Target audience

The workshop has been designed for public sector officials from ministries concerned with both budgetary development, and statistical and financial reporting, external and internal auditors (who will both be directly affected) as well as from international institutions, and professional associations, in particular accountants. The proposals for harmonization also cannot be discussed without a reflection of the political implications.

Course description

The sovereign debt crisis has underlined the need for more rigorous, transparent and comparable reporting of fiscal data. This concern prompted the European Commission to commission a report to assess the suitability of the International Public Sector Accounting Standards (IPSASs) for the Member States.

The report concluded that, even if IPSASs cannot be implemented in EU Member States as they currently exist, “the IPSASs standards represent an indisputable reference for potential development of European Public Sector Accounting Standards (EPSAS), based on a strong EU governance system”. The report took as its starting point the high dependence of the quality of European-level statistical. Eurostat, in order to secure that quality, therefore advocates that a system of harmonised accruals based accounting standards which are consistent with the European System of Accounts (ESA), should be applied for all entities of the government sector. International compatibility of concepts is crucial when comparing statistics for different countries.

The ESA system “records flows on an accrual basis; that is, when economic value is created, transformed or extinguished, or when claims and obligations arise, are transformed or are cancelled. Thus, output is recorded when produced, not when paid for by a purchaser, and the sale of an asset is recorded when the asset changes hands, not when the corresponding payment is made. Interest is recorded in the accounting period when it accrues, regardless of whether or not it is actually paid in that period. Recording on an accrual basis applies to all flows, monetary as well as non-monetary and intra-unit a well as between units.

However, in some cases it is necessary to show flexibility as regards time of recording. This applies in particular to taxes and other flows concerning general government, which are often recorded on a cash basis in government accounts. It is sometimes difficult to carry out an exact transformation of these flows from cash basis to accrual basis. In these cases it might therefore be necessary to use approximations.”

All European Governments (apart from that of the United Kingdom) prepare their budgets on a cash basis. Financial reporting arrangements though are increasingly being reformed to adopt an accrual basis of accounting. The only available internationally recognized standards applicable to accrual accounting are those published by the Public Sector Accounting Standards Board of the International Federation of Accountants (IFAC). In March 2013 Eurostat following a public consultation issued a report on the suitability of the International Public Sector Accounting Standards (IPSASs) to EU member states. The overall conclusions of this Eurostat study were that after taking into account the views of member state authorities and the results of the public consultation:

IPSASs cannot be simply implemented in EU Member States in their current status;
Most stakeholders agree that IPSASs represent an indisputable reference framework for potential EU harmonised accruals-based public sector accounts ("EPSAS");
Currently, the IPSAS standards do not describe sufficiently precisely the accounting practices to be followed;
At its current state of development, the suite of standards is not complete in terms of coverage or its practical applicability to some important types of government flows, such as taxes and social benefits, and does not take sufficient account of the specific needs, characteristics and interests of public sector reporting;
IPSASs can also be regarded as insufficiently stable, since it is expected that some standards will need to be updated once work is completed on the IPSASs conceptual framework; At present, the governance of IPSAS suffers from insufficient participation from EU public sector accounting authorities. In addition, the IPSAS Board currently seems to have insufficient resources.

This workshop is designed to explore:

the tensions between statistical and financial reporting;
Whether, even if accounting standards can be harmonised for both statistical and financial reporting purposes, accrual based accounting information can be effectively used for managerial and public accountability purposes, given that budgets are prepared on a cash basis or whether a more appropriate course is to revert to a mixture of cash and accrual reporting in order to secure appropriate comparisons of current expenditure with budget forecasts and also to provide information about assets and liabilities;
how both Eurostat and national parliaments, as well as the general public can be satisfied that accrual based information is consistently applied between statistical and financial reporting and between financial years to avoid ‘adjustments’ being made to suit perceived political necessity;
Whether the accounting policies underpinning those standards being applied by governments are appropriate, and at a minimum comparable with those being applied in the private sector; Whether it is appropriate for a central body such as Eurostat to be the determinant of detailed accounting policies.

Topics covered

The following topics will be addressed during the workshop:

The Commission/Eurostat report and its findings;
Understanding the different purposes of statistical and financial reporting; Is harmonization practical and if it is, does this inevitably mean that budgets will have to follow or can budgets be maintained on a cash basis with the financial reporting process for national (as compared with international) public accountability purposes needing to become more sophisticated?
How can or ought the process resulting from harmonization be monitored to ensure that manipulation for either statistical or financial reporting purposes is not manipulated? Can the accountant learn from the statistician? Does this change the role of the external auditor?
How acceptable will it be for a pan European organization to specify the detail of accounting policies and will such detailed specification be required to secure harmonization?

Benefits to the individual

The Commission report highlights the need for urgent discussion of these issues and the intention of this workshop is to assist representatives from EU member countries and those seeking to join the Union to have a better understanding of the issues that need to be addressed. In the past the debate has been more simplistic, because it has been primarily concerned with how a country might change to accrual accounting and with an understanding of the applicability of the IPSASs. Now the quality of that debate ought to change.

Faculty

Noel Hepworth, Independent Public Policy Professional, United Kingdom

Mr. Hepworth was Chief Executive of Chartered Institute of Public Finance and Accountancy (CIPFA) from 1980-1996. He was Chairman of the Féderation des Experts Comptables Européens Public Sector Committee from its establishment in 1985 to 2003. As part of this he was responsible for providing a European perspective on the IFAC public sector standards proposals. In addition on behalf of the Féderation des Experts Comptables Européens he was responsible for the development of their agenda of activity and managed the work of the European profession on the introduction of the single currency across the EU, 1996 to 2001. He was also a technical adviser to the IFAC public sector committee for a period of years.

From 1996 he was also Chairman of the Institute of Public Finance (a wholly owned subsidiary of CIPFA). In this capacity he was responsible for the development and management of the Institute’s international strategy with particular regard to the establishment of certified training programmes in public sector accounting and internal and external audit, in developing and transition economy countries, including Slovenia, Croatia, Albania, Macedonia and Kosovo.

More recently, he has worked extensively with OECD/SIGMA and completed peer reviews and annual assessments of public financial management in many Balkans and Eastern European countries. He is also the external adviser to the Palestine Ministry of Finance Audit Committee.

Noel Hepworth is a qualified accountant and has been a member of CIPFA since 1958. He holds a post graduate diploma in public administration from the University of London. He has been awarded honorary doctorates by the University of Hull, by the University of Brighton and by London City University. He is a member of the Royal Society of Arts and was awarded an OBE by Her Majesty the Queen in 1980.

Andrej Flajs, Statistical Office of the Republic of Slovenia

Mr. Flajs is an expert in national accounts at the Statistical Office of the Republic of Slovenia. His expertise includes developing macroeconomic statistics and compilation of System of National Accounts, being responsible for co-operation with international institutions in the field of macroeconomics statistics, presenting National Accounts of Slovenia in Task Forces organized by EUROSTAT and being responsible for further methodology improvements and development of National Accounts of Slovenia in line with ESA 95. He has numerous working experience in the region.

Mr Graham Lock, Assistant, GFS Quality Management and Government Accounting, Eurostat, European Commission

Mr Lock joined Eurostat, the Directorate- General of the European Commission responsible for statistics, in 1990 and has worked on improving and applying EU statistics in a number of areas. He was involved as an adviser in negotiations with the oil and auto industries on taking steps to reduce emissions from road traffic and has also been involved in discussions on bringing air transport into the EU's Emissions Trading Scheme. A major interest has been the contribution that statistics can make to policy making, especially by means of indicators and indicator-based techniques for assessing policies.

He is currently working on the quality management of government finance data needed for the monitoring of the Maastricht criteria. In this capacity he was involved in the analysis of the responses to the public consultation on IPSAS that Eurostat carried out last year, and was one of the team that prepared the Commission's assessment of the suitability of IPSAS.

Mrs Anabela Rodrigues, Seconded National Expert, GFS Quality Management and Government Accounting, Eurostat, European Commission

Mrs Anabela Rodrigues has been working with Government Finance Statistics at the Directorate General of the Budget of the Portuguese Ministry of Finance since 2001. Currently she is a Seconded National Expert at Eurostat in the Government Finance Statistics Directorate – unit of quality management and government accounting. She was involved in the preparation of the Commission’s assessment report on the suitability of IPSAS for the EU member States and participates in the project to introduce harmonised European Public Sector Accounting Standards. Anabela Rodrigues holds a diploma in Management by Instituto Superior das Ciências do Trabalho e da Empresa, in Lisbon, and a Master of Business Administration by KU Leuven, in Belgium.

Zdenka Vidovič, KPMG, Slovenia

Ms. Vidovič is a certified auditor and has worked as an inspector and auditor for the Public Accountancy Service. She has also worked as a public sector auditor for the Court of Audit of the Republic of Slovenia. In 1995 she was appointed as the Court of Audit’s Member and at the end of her nine years mandate she acted as the Deputy President. She was involved in consultancy and training projects for a range of national and international organizations in the areas of public sector internal controls, auditing and accounting. She is currently working as external auditor at KPMG Slovenija d.o.o. and the CEF Associate Fellow.

Accrual Accounting

Target audience

Course description

Topics covered

Benefits to the individual

Faculty

Application procedure