Budget%20Execution%20Course%20Fiscal%20Reporting%20And%20Transparency

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Budget Execution CourseFiscal Reporting And
Transparency

• David Shand
• OPCFM
• 17 January, 2003

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1. Reporting on budget execution is an important
   aspect of accountability to the legislature and
   to the public, and in some cases for use by
   financial markets. Impact of fiscal rules/targets
2. In some countries budget results are published
   regularly throughout the year quarterly or even
   monthly.
3. But fiscal reporting needs to go beyond reporting
   on budget execution. Needs also to cover overall
   financial results and position. In addition to
   reporting on financial flows (both operating and
   financing transactions) what information should
   be reported on government assets and liabilities
   and thus some concept net equity of government.

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1. Are subsets of this more appropriate ? for
   example reporting only on financial assets and
   liabilities.
2. Good external transparency builds on internal
   transparency or information flows which is
   important for the governments management of its
   finances.
3. Poor external reporting may not reflect a
   government being secretive about its finances
   it may not know itself.
4. Reporting is need both at the responsibility
   center (agency, ministry) level and the aggregate
   level for both management and accountability
   purposes.

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• External reporting is one potential form of
  social control but who may use these statements
  and with what effect?
• Two major fiscal documents are available
• the budget documents forward looking , but some
  past information, in relation to fiscal targets.
  But how comprehensive is the budget? The
  information is not audited. Should these be
  regarded as general purpose financial statements
  subject to standards and audit. Standard used
  usually some form of GFS (?).
• the aggregate financial statements or public
  accounts. Historical information. Format and
  coverage may be different from the budget. The
  information is audited. May reflect legal fund
  concepts e.g. consolidated fund, loan fund etc.
  in coverage of the budget.

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1. In addition individual ministries/agencies may
   prepare their own financial statements, usually
   audited. These reflect moves to have them
   exercise greater responsibility for their own
   financial management. They usually cover more
   than just budget execution.
2. The scope of the budget is an important reporting
   issue. What is the extent and nature of
   off-budget public financial transactions, for
   example extra-budgetary funds and public
   enterprises. How should budget reporting relate
   to reporting of the whole of government i.e.
   what is the reporting entity.

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• In many countries the aggregate financial
  statements
• may not be timely, reliable or not audited.
• may be unintelligible due to their format and
  length
• may reflect legal rather than management concepts
  (e.g. fund accounting)
• may be only loosely linked with the budget.
• What basis of reporting should be used cash,
  obligations, modified accrual, full accrual. To
  what extent should this follow the budget basis?
• Need for international standards in fiscal
  reporting who should set them? economists,
  accountants, statisticians?

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1. GFS has been a commonly accepted standard, used
   with variations by many governments for reporting
   in budget documents but not public accounts.
   Most recent GFS manual issued in 2001 and is
   accrual based. GFS reports in three parts
   general government (central/state/local),
   non-public financial corporations and public
   financial corporations. This could be
   consolidated.
2. Accounting profession appears to regard GFS as a
   statistical tool for macro-economic analysis,
   (e.g. psbr) rather than as a measure of fiscal
   performance

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1. International public sector accounting standards
   being developed by International Federation of
   Accountants (IFAC) Public Sector Committee. They
   do not cover budget reporting specific project
   on this.
2. The 25 standards issued to date, are based
   largely on international accounting standards for
   the private sector and assume accrual based
   reporting, but there is a standard for cash
   accounting and guidance on transition to accrual
   accounting. The cash accounting standard requires
   disclosure of all receipts and payments
   controlled by the government and encourages
   additional disclosure in notes of assets,
   liabilities etc.

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• The definition of the entity is wider than GFS
  general government concept of control would
  consolidate all government enterprises. But can
  report at more than one level.
• Both are based on similar concepts (accrual) and
  a common data base.
• New Zealands Crown Financial Statements
• Prepared in accordance with generally accepted
  accounting practice in New Zealand
• Statement of Financial Performance (operating
  balance before revaluations)
• Statement of Financial Position (Crown balance)
• Statement of Movements in Crown Equity
• Cash flow statement (operating and financing
  transactions)
• Statement of Contingent Liabilities
• Statement of Commitments etc etc

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• 22. Given accrual basis of IPSAS and accruals
  basis of GFS, at what rate can countries move to
  the accruals basis.
• 23. A pragmatic and gradual approach needed.