System in Japan. -Current Status and Ongoing Issue- Takashi Kitaba. Director, Public Accounting Office, Budget Bureau, Ministry of Finance, Japan

Transcription

1 Government of Japan Financial Reporting System in Japan -Current Status and Ongoing Issue- OECD Public Sector Accruals Symposium Paris, March Takashi Kitaba Director, Public Accounting Office, Budget Bureau, Ministry of Finance, Japan 1

2 Content Government of Japan Ⅰ. Current status and what we have made efforts 1. How to show the financial situation 2. Dual reporting system we employ 3. Our standpoint (Cash-basis, Accrual-basis) 4. Our history of Accrual-basis financial Statements 5. Composition of the Accrual-basis Financial Statements 6. Components of the Accrual-basis Financial Statements Ⅱ. Ongoing Issue 1. Policy Evaluation System 2. Basic idea of Policy unit Cost Information 3. Expected effect of availing the Policy unit Cost Information 2

3 Ⅰ. Current status and what we have made efforts 1. How to show the financial situation by providing Various Reports. For example <Financial information > Annual Budget Plan Financial Statement (closing account) Revenue and Expenditure information In Addition, Financial Statement (accrual basis) converting the cash-basis statement into the accrual-basis integrating A&L info. into R&E info. <Other information> National Property Register (revised every 5 years) National claim debt information Trial calculation report on time load at later years Public pension finance calculation report etc. Assets and Liabilities information Forecasting information 3

4 2. Dual reporting system we employ Cash-basis Financial Statement (Public Finance Law) is submitted to the diet in November. Cash Flow during the Fiscal Year (April to March) + Receipt and Disbursement arrangement period ( to July) Statutory Statements Accrual-basis Financial Statements on Special Accounts (Special Account Law) are submitted to the diet in January, at the same time, Statement of General Account is published. Concerning accrual-basis statement, Ministerial Statements are published in February, Consolidated Statement by the Government is published in June 4

5 Reference1 Current time schedule of preparation and publication of F/S FY2009 Receipt and Disbursement period Accrual-basis F/S of Special Account submitted to diet Accrual-basis F/S of General Account published Accrual-basis ministerial F/S published 1 Apr 31 Mar 31 Jul Nov Jan Feb Jun Cash-basis F/S submitted to diet Accrual-basis consolidated F/S published Accrual-basis Ministerial F/S of FY2009 prepared by each ministry Accrual-basis Consolidated F/S of FY2009 prepared by Ministry of Finance 5

6 Our budget accounts and Government organizations Reference2 Budget accounts Regional tax allocation Earthquake reinsurance Debt consolidation fund Government investment and loan Foreign exchange capital Energy policy General account 18 special accounts Workers insurance Pension Food stable supply Agricultural mutual aid Forestry insurance National forestry project Fishery mutual aid Trade reinsurance Patent Infrastructure Car security Register and recording 17 organizations (reporting entities) Imperial household Diet Court Board of audit Cabinet Cabinet office Ministry of Public Management, Home Affairs, Posts and Telecommunications Ministry of Justice Ministry of Foreign Affairs Ministry of Finance Ministry of Education, Culture, Sports, Science and Technology Ministry of Health, Labor and Welfare Ministry of Agriculture, Forestry and Fisheries Ministry of Economy, Trade and Industry Ministry of Land, Infrastructure and Transport Ministry of Environment Ministry of Defense 6

7 3. Our standpoint (Cash-basis) Dual Reporting System Why cash-basis? The Pubic finance Law requires Cash-basis accounting. Because.. Function of National budget is basically to collect and distribute fiscal resource. It is necessary to show strictly How Much Amount tax revenue, claim, debt and distribution. National budget and financial statement is subject to the diet s discussion. However, Traditional accounting style ( based on single-entry bookkeeping) becoming not sufficient for comprehensive understanding of financial situation 7

8 3. Our standpoint (accrual-basis) Dual Reporting System Why accrual-basis? Promote Further and Easier Understanding of Fiscal situation Show the relation between Revenue/Expenditure and Assets/Liabilities Accustomed and Familiar for the private sector Government accounting treatment system is already corresponded to double-entry bookkeeping Reform of Special Accounts in 2007 : Special Account Law Improve transparency of complex special accounts Integration and Abolition of special accounts ( 31 accounts (FY2006) 17 accounts(fy2011)) Setting of General rule of treatment of surplus, reserve fund and so on Clarify surplus fund of Special Accounts to contribute to national budget Require Accrual-basis Statement of Special Accounts 8

9 4. Our history of Accrual-basis Financial Statements ~Initial Stage ( ) Since the very beginning of this century, we have advanced accrual-basis approach. 2000: The first Prototype of Government s Balance Sheet was published. 2001: Government Report Introduction of accrual-basis financial statements was mentioned. 2004: Setting of Standard for preparing Accrual-basis Ministerial Financial Statements by the Fiscal System Council of the ministry of finance. 2005: The first Consolidated Financial Statement by the Government (FY2003) was published. 9

10 4. Our history of Accrual-basis Financial Statements (2007~2010) The phase has moved to the improvement period. 2007: Reform of Special Accounts Revised Special Accounts Law came into force in Apr Accrual-basis Financial Statement of Special Accounts are obliged to be submitted to the diet. Statement of Special Accounts in FY2007 was submitted in Jan : Introduction of Policy Evaluation System Enforced by the Policy Evaluation Law All ministries must have a Policy Evaluation System which makes output and outcome of each policy unit clear and public :The Fiscal System council s Recommendation Introduction of the Policy unit based Cost Information. Now Ongoing Issue. The first report is scheduled to come out this spring. (The detail of this project is explained later.) 10

11 5. Composition of Accrual-basis Financial Statements Consolidated Financial Statement by the Government Consolidated financial statement covering all ministries (reporting entities) is published by ministry of finance as part of information disclosure. Financial Statement of each ministry Each ministry (reporting entity) prepares its financial statement which consists of a statement of general and special account under its jurisdiction, and consolidate the statement with public corporations. Financial Statement of each account Financial statements of Special Accounts are required to submit to the diet by the special account law. Consolidated Financial Statement of General Account is published by ministry of finance as part of information disclosure to people. All statements available on web site ( but only in Japanese now. 11

12 6. Components of the Accrual-basis Financial Statements 4 components show the situation, present 2 years of financial data. Difference b/w Assets and Liabilities paid attention. Balance Sheet :The amount of the government s (ministry s) assets and liabilities and the difference between the two is shown. Operating Cost Statement :How much it costs on the accrual basis of accounting to operate the government (ministry) is shown. Statement of Change in Difference between Assets and Liabilities :The factor of the changes in difference b/w Assets and Liabilities is shown. Also the results of the government s (ministry s) annual operations (tax revenue less cost) is captured. Cash Flow Statement :The changes of cash flow by activity in government (ministry) is shown and balance of cash and deposits at the end of the current fiscal year is presented in the end. Government of Japan 12

13 Accrual-basis financial statement covers wide range of assets and liabilities For example; Property for public use e.g. river, bridge, airport, national forest are recognized as the asset. Too difficult to estimate real market price, future value of service.. Then summed up the accumulated amount of total expenditure to the B/S. Pension system related asset and liability are also earmarked in the accrual-basis financial statement Reserve fund for pension are recognized as both asset and liability. And the present amount of pension provision is described to the note. Balance Sheet: (Assets) Money in trust trillion yen / (Liabilities) Deposit reserved for the public pension trillion yen Note of statement: Present Amount of Pension Provision Employee s pension 1,710 to 2,630 trillion yen National (Basic) pension 280 to 440 trillion yen 13

14 Balance sheet of Accrual-basis Consolidated Financial Statement by the Government Trillion yen Assets FY2007 FY2008 Liabilities FY2007 FY2008 Cash and deposit Securities Accounts receivable Loans Money in trust Allowance for doubtful debt Tangible assets National property Public service property Commodities Intangible assets Investments Other Assets Accounts payable Allowance for bonus payment Financing bills Government bonds Borrowings Money in custody Policy reserve Deposit reserved for the public pension Allowance for retirement benefits Other Liabilities Total liabilities Difference between assets and liabilities Total assets Total liabilities and difference between assets and liabilities Note:The figure on the table represent the amount all special accounts and general account are consolidated. 14

15 Operating Cost Statement Trillion yen Personnel cost Reserve for retirement allowance, etc Employees pension insurance benefits Basic pension benefits Other social security costs Subsidies, etc Consignment costs, etc Local allocation tax grants, etc Grants to IAAs Administrative costs, etc Expenses for issues of GB Depreciation costs Reserve for allowance for doubtful debt Interest expenses Loss on disposal of assets, etc Valuation Loss on Investments Other expenses FY FY TOTAL IAA: Independent Administration Agency (established and funded by the government) 15

16 Changes in Difference between Assets and Liabilities Difference b/w A & L at the end of the previous fiscal year Total operating costs for the current fiscal year Source of revenue Tax, etc Other Difference resulting from valuation of assets Difference resulting from valuation of foreign-currency denominated assets Other changes Difference b/w A & L at the end of the current fiscal year Cash Flow Statement Cash flow from operating activities Revenue Expenditure Cash flow from financing activities Issue of GB, etc Payments and redemptions of GB, etc Net Cash flow during the current fiscal year Transfers to funds Balance of funds, etc Balance of cash and deposits at the end of the current fiscal year FY FY

17 Ⅱ. Ongoing Issue 1. Policy Evaluation System The policy evaluation law was enforced in Every Ministry set the goal of each policy unit. For example, Ministry of Finance has 10 units. Budget document and financial statement (cash-basis) Rearranged to be suitable for the policy evaluation items. Image figure of Policy Evaluation System Individual Ministries 2.Do (Implementation) 3.Check (Evaluation) The policy Management cycle 1.Plan (Policy Making) 4.Action (Reflecting on the planning) However, it is not sufficient to estimate cost-side effectiveness. 17

18 2. Basic idea of Policy unit Cost Information Policy Cost (Direct cost) Overhead Cost (Indirect Cost) e.g. staff cost, depreciation cost for the use of tangible asset such as building or machinery Overhead Cost can be allocated to each Policy cost on the basis of appropriate cost driver and then full cost is presented. Example of cost driver Staff cost: the amount of salary paid or the number of staff (principal) The amount equivalent to depreciation expense for building: occupied area (principal), follow the allocation method of staff cost (exception) Note: Flexible option is permitted according to the each ministry s situation 18

19 3. Expected Effect of availing the Policy unit Cost Information Government of Japan Achieving fiscal soundness. Transparent and efficient allocation of limited financial resource. Monitoring how much money is spent and whether the amount is appropriate level or not. Reflect on the forthcoming budget process. 19

20 Government of Japan Thank you for your attention. We are trying further information soon. 20