Gerhard Steger, Director General Budget and Public Finance Austria - IFAC Sovereign Debt Seminar Presentation


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Gerhard Steger, Director General Budget and Public Finance Austria - IFAC Sovereign Debt Seminar

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Gerhard Steger, Director General Budget and Public Finance Austria - IFAC Sovereign Debt Seminar Presentation

  1. 1. From Cash to Accrual Accounting Budgeting inGovernment – The Austrian CaseGerhard StegerVienna, 19 March 2012
  2. 2. Budgetary Reform in Austria Primary motivation: Improved budgetary decision-making Addresses the following weaknesses of the current system: – No binding medium-term perspective – Prevailing focus on inputs – Dominant Cash Perspective The budget as a comprehensive steering instrument for resources & outputs & outcomes Implementation in two stages: 2009 and 2013 Unanimous decision in Parliament 2
  3. 3. Austrian Federal BudgetReform - Overview  Budgetary discipline and planning: binding medium term expenditure framework Result-oriented  Flexibility for line ministries through management of full carry-forward of unused funds administrative units Performance Budgeting including Gender Budgeting New budget structure: Accrual budgeting and „lump-sum budgets“ accounting new budget principles: impact-orientation; efficiency; transparency; true and fair view 3
  4. 4. Accounting system: 1986 – 2012 Cash budget (with some accrual modifications) Incomplete accrual accounting system: • No appropriate valuation rules • No management impact • IT-infrastructure in place • Some practical experience of staff with accruals Cost accounting: • Implementation in central units of the ministries from 2000 – 2005 • No steering function 4
  5. 5. Conceptual ideas for accruals inAustria Part of a comprehensive reform addressing the whole system and not only specific elements  focus in discussion on performance budgeting, relieved from discussion about accruals in general and in detail Pragmatic approach with long-term perspective: Systematic recording and appropriate valuation of assets Avoid hyper bureaucracy: Concentration on practical needs for steering the budget! Alignment with statistics (reduce duplication)  Convergence of Maastricht deficit and deficit in Austrian system 5
  6. 6. Reporting entities in the federalaccounting system Federal accrual system is obligatory for Federal Level: • Ministry of Finance • All line ministries • All federal agencies Separate reporting: • Regional level (9 provinces/states) • Local level (municipalities) • Off-budget corporatisations Efforts to develop an aligned framework for regional and local level 6
  7. 7. Accrual budgeting & accountingas of 2013 Operating Statement (~profit and loss statement) Statement of Financial Position Cash Flow (~Balance Sheet) Statement 7
  8. 8. Regulations for theaccounting systemStandard set of rules defined by the Ministry of Finance and the Court of Audit• Basis is laid in the Austrian Federal Constitution: true and fair view as new budgetary principle as of 2013• Main features of the accrual system are defined in the organic budget law, enacted by the Parliament• Details on the accrual system can be found in detailed regulations - Regulation on the opening balance sheet issued by the Ministry of Finance - Accounting regulation issued by the Court of Audit in consultation with the Ministry of Finance - Budget regulation issued by the Ministry of Finance in consultation with the Court of Audit 8
  9. 9. Standard settingAustria IPSAS is the reference standard Concentrate on Standards which are relevant for Austria SAP-standard as reference for best booking practices; reduce implementation complexity 9
  10. 10. Standards not applicableNumber Name ReasonIPSAS 10 Financial Reporting in Hyperinflationary Economies Austria: no hyperinflationary economy Mostly delegated to off- Budget Corporations: Austrian railways (ÖBB), federal real estateIPSAS 11 Construction Contracts management (BIG), ASFINAG (highway construction and operation) Not relevant: investment in property to earnIPSAS 16 Investment property rentals is minor in Austria No management of agricultural assets by theIPSAS 27 Agriculture federal administration 10
  11. 11. Deviating StandardsNumber Name Reason Consolidated and Separate Financial Full consolidation not by 2013, in a 3rd phase ofIPSAS 6-8 Statements/Investments in Associates/Investments the reform in Joint Ventures Simplicity: measurement by lower of cost principleIPSAS 12 Inventories (no options) Simplicity: measurement by acquisition costs (noIPSAS 17 Property, Plant and Equipment options) IPSAS: assets in respect of taxes are recognised Revenue from Non-Exchange Transactions (Taxes when taxable event occurs. Austria: taxIPSAS 23 and Transfers) recognition at cash basis, minor steering possibility Retirement benefits: no provision (reason:IPSAS 25 Employee Benefits Maastricht), but estimation of future benefits in the annex of the federal financial statement Simplicity: No activation of internally generatedIPSAS 31 Intangible assets intanglible assets 11
  12. 12. Asset valuationOpening balance sheet Buildings • Historical acquisition and production costs • If not available – 3 options • Overall refurbishment costs • Average construction costs of comparable buildings • Expert opinion if available • Straight-line depreciation Property • Acquisition and production costs • Asset accounting records used • Straight-line depreciation • Impairment 12
  13. 13. Asset valuation Heritage assets • IPSAS ED as reference • Recognition if acquisition costs are available or if • Expert opinion is available  If not: Registration in asset accounting without value and disclosure on aggregate level in final report 13
  14. 14. Asset valuationOpening balance sheet Subsidiaries and associated entities • More than 130 • Wide variety • Equity method • No full consolidation (later stage, 3rd phase of the reform) • IT tool for systematic data managementExamples:- unemployment service (AMS) – 100% - 134 Mio. € (2010)- ASFINAG (highway construction and operation) – 100% -1.871 Mio. € (2010)- University of Vienna – 100%- 151 Mio. € (controlling function) 14
  15. 15. Challenges of project managementand implementation Standard setting: • by Ministry of Finance, Court of Audit • Information of Parliament (specific parliamentary committee) Budget transition: • Use of non-cash elements (depreciation, provisions) as steering information is challenging for accountants at federal level Opening balance sheet: • Use of information of „old accounting system“ if existing • Specific problems: valuation of cultural heritage/historic buildings. Many paintings, pieces of art in the museums, many other historical sites (monuments, furniture, etc.) New accounting system: • IT-system is crucial! • Tests and concurrent operation in 2011 and 2012 (f.e. budgeted balance sheet) 15
  16. 16. Advantages of Accruals True and fair view established: Is the country poorer or richer than a year ago? Transparency: deeper insight of Parliament and public in federal finances: clearer picture where we stand Enhanced quality of public staff: To cope with the new system staff needs additional skills Helps better steering: As it is clear, where we stand, it‘s easier to identify the necessary steps to improve the financial state 16
  17. 17. Thank you for your attention! Contact address: Dr. Gerhard Steger Director General Directorate for Budget and Public Finance Austrian Federal Ministry of Finance Tel: +43 1 514 33 50 2000