Research Report on Budget Reporting

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Research Report on Budget Reporting
Presentation to PSC Buenos Aires, Argentina March
2004
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Research Question

• Should an international public sector accounting
  standard be issued on budget reporting?

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Composition of Steering Committee

• Belgium
• China
• Denmark
• France
• India
• New Zealand
• Netherlands
• Norway
• South Africa

• Sweden
• UK-African Focus
• USA (Chair)
• ACCA
• FEE
• World Bank
• OECD (Associate)
• Individual Member from Australia

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Objectives of Research Study

• Identify current best practices in budget
  formulation, execution, and reporting.
• Determine if development of an IPSAS on budget
  reporting and/or other budget related matters
  falls within PSC mandate.
• Determine if there is any precedent for an
  accounting standard setter to deal with budget
  reporting issues.
• If an IPSAS is appropriate, determine the issues
  to be dealt with by that IPSAS.

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Recommended Practices by International Bodies

• IMF Code of Good Practices on Fiscal Transparency
• OECD Best Practices for Budget Transparency
• UNDP Budget Preparation ProcessKey Factors
• World Bank Country Financial Accountability
  Assessment

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OECD/World Bank Survey of Budget Practices

• 44 of 60 countries responded
• Specific areas of concern
• 4.2 Budgeting, Accounting and Financial Reporting
• 5.2 Budget Documentation and Performance
  Management
• 5.3 Budget Classification
• 6.5 Budgeting and Reporting

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Current/Recommended Practices in Select Countries

• Australia
• Belgium
• Denmark
• Finland
• France
• Germany
• Ghana
• Honduras
• Italy
• Kenya
• Netherlands

• New Zealand
• Nigeria
• South Africa
• Spain
• Sweden
• Switzerland
• Tanzania
• Uganda
• United Kingdom
• United States
• Zambia

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Objective of the PSC

• Develop programs aimed at improving public
  sector financial management and accountability
  including developing accounting standards and
  promoting their acceptance.
• (Preface to IPSASs)

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IPSAS 1. Presentation of Financial Statements

• General purpose financial statements are those
  intended to meet the needs of users who are not
  in a position to demand reports tailored to meet
  their specific information needs.
• (Paragraph 2)

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IPSAS 1. Presentation of Financial Statements
(continued)

• Financial reporting may also provide users with
  information
• Indicating whether resources were obtained and
  used in accordance with the legally adopted
  budget and
• Indicating whether resources were obtained and
  used in accordance with legal and contractual
  requirements, including financial limits
  established by appropriate legislative
  authorities.
• (Paragraph 14, underlining added)

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IPSAS 1. Presentation of Financial Statements
(continued)

• Where the financial statements and the budget
  are on the same basis of accounting, this
  Standard encourages the inclusion in the
  financial statements of a comparison with the
  budgeted amounts for the reporting period.
• (Paragraph 22, underlining added)

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Budget Reporting Model
Cash
Budgetary Basis
Modified
Ex- Ante
Full Accrual
Legally Approved
Types of Budget Reports
National
Prospective
State
Central Government
Local
Agencies
Ex-Post
Levels of Government
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Key Recommendation

• The PSC should issue an IPSAS on Budget Reporting
  since it falls within the mandate identified in
  the Preface to the PSC. This includes both
• ex-ante budget reports and
• ex-post budget reports

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General Recommendations

• Budget reports (both ex-ante and ex-post) should
  meet qualitative characteristics of financial
  reporting.
• Budget reporting should be incorporated into the
  Conceptual Framework for IPSASs.

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Key Recommendations on Ex-Ante Budget Reports

• IPSAS on Budget Reporting should require that
  legally approved budget and prospective budgetary
  information be published with appropriate
  supporting budget documentation.
• (meets transparency criteria)

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Key Recommendations on Ex-Post Budget Reports

• IPSAS on Budget Reporting should require the
  following
• Budget to Actual Comparative Statement should be
  part of the general purpose financial statements.
• Comparative Statement should include original, as
  well as final approved, budget.
• If difference between budget and accounting
  bases, reconciling statement should be prepared.
• (meets accountability criteria)

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Other Key Recommendations

• IPSAS on Budget Reporting should encourage the
  following
• Integration of budget and accounting systems to
  maximum extent possible
• Use of commitment accounting procedures
• (addresses other budget related matters)

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Issues To Be Researched

• Clear definition of budget reporting
• Inclusion of ex-ante budget reports in an IPSAS
• Inclusion of ex-post budget reports as part of
  general purpose financial statements
• Requirement for a reconciling statement where
  differences between budget and accounting bases
  exist
• Coverage of budget execution and control
  procedures in an IPSAS

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Issues To Be Researched (continued)

• Specification of procedures to meet qualitative
  characteristics of financial reporting
• Inclusion of budget reporting in the Conceptual
  Framework

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