The document summarizes government accounting and financial reporting reforms in Latin America. It discusses the evolution of reforms from initial macroeconomic stabilization to improved management of public resources and service delivery. While early reforms focused on budgeting, the 2008 crisis highlighted the importance of accounting and financial reporting. Most countries plan to modernize systems and adopt IPSAS on an accrual basis, motivated by increased transparency and accountability. Implementation faces challenges around resources, regulations and resistance to change. Regional support is needed for knowledge sharing and coordinated reforms.

1. Government Accounting and Financial
Reporting in Latin America:
The State of Public Finance
Victoria Renée Narváez Alonso, General Secretary, CGR, Chile
Svetlana Klimenko, Lead Financial Management Specialist, The World Bank Group
Paris, OECD, February 26-27, 2015

2. Evolutionof Reformsin LatinAmerica:
FiscalDisciplineandManagementofGovernmentFinances
Fiscal Position
Fiscal Stability
Fiscal
Sustainability
• Macroeconomic reforms of the mid-80s to
early 2000s
• Tackled structural and macro-fiscal issues and
helped to:
• Reduce inflation
• Control budget deficits
• Attract foreign direct investments
• Higher growth rates since 2003 (with
some interruptions) contributed to:
• Lower poverty rates
• Expanding middle class
• Greater demands for improvements in the
quality of public services
• Increased calls for transparency and
accountability
Initial reforms focused on macro-fiscal
stabilization.
Subsequent reforms shifted towards
management of public resources and
delivery of services.
This evolution of reforms in Latin America reflects the interdisciplinary approach needed for a
well-functioning state and underscores the importance of government credibility. 2
TheWorldBankGroup

3. Centrality of the Budget
The budget:
• Is a strategic link between
POLICIES and
IMPLEMENTATION.
• Allocates resources among
competing priorities.
“The budget is the single most
important policy document of
governments, where policy
objectives are reconciled and
implemented in concrete
terms.”
Source: OECD Best Practices for Budget
Transparency. • 9 countries
currently have
fiscal rules or
FRLs.
• All countries have
made changes but
reform in this area
remains
incomplete.
• 6 countries have
MTBFs but
others have
practices that
are consistent
with MTBFs in
place.
• 10 countries use
PB at the central
govt. level; 4
countries use it
in line
ministries.
Performance
Budgeting (PB)
and
Management
Initiatives
Medium-Term
Budget
Frameworks
(MTBF)
Fiscal Rules and
Fiscal
Responsibility
Laws (FRLs)
Integrated
Financial
Management
Information
Systems (IFMIS)
Evolutionof Reformsin LatinAmerica:
FiscalDisciplineandManagementofGovernmentFinances
Historically, reforms focused on the budgeting process given its importance. However, the
2008 global financial crisis highlighted a missing (neglected) piece in PFM reforms.
Focus of PFM Reforms in Latin America
3
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4. Accounting
and
Financial
Reporting
Financial
Statistics
Budget
Accounting and financial reporting are
the foundations of proper budgeting
and fiscal projections.
• Adherence to fiscal rules is largely nugatory
without accurate information.
• Unsustainable increases in expenditure likely
in absence of proper understanding of
available revenue.
• Unbudgeted liabilities could lead to fiscal
crisis unless contingent liabilities are
accounted for properly.
• Unrealistic economic projections arise with
incomplete information.
Evolutionof Reformsin LatinAmerica:
Missing(neglected)Piece:AccountingandFinancialReporting
GFS Manual 2014 “recognizes the close relationship
between guidelines for reporting GFS and accruals
based public sector accounting standards.”
“Information contained in
financial statements helps in
compliance with fiscal rules.”
Source: Cangiano et al. 2013.
Key Pieces of Fiscal Information
As was illustrated by the recent global financial crisis, often the importance of an item is
highlighted by the consequence of its omission.
4
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5. GlobalTrends:Harmonizationof StandardsANDProcesses
RelevancetoLatinAmericanReforms
FROM…
Lack of harmonization in preparing
government information
RISKS to Policy – and Decision Making
(e.g., debt, cost of capital, revenue)
Accounting
(IPSAS)
Budgeting
(OECD*)
Statistics
(GFS/SNA)
TO….
Convergence attempts at international
and regional (EU) level
• Ongoing convergence of standards to
improve fiscal transparency and minimize
risks (e.g., GFS/IPSAS).
• In the EU, the focus is on harmonization
of standards (EPSAS) AND processes
(EU Directive 2011/85 EU – Budgetary
Framework, “Sixpack” regulation).
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Different Standards, Practices, and Staff
* No international standards; OECD Best Practices.
GFSM 2014 & Current Reforms in Latin America
Statistics & Accounting Standards  ACCRUAL BASIS
Budgeting  CASH BASIS
Practices  Diverse and Inconsistent

6. The Survey
CurrentStateof
AccountingandFinancialReportingReforms
TheWorldBankGroup
6

7. Method
• Accountants General of 18 selected countries
(83% response rate).
• Argentina did not respond; Bolivia and Venezuela responded
only to Part 2.
• Self-assessment.
• Open and Close-ended questions.
• International Public Sector Accounting Standards (IPSAS) as
reference.
TheWorldBankGroup
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Part 1
Implementation
Progress of Reforms
Part 2
Current Reporting and
Accounting Practices

8. Survey Results Part1
ImplementationProgressofReforms
Accounting and Reporting Reform
TheWorldBankGroup
8
Basis of Accounting
All have plans to modernize their government accounting and
financial reporting systems, including:
• Adoption of IPSAS
• FMIS Updates
Nicaragua
Mexico
Panama
Uruguay
Brazil
Chile
Costa Rica
Dom. Rep.
Honduras
Paraguay
Peru
Colombia
Ecuador
El Salvador
Cash to modified accrual basis Cash to accrual basis IPSAS Modified accrual basis to IPSAS Different accrual bases to IPSAS

9. Perceived Benefits and Advantages of IPSAS Adoption
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Survey Results Part1
ImplementationProgressofReforms
0
2
4
6
8
10
12
Improve transparency and
accountability of governments
Harmonize accounting standards
Improve the quality of decision-
making
Strengthen fiscal sustainability
Provide complete information on
assets and liabilities
Standardize the information
Reflect the economic reality of
public bodies more reliably and
consistently
Facilitate comparison at the
international level
Provide reliable basis for audits and
financial control
Effective and efficient use of
resource
Improve perceptions in the market

10. Legal Framework and Adoption of IPSAS
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10
Strong preference for “indirect adoption” of IPSAS
Need to modify legal framework, but relatively simple
Implications for:
• Harmonization of accounting standards
in the public sector
• Comparability of financial statements
• Delays
Based on national law,
which complies with the
requirements of IPSAS
Survey Results Part1
ImplementationProgressofReforms
• Approximately equal divide between phased and “Big Bang” implementation approach

11. Survey Results Part1
ImplementationProgressofReforms: AretheDatesRealistic?
Country Progress Expected Year of First IPSAS
Financial Statements
Costa Rica 54% - 59% 2016
Dominican Republic Analysis Stage 2016
Peru 75% 2016
Honduras 35% 2017
Colombia 70% 2017
El Salvador 30% 2018
Uruguay Moderate 2018
Chile To begin in 2016 2019
Ecuador 10% 2019
Brazil Fair 2020
Mexico 10% 2020
Panama 20% 2021
Paraguay Analysis Stage Not stated
TheWorldBankGroup
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12. Perceived Obstacles and Disadvantages of IPSAS Adoption
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Survey Results Part 1
ImplementationProgressofReforms
0 1 2 3 4 5 6 7 8 9 10
Lack of trained personnel as agents of change
Need for change in the regulations (laws)
Ignorance of the importance of government accounting
Resistance to change
Prevalence of budget information
Shortage of local experts
Time and investment requirement
Associated costs

13. Priority Technical Areas for Implementation of IPSAS
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Survey Results Part1
ImplementationProgressofReforms
0 1 2 3 4 5 6 7 8 9
Employee benefits
Update or acquisition of computing platform
Tax revenue recognition
Contingencies and provisions
Transition to accrual accounting
Fixed asset management
Fixed and intangible assets

14. Modalities and Critical Areas of Support
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Survey Results Part1
ImplementationProgressofReforms
0
2
4
6
8
10
12
Peer review Training Opportunities to
interact with
peers or experts
Exchange of
expertise
Technical
Assistance
Preferred Support Modalities
In addition to technical areas, support is needed in: budget and
accounting integration, organizational restructuring, IFMIS, electronic
consolidation tools…

15. Main Messages Part1
ImplementationProgressofReforms
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There are incentives and strong pressure to adopt accrual
accounting standards.
Countries are motivated by the benefits of adopting IPSAS
but aware of the obstacles to successful implementation.
Further integration of fiscal statistics, budgeting
information, and financial accounting is important.
Accrual accounting standards minimize tendencies to work in
silos to reduce time and costs.

16. Scope of Financial Statements
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Survey Results Part2
Current ReportingandAccountingPractices
Compares the scope of currently prepared financial reports with the requirements
included in IPSAS 1 “Presentation of Financial Statements”

17. Coverage of the Financial Statements
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Survey Results Part2
Current ReportingandAccountingPractices
(i) Whole of
Government
(ii) General
Government
(central,
state and
local)
(iii) Central
Government
(iv) limited
entities
within the
Central
Government
8
1
6
1
Statement of Financial Position
(i) Whole of
Government
(ii) General
Government
(central, state
and local)
(iii) Central
Government
(iv) limited
entities
within the
Central
Government
7
1
6
1
Government entities included in the prepared financial statements
(Classification aligned with the GFSM 2001)
Statement of Financial Performance

18. TheWorldBankGroup
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Survey Results Part2
Current ReportingandAccountingPractices
(i) Whole of
Government
(ii) General
Government
(central, state and
local)
(iii) Central
Government
(iv) limited entities
within the Central
Government
4
1
6
1
Coverage of the Financial Statements (continued)
Statement of Cash Flow
• Costa Rica reports at the level of general government; Mexico reports at
the level of limited entities.
• No consistency of what should comprise government-controlled entities.
Government entities included in the prepared financial statements
(Classification aligned with the GFSM 2001)

19. Comprehensiveness and Classification of Information
Presented on the Face of Financial Statements
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Survey Results Part2
Current ReportingandAccountingPractices
Respondents overall follow the recommendations of IPSAS 1.
Areas requiring attention:
i) Fixed and intangible assets, deferred and other assets and liabilities, financial
instruments, pensions, and other post-employment liabilities (Statement of
Financial Position). “Other” categories are used as a “parking space.”
ii) Transfers, own revenues, non-budgetary transactions, and grants paid
(Statement of Financial Performance).
iii) Payments made by third parties on behalf of the government and
classification of cash flows by operating, investing, and financing activities
(Cash Flow Statement).
iv) Segregation of amounts related to property revaluation, foreign exchange
differences, and investment revaluations (Statement of Changes in Net
Assets).

20. Notes to the Financial Statements
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Survey Results Part2
Current ReportingandAccountingPractices
Notes to Financial Statements
16 15
11 11
12
13
6
12
16
12
9
11
3

21. Accountability and Transparency
TheWorldBankGroup
21
Survey Results Part2
Current ReportingandAccountingPractices
0
3
6
9
12
15
Published Financial
Statements
SAI Issued Opinion FS Include SAI
Opionion
13
10
6
Existing disclosure practices with respect to financial information and external audits
Of nine issued opinions, two are unqualified; five are qualified; one is
a disclaimer; and one is a negative opinion.

22. Recognition and Measurement of PPE
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Survey Results Part2
Current ReportingandAccountingPractices
• Simultaneous use of the fair value and cost as measurement method poses a
question about the underlying policy.
• Only 9 countries systemically recognize depreciation.
Cost at Acq. Fair Value at
Acq.
Both Meas.
At Acq
Cost at Post-
Acq
Fair Value at
Post-Acq
Both Meas.
At Post-Acq
Neither at
Post-Acq
16
9
8 8
6
4
7

23. Recognition and Measurement of Tax Revenue
TheWorldBankGroup
23
Survey Results Part2
Current ReportingandAccountingPractices
Definition of a taxable event for three key taxes:
• Income Tax: 14 countries - “earning of assessable income during the taxation
period by the taxpayer”
• Value Added Tax: 15 countries - “the undertaking of taxable activity during the
taxation period by the taxpayer”
• Property Tax: 12 countries - “passing of the date on which the tax is levied, or
the period for which the tax is levied”
However, at the moment, tax revenue is measured and recognized in:
• 8 countries at the time of actual cash collection (Dominican Republic, Ecuador,
El Salvador, Guatemala, Honduras, Mexico, Paraguay, and Venezuela).
• 4 countries in the tax returns presented by the taxpayers (Chile, Colombia,
Nicaragua, and Peru).
• 8 countries disclose their policies for the recognition and measurement of tax
revenue in the Notes, and 6 countries recognize the advance payment of taxes
as an asset with the respective liability.

24. Types of Employee Benefits Included in Financial Statements and
Approach Used to Measure the Value of the Defined Benefit Pension Plans
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Survey Results Part2
Current ReportingandAccountingPractices
• 4 countries use both Defined Contribution and Defined Benefit Plan.
• 3 countries (Colombia, Costa Rica, and Peru) determine the present value of
Defined Benefit obligations and fair value of assets, using actuarial
assumptions.
Wages, Salaries,
Annual and
Sick Leave
Social Security Defined
Contribution
Plan
Defined Benefit
Plan
Post-employm.
Ins. & Med.
Care
Termination
Benefits
16 16
7
4
6 5

25. Conclusions
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Analysis of the survey results shows:
• Similarities in the challenges faced, from application
and compliance with technical standards to adapting
and integrating systems and processes.
• Universal need to better-understand, document,
and optimize links connecting financial reporting,
budgeting, and fiscal reporting processes.
Solutions will require engagements at both the country and regional levels:
• Country level: To harmonize laws, regulations, policies, and procedures to
enable implementation across different levels of government.
• Regional level: To facilitate knowledge sharing and dissemination, and deepen
collaborations to identify common, cost-effective solutions.

26. Conclusions
TheWorldBankGroup
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In tandem with the reforms taking place in countries, a few areas merit
further attention:
• How does the introduction of accrual accounting impact the budgeting
process and the preparation of GFS?
• What role can government internal and external auditors play in the reform
process?
• While anecdotal evidence points to linkages between greater transparency
and accountability and improved service delivery, how can this correlation
be better understood and documented?
A starting point would be systematic documentation and dissemination of:
• Individual country approaches to adoption and implementation of accrual
accounting or IPSAS
• Analysis and use of applicable international experiences and practices
• Coordination of the on-going and planned accounting and financial reporting
reforms at the regional level.

27. División de Análisis Contable
Área o Unidad
IPSAS ADOPTION IN CHILE

28. Local context today
 The General Comptroller Office (Contraloría General de la
República or “CGR”) is in charge of setting the national
accounting standards.
 Public sector entities register their accounting information
according to a national standard, but they do not present
financial statements.
 CGR adds the information in a report where it is presented in
four separate sectors: Central Government; Municipal Sector,
State Higher Education Institutions; and Government
Business Enterprises.

29. Benefits
 There will be more complete information about assets
and liabilities of public entities.
 The adoption of IPSAS will increases the transparency
and the accountability of the financial administration.
 IPSAS delivers new and more accurate information
for the decision making process.

30. Strategic decisions for IPSAS adoption
8. Partnership with the Ministry of Finance
4. Codesign of the new standard with public sector entities between
the years 2011 an 2014
1. Gradual implementation by sectors
3. Indirect adoption of IPSAS through the issue of a new national
standard
5. Collaboration from universities and audit firms as revision groups
9. Use of a transitional period for the first-time adoption of IPSAS in
accordance with IPSAS 33
6. Dissemination and training programs lead by CGR, universities and
audit firms
7. Modify the existing information systems
2. Adopt all IPSAS simultaneously

31. CGR issued
resolution with
the national
standard for
the indirect
adoption of
IPSAS
Begins the
application of
the new
standard
Presentation
of non
comparative
transitional
financial
statements.
Presentation
of
comparative
transitional
financial
statements
Presentation
of the first
IPSAS financial
statements
Implementation chronogram in the Central Government