This presentation was made by Caroline Aggestam Pontoppidan, Copenhagen Business School, at the 15th Annual OECD Public Sector Accruals Symposium held in Paris on 26-27 February 2015.

1. Comparing the use of consolidated public sector accounts

2. Danny Chow (Durham University, UK)
Ronald Day (University of Sydney, Australia)
Caroline Aggestam (Copenhagen Business School, Denmark)
Raili Pollanen (Carleton University, Canada)
Rachel Baskerville (Victoria University Wellington, New Zealand)
Comparing the use of
consolidated public sector
accounts

3. Outline
• Understand how and who uses consolidated
public accounts across the selected case-
countries
Focus
• Comparing the use of consolidated public
sector accounts in five countries: UK,
Australia, New Zealand, Canada and Sweden
Scope
• Qualitative methods and document reviews
• 2014/2015
How &
When
This presentation presents the high-level indicative findings
of the study

4. Focus
• The focus of the study: Understand how, why,
when and by whom consolidated public sector
accounts are used.
• The use of accounting information can be related to
internal and external users.
• In the public sector, external users are primarily
emphasizing the control function of accounting, while
internal users, in addition to that, could benefit from
using accounting information as an input in various
decision making processes.

5. How?
Research methods
• Previous research on the use of accrual accounting information in the
central government in Sweden showed that our understanding of
the use of accounting information is closely related to the
research method that is chosen (cf. Paulsson, 2006).
• Example: In survey studies in Sweden it had been indicated by the
respondents that accrual accounting information was not used to a
large extent.
• However, research has shown that the interview study, provided
more subtle dimensions of the concept of use and it became
evident that accounting information actually was used, although
not in the most conventional meaning.

6. How can we understand ‘use’?
Indirect
use
Direct use
Diagnostic
use
Interactive
use

7. The starting point
• Reviewing how consolidations are done
across the case countries
• Finding: Consolidation practices differs in
each of the included countries

8. UK
Central Govt
Local Govt
Public
Corporations

9. Australia
Common
wealth
NSW
Local
Gov
VIC
Local
Gov
QLD
Local
Gov
WA
Local
Gov
NT
Local
Gov
SA
Local
Gov
TAS
Local
Gov

10. New Zealand
Central Govt
Local Govt

11. Canada
Federal
States & Territories
Local

12. Sweden
Central Govt
Local Govt

13. High level conclusions
• International variation
• Dependent on ‘organisation’ of government
• Local Solutions / Adaptations

14. Indicative findings per case country

15. UK
• Still primarily prepared as a statutory requirement and
consequently only limited use by a small coterie of interested
individuals who use WGA as a platform for broader discussions
over the government's management and accountability for public
finances.
• Scepticism about how useful WGA is, in part due to audit
qualifications on some entity accounts and lack of timely
publication.

16. UK
• Some evidence that WGA is being used at the periphery for
thinking about policy implications on taking on more debt.
Recognised that WGA presents a sound picture of debt.
• Also it has been noted that Office for Budget Responsibility
making use of WGA to forecast ahead
• It was highlighted that the accounts are written from the
perspective of an accountant, so this precludes many non-
specialist

17. UK
• WGA as a catalyst to persuade government departments to do
better accounting to improve internal decision making and external
accountability
• Credit rating agencies use WGA to a limited extent
• Treasury highlighted the value of WGA over national accounts
especially around assets and liabilities; noted that WGA also helps
to improve the evaluation of fiscal risk

18. Australia
• Key Treasury/Finance staff and politicians indicated only a vague
understanding of the rationale and reporting frameworks
• Politicians have no training on reading and understanding WGA
reports (Little to no training or background given, except on the
job training)
• However…

19. Australia
Participants agreed that WGA reports have some benefits for
‘users’
• WGA reports include a balance sheet which provides more
recognition of future problems not just current problems this year.
• In Australia, it enables a set of financial statements to be
prepared that broadly incorporate both the statistical and
accounting requirements
• However…

20. Australia
General agreement among participants that there is a relatively
low use of WGA reports partly because they are not user
friendly or accessible
• CFS (WGA) is more specific purpose than general purpose
reports.
• There is not much interest in them from the point of view of
the public, with very little to no attention in the press about the
CFS (WGA) reports
• There is little to no discussion on the balance sheet side of
the financial report

21. Australia
• Focus of parliamentarians and other interest groups is on the
budget numbers rather than the WGA accounting numbers;
• Credit ratings are a key driver for Governments, but credit rating
agencies use WGA info in a small category and proportion of their
assessment

22. Canada
• It was identified that the implementation of accrual accounting is seen
as the single (or the only) most important accounting/financial reporting
initiative in many decades.
• Another recent significant development was a requirement to establish
departmental audit committees, which brought additional independent
oversight over departmental financial reporting and management.
• Consolidated government-wide financial statements are seen by most
participants only as an external accountability tool for complying with
legal and professional requirements.

23. Canada
• Departmental plans and priorities reports and departmental
performance reports are major accountability tools to Parliament.
Consolidated government-wide financial statements do not reportedly
play a major role for such purposes.
• Different information needs of different stakeholders were expressed
by most participants. Nonetheless, all participants agreed that
financial accounting and reporting in Canadian governments has
improved greatly in the past decade at all levels.

24. Canada
• Specific users of consolidated government-wide financial
statements were difficult to identify and verify. For example,
several individuals, even those referred to by others as experts or
potential major users, did not seemingly consider themselves as
experts.

25. Sweden
• User perspective integrated from the very beginning of the
adoption of accrual accounting in the public sector
• Co-operation with academia during the adoption of accrual
accounting at the local level (accrual accounting was first adopted
at the local level and later at central government level)
• Consolidation was not seen as a separate ‘wished for’ target – it
was more a side product that came out of the adoption of accrual
accounting
• For most users the consolidation in two tiers (central /local) make
more sense than WGA

26. Sweden
• Users see the timeliness of the consolidated accounts as a key
factor. In Sweden central government consolidated accounts are
released within 4 months of year-end. This was seen beneficial in
terms of enabling use of the accounts.
• Finance-committee as a standard practice considers the
consolidated financial statements at its June meeting every year

27. Sweden
• Finance committee plays an imperative role in the ‘use’ of the
consolidated accounts. Outside the finance committee few
considered themselves able to read an understand the
consolidated accounts of central government
• Even though there was a consensus among users that the
accounts were used, some respondents elaborated that they still
were used only at the minimal level in comparison with for
example budget

28. Direct
• Finance committee / Parliamentarians
• Treasury
• External (e.g., Credit Rating Agencies)
Indirect
• Catalyst for Change
Summarising Thoughts

29. • The notion of Use is subjective and highly dependent on
how/why/by whom that is considering ‘use’. Conceptualise
the concept of ‘use’ may assist the process
• From, for example, the preparers and auditors, it was
observed across the countries that WGA is useful as it
helps to catalyse other laggard organisations within
government / public sector to do better accounting and also
to professionalise the accounting service within government
/ public sector to do better accounting and also to
professionalise the accounting service.
Summarising Thoughts

30. • Other users would, for example, consider of the use of
WGA as a platform for broader discussions over the
government's management and accountability for public
finances, but saw factors as the user-friendliness and
timeliness as obstacles for use
Summarising Thoughts

31. Summarising Thoughts
• Governments need to consider how consolidated accounts
(if prepared) can be used to strenghten fiscal transparency
and accountability
• Consider training and education on the use of consolidated
accounts
• Join up planning, annual budgeting and year end reporting
information rather than treating as separate exercises

32. Summarising Thoughts
The consolidated reports across the countries can be
improved
For example:
• producing a summary form (eg. In UK tried to do a 4 page
report)
• demystify them by simplifying them and making them
understandable to the public (and politicians) rather than just a
few people
• Having some forward looking information if you are looking at
risk is important and a bit of economic impact of any big
expenditure items to happen in the immediate future, if not
longer term
• Different levels of information that modern technology now
allows