OECD 2016 ACCRUALS SURVEY March 21-22, 2016 OECD Conference Center Delphine Moretti Budgeting and Public Expenditures Division Public Governance and Territorial Development Directorate, OECD

Introduction

• Objective of the 2016 OECD Accruals Survey:

– Update of previous results on accrual accounting and budgeting practices, and the treatment of specific transactions;

– Overview of the accounting framework (consolidation, standard-setting and audit);

– Stock-taking on past accruals reforms: objectives, implementation challenges, and associated benefits.

• Answers received from 34 member countries.

• Amendments possible until March 31.

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ACCRUAL ACCOUNTING

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Accounting Basis for Annual Financial

Reports

• In less than 15 years, from 24% to 84% of OECD Countries using accrual accounting.

• “Cash”

Supplementary accrual data.

Accrual accounting outside of budgetary entities.

• “Cash transitioning to Accrual”

Close to cash accounting

Accrued expenditures main difference.

• “Accrual”

Uneven progress in populating balance sheets.

Different practices with regards to consolidation, standards, etc.

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Accrual

Cash and Accrual

Cash

Accounting basis (OECD Countries, 2016)

Annual Financial Statements:

Presentation and Content

• Balance sheet, income statement, and disclosures considered necessary statements.

• Some countries establish either a CFS or comparison of budget and actuals.

• Management commentary still a limited practice.

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• Financial assets and liabilities, accrued expenses are core information for Governments.

• Fixed assets more reported than contingent liabilities and provisions.

Presentation of Financial Statements

(Percent of OECD countries on accrual basis)

Content of Financial Statements

(Percent of OECD countries on accrual basis)

Annual Financial Statements:

Reporting Method for Selected Transactions

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• Notable progress in reporting of fixed assets, tax receivables, and derivatives.

• Other assets and liabilities underreported:

Lack of reference accounting treatment.

National specificities.

Possible reluctance to report liabilities.

Reporting Method for Selected Transactions

(Percent of OECD countries on accrual basis, 2016)

ACCRUAL BUDGETING

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Accrual Budgeting: Foreword

• Categorization of budgeting practices using accounting concepts creates difficulties (e.g., cash and commitment budgeting framework).

• Need to differentiate between ‘forecasts’ and ‘appropriations’ for some countries.

• Sources of graphs: 2016 OECD Accruals Survey and case study exercise.

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Preparation Basis for Budgets

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• 31% of OECD Countries implementing accrual budgeting.

• Accrual forecasts differ in terms of statements and elements presented in the budget.

• Commitments and some accrual elements often reported in cash budgeting frameworks.

Accrual

Cash and Accrual

Cash

Preparation Basis for Budgets

(OECD Countries, 2016)

Appropriations

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• 78% of OECD Countries use cash and/or commitment appropriations.

• A variety of practices, not fitting always in the cash vs. accrual categories: Modified cash appropriations (e.g.,

Canada)

Commitments appropriations (e.g. Germany)

Cash and commitments appropriations (e.g. France)

Cash appropriations with annual expenditures and expenses ceilings (e.g. Austria);

Accrual appropriations with cash allocations (e.g., UK)

Accrual appropriations with exceptions (e.g., Australia)

Accrual

Cash and Accrual

Cash

Accounting Basis for Appropriations

(OECD Countries, 2016)

COVERAGE, STANDARDS, AND AUDIT

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Institutional Coverage

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• 32% of countries cover only the budgetary entities in their financial statements.

• Full overview of public finances in only 15% of countries.

Budgetary Entities

or No Consolidation

Central Government

Institutional Coverage

(OECD Countries, 2016)

Public Sector

Federal Gov (CG+SOEs)

General Government

Accounting Standard-Setting

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• MoF is the standard-setting authority in about a half of countries.

• Advisory Boards and Standard Setting Boards in one third of countries: technical expertise needed.

• National standards used by 87% of countries, to accommodate local circumstances/deviations.

• IFRS, IPSAS used as references in most cases.

Standard Setting Authority

(Percent of OECD countries)

Nature of Standards

(Percent of OECD countries)

External Audit

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• All but one countries have external auditors.

• In 59 % of countries, the external auditor provide an opinion on whether the financial statements present a true and fair view.

• Usefulness of external audit highlighted by the respondents.

• Qualifications do not reflect gaps identified in balance sheets.

Nature of Audit Opinion

(Percent of OECD countries)

Nature of Qualifications

ACCRUAL REFORMS

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Status of Accrual Reforms

in OECD Countries

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• Reform program completed in a majority of countries, despite variations in current accrual frameworks.

• Accrual implementation often part of wider PFM reforms.

• Great variety in durations, and costs.

• Explicit or implicit sequenced transition in most cases.

Completed

On-going

Planned

Not Comtemplated

Status of Accruals Reforms

(OECD Countries, 2016)

Preparation and Implementation Challenges

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• Similarities in challenges pointed out by countries.

• Most countries underline the importance of :

– Allowing sufficient time to preparers (ministries/departments and agencies) and providing guidance/assistance.

– Human resources management (training and/or recruitment).

– Collaboration with external auditor.

Preparation Phase Implementation Phase

Achievement of Reforms Objectives

• Large range of objectives in all cases.

• Better accountability and transparency achieved in a majority of cases.

• Lack of interest/use of accrual information is a concern.

On-going initiatives to meet objectives : analysis of the performance in managing the balance sheet; fiscal ratios ; shortening delays for establishing the financial statements; "Citizen Accounts”…

What did accrual reforms achieved ?

THANK YOU FOR YOUR ATTENTION

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