feeds back into the operating ledger to report the depletion of assets over time.

  • Employee and Contractor

Public sector disclosure requirements can add employee and named-contractor spending measures to the list.

It does not require casting the net very far to count ten or more different dimensions required by an organization for their public sector accounting requirements, yielding a very large matrix-style reporting challenge. Added to each dimension is the variety of hierarchical roll-ups used for alternate and aggregate reporting. Complexity increases when changes in the alignment of reporting structures are made, in re-organizations and cost reporting classification changes, and historical structures must be preserved for the purpose of comparative reporting.

These are only the financial measures.

Statistical Measures and Environmental, Social and Governance (ESG)

Statistical measures of resource inputs and service outputs, such as staffing and workload, are meant to provide context to spending, and must therefore be closely aligned with financial measures.

Currently, measures relating to ESG are rapidly evolving in policy and practice, and public sector accounting needs to be prepared for these changes.

The Consequences of Disconnected Tool Sets

Many public sector organizations are furnished with the most rudimentary ledgers to manage herculean tasks of recording, governing, and reporting on financial and statistical activities. Even with vast efforts dedicated to the task, managing the sheer volume of public sector accounts is bottle-necked by disconnected tool sets such as disconnected ledgers, and a plethora of spreadsheets, for operating, capital, projects, funding & grants, assets, and statistics.  This can cause risk of error, delays due to audit verification and error correction, and extended deadlines for statutory submissions. Governance is a challenge where systems do not intrinsically provide the capabilities for consistent application of accounting policies for all measures, along with governance tools to ensure ‘work-arounds’ do not evolve in practice. Reporting on disconnected ledgers leaves public accountants grappling with many versions of ‘truth’ in a volume of numbers that, in many organizations, reaches hundreds of thousands (or even millions) of lines in the official trial balance.

One System to Rule them All

Oracle’s Cloud Applications combine into a single system all the functions necessary for advanced public accounting. Scaling all the way through national governments, corporate agencies, municipalities, healthcare, and local public universities, Oracle has proven capabilities to unify accounting practices for the diverse range of requirements seen in all areas of public sector. At the core of the design is the concept that each transaction can be coded to automatically post in every reporting framework that the organization is required to manage.

Oracle’s single source of truth is an integrated system of record for each and every way that spending must be tracked:  operations, both revenue and expense, projects and capital, funding and grants, and non-financial measures and statistics. Oracle Cloud includes full subledger capabilities for HCM/Payroll, Procure-to-Pay, and Revenue.  The entire Oracle Cloud Applications system uses the same accounting standards throughout, for consistent accounting, strong governance, and auditable results reporting.

Oracle’s advanced multi-entity capabilities support the co-existence of many different charts of account, accounting calendars, currencies, and accounting standards to be implemented in one system. Automated calculation of due-to/due-from balances ensure accurate reporting for entities and funds. For multiple currencies and dissimilar ledgers, Oracle provides translation for both. Security rules keep information within the relevant business units in tandem with responsibilities of people in the organizational structure.

Oracle’s leading edge accounting rules engine incorporates artificial intelligence to manage consistent application of accounting methods and policies, even when multiple, possibly conflicting, accounting standards must be followed at the same time. Each transaction can be accounted for under multiple independent accounting standards and calendars, without requiring additional translation.

Governance, risk management, and internal controls are built intrinsically into Oracle Cloud Applications enabling activity monitoring and ensuring segregation of duties.

Integration with Planning and Reporting across all ledger types provides comprehensive analysis of organizational performance, forecast control, and streamlined publication of results.

Conclusion

Matrix-driven reporting requirements can present a challenge to public sector accounting. However, Oracle’s Cloud Applications provide a modern, flexible tool set with which to master the complexity.

Dallas Petry

Master Principal Solution Consultant

Dallas Petry is a veteran solution consultant with broad experience in both public sector and industry.  Combining skills in communications, a wide knowledge of systems capabilities, and business process analysis and design, he assists organizations in re-thinking business operations and re-igniting their creativity in business transformations.

Key areas of success include healthcare finance and capital management, ag-chemicals, engineering and construction, nuclear power regulation and operation, and all levels of government.  New technology brings new opportunity, and Mr. Petry helps organizations to define the vision and objectives for change.


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