OUTLINE OF PRESENTATION

Transcription

1 PUBLIC SECTOR ACCOUNTING: EXPERIENCES IN OTHER COUNTRIES AND APPLICATION TO VIETNAM Presentation to the Vietnam State Treasury June 24, 2003 Susan J. Adams, PhD IMF Office-Hanoi OUTLINE OF PRESENTATION BACKGROUND/INTRODUCTION PUBLIC SECTOR ACCOUNTING STANDARDS STATUS OF COUNTRIES MOVING TO ACCRUAL ACCOUNTING COUNTRY EXPERIENCES HARMONIZATION ISSUES RESOURCES

2 1. BACKGROUND/INTRODUCTION Both accounting and statistical frameworks are used for organizing Government data. For ACCOUNTING purposes, transactions are organized by government unit. For PLANNING purposes, transactions are organized by input or output function. For BILLING AND CONTROL, transactions are organized by the partner of transaction. Often private companies use accrual accounting, while Governments have tended to use cash basis in their budgets. GOVERNMENT FINANCIAL STATISTICS (GFS) - IMF GFS is about STATISTICS, NOT ACCOUNTING. The GFS framework is designed to facilitate MACROECONOMIC FISCAL ANALYSIS. The GFS Manual (2001) is the latest update on GFS standards for IMF member countries. A committee has formed to harmonize GFS and IPSASs, as about 11 basic differences still remain.

3 Generally Accepted Accounting Principles (GAAP) Accounting data, for budgets and financial reports, are usually compiled in accordance with national or international GAAP. In some countries, required statistical standards are also addressed in the accounting data. Bridge tables are used by some countries where the chart of accounts does not incorporate the requirements of statistical standards. Statistics and Accounts require HARMONIZATION. 2. Public Sector Accounting Standards (PSA Standards) Private sector accounting standards are generally set by professional accounting standard-setters, while public sector standards are set by Ministries of Finance or national Treasuries. Countries are now recognizing that there is a need for independence (and globalization) of the public sector standard-setters.

4 PRIVATE VERSUS PUBLIC PRIVATE STANDARDS: International Accounting Standards Board (IASB) publishes International Financial Reporting Standards (IFRSs) and adopted in 2001 the International Accounting Standards (IASs). PUBLIC STANDARDS: The Public Sector Committee of the International Federation of Accountants (IFAC PSC) is responsible for developing International Public Sector Accounting Standards (IPSASs). International Public Sector Accounting Standards (IPSASs) In 1996, the IFAC PSC launched a project to develop the IPSASs by adapting private sector IASs to a public sector context. So far 20 IPSASs on an accrual basis and one on a cash basis have been released. As IPSASs do not apply to public corporations, they are following the IASs.

5 3. STATUS OF COUNTRIES MOVING TO ACCRUAL ACCOUNTING Governments may produce their budgets and financial reports on different recording bases (e.g., cash versus accrual basis). A recent OECD study found that there is a greater acceptance of accrual accounting for financial reporting than for budgeting purposes by governments. State Treasurers are the best-placed agent to determine national accounting standards, checked by Independent State Auditors. The standards selected form the basis for the country s CHART OF ACCOUNTS. Countries Adopting Accrual Accounting in PSA 1. EU has announced that its member countries will adopt IAS and IPSASs in Canada moved to an accrual budget in 2003 (see: 3. Seven countries in Latin America have adopted accrual accounting for various parts of the public sector: Argentina, Bolivia, Brazil, Columbia, El Salvador, Paraguay and Peru. Uruguay has a mixed system. Three others have accrual information only for public corporations: Chile, Ecuador and Honduras. Three others are considering accrual accounting: Dominican Republic, Mexico and Venezuela. 4. Australia and New Zealand have adopted for government financial reporting.

6 4. COUNTRY EXPERIENCES: UK Accrual accounting in the UK has existed for some time in the central government, but only newly affects specific government departments. During the mid-1990s, health provider units were established as separate entities and prepared GAAP-based accounts. Health units are classified as non-financial public corporations for national accounts purposes. In April 2001, the UK moved to a new resource-based financial management system (RAB). The UK Government s RAB : Resource Accounting and Budgeting RAB is an accrual based approach to Government accounting and budgeting, which also reflects Parliamentary control and a move to focus on outputs, rather than inputs. It is wider than simply the adoption of accrual accounting techniques. Other key elements: linking inputs and department aims and outputs. (Not every country using accrual accounting includes these other elements.)

7 ADVANTAGES OF ACCRUAL ACCOUNTING AND RAB in the UK: Provides a better picture of the true costs of a department s activities, including use of assets, costs of capital and non-cash costs, and relating these more directly to any revenues generated by the activity. Improves local accountability capacity for asset and liabilities of local government units. Each financial year the Treasury updates the accounting guidelines according to the standards set by the UK s Accounting Standards Board. The UK Debate on Who Should Set the Public Sector Accounting Standards It would be inappropriate for those responsible for preparing financial statements to have the sole responsibility for deciding on the standards such statements should follow. Clearly the Treasury should have a major role in the development of accounting requirements specific to central government. However, Parliament and other users of the accounts, auditors and professional bodies should also play a role. In Canada, the US and Australia, the arrangements provide for an independent body to oversee and approve central government accounting standards.

8 COUNTRY EXPERIENCES: NEW ZEALAND New Zealand experienced major reforms in its public sector during the late 1980s and early 1990s. Accounting reform was part of a general overhaul to an Integrated Public Financial Management System. The design of legislation was key in rolling out the reforms. NEW ZEALAND s CHANGING PUBLIC SECTOR ACCOUNTS The Public Finance Act of 1989 required all NZ Government and Department financial statements to be prepared using GAAP. NZ has one professional accounting body to set standards and certify professionals. Once departments had fully converted to the new financial management regime, they could then focus on the aggregated financial reporting of the Government. A central NZ Audit Office provided opinions attached to the financial statements of Government agencies. Publication, communications and marketing of audited financial statements was encouraged for public use and transparency.

9 COUNTRY EXPERIENCES: FRANCE A DUAL SYSTEM: The national budget is expressed and executed on a modified cash basis, while the General Account of the Finance Administration (CGAF) is expressed on accrual basis, as it represents the financial statement of the central government. WHY IS FRANCE COMMITTED TO MODERNIZING ITS PUBLIC FINANCE? Internationally, the governments of major industrial countries are committed to introducing accrual accounting; the EU is adopting by 2005 for all members. France will introduce accrual-based general government accounts on Jan. 1, 2005 and adopt officially on Jan. 1, The European System of Accounts (ESA 95) has defined new accounting standards on an accrual basis, including the Maastricht budget balance. The French central government is serving as a leader for all of its local public sector agencies, to set an example of transparency and accountability.

10 5. HARMONIZATION ISSUES: THE CASE OF AUSTRALIA Australia has implemented accrual accounting for its budget and financial reporting. Central, state and local governments in Australia are required to report in Australian Accounting Standards (AASs). Australia will adopt IASs in Harmonization of GFS and accounting standards is a big issue for Australia. A separate national project is underway, to be completed ahead of the international harmonization exercise. HARMONIZATION or CACOPHONY? GFS IPSAS Public Sector GAAP International Statistics Private Sector GAAP IFRS European Statistics ESA 95

11 HARMONIZATION ISSUES An international project is underway to identify the differences between the IPSASs and the GFSM-2001, in order to create convergence between the accounting and statistical standards. The PSC may issue reconciliation statements to link the key aggregates produced under accounting and GFS reports. ACCOUNTING FOR DEVELOPMENT ASSISTANCE: ISSUE FOR VIETNAM Stage one deals with disclosure of information on ODA under the cash basis of accounting Stage two deals with the disclosure under the accrual basis of accounting Project advisory panel to be established Work is beginning now (QII, 2003)

12 6. RESOURCES FOR FURTHER INVESTIGATION IFAC WEBSITE: IMF Website for GFS Manual: UK: France: Also note: IMF Manual on Fiscal Transparency THANK YOU! IMF OFFICE-HANOI