This presentation was made by Pal Longva, Norway, at the 36th Annual Meeting of OECD Senior Budget Officials held in Rome on 11-12 June 2015.

1. Norwegian Ministry of Finance
Accrual Budgeting
Is it time to let it go and move on?
Director General Pål Longva
Rome 11-12 June 2015

2. Norwegian Ministry of Finance
Slow development towards accrual
budgeting
According to OECD 2015 survey, accrual
budgeting is introduced in 10 of 38 countries
• Only 3 of these 10 countries have adopted
full accrual
• 4 countries have excepted public service
pensions
• 4 countries have excepted capitalization of
investments
11 - 12 June 201536th Annual Meeting SBO

3. Norwegian Ministry of Finance
Fast development towards accrual
financial reporting
25 of 38 countries have adopted accrual in financial reporting
…….but still 8 countries have excluded public service pensions in
their financial reporting
The need to create a full overview of the financial position and
fiscal risks may explain this development in financial reporting
This need is not related equally to budgeting.
11 - 12 June 201536th Annual Meeting SBO

4. Norwegian Ministry of Finance
What are the problems accrual
budgeting shall solve?
One serious problem with cash budgeting;
accumulation of future costs is not fully presented:
• Financial costs may be manipulated
• Future provisions such as PPSs are not shown
• Loan and guarantee programs
11 - 12 June 201536th Annual Meeting SBO

5. Norwegian Ministry of Finance
Is introducing accrual budgeting
increasing or solving the problem?
Do we create new problems to solve the old?
Accrual budgeting introduces:
• Unreliable estimates for future costs of pensions
schemes as a part of this year’s appropriations?
• Authorizations for non-cash appropriations
• Costly records of fixed assets which not really
affect our decisions. It is nice to have, but the
benefits may be low.
11 - 12 June 201536th Annual Meeting SBO

6. Norwegian Ministry of Finance
What alternatives to accrual
budgeting do we have?
Introduce solutions for the specific problems we have and solve
them separately
Such simple solutions may be:
• introducing accrual where it is needed (interest payments
as an example)
• creating funds through cash appropriations for future
expenses when the liabilities are created.
Accrual budgeting is difficult to understand. Using cash we:
- keep the budget information easily accessible for the
legislature and the public.
- focus the budget on authorization of spending, included
appropriations for investments.
11 - 12 June 201536th Annual Meeting SBO