EPSAS WG Meeting November 21st

Transcription

1 EPSAS WG Meeting November 21st AGENDA ITEM 8 Report on methodology for the measurement and monitoring of the transparency of public sector financial reporting in the Member States

2 1. Introduction September 5th - Progress Meeting 2

3 Introduction (1/2) The EC emphasised the need for more rigorous and transparent reporting of fiscal data Eurostat is in charge of monitoring the quality of the fiscal indicators reported by MSs in the context of EPSAS Eurostat contracted to build a methodology for measuring the main aspects of public financial reporting transparency 3

4 Introduction (2/2) 4

5 2. Definition of the notion of financial reporting transparency September 5th - Progress Meeting 5

6 2.1. Financial reporting transparency as an essential aspect of public transparency Public transparency Citizen information Accountability of public decisionmakers General purpose financial reports (GPFRs) must provide adequate information to fulfil their users needs Public financial reporting transparency Financial information on public entities For accountability of public decisionmakers and decision-making of users 6

7 2.2. Financial reporting transparency as a means to satisfy the needs of the users of GPFRs (2/2) Information provided by GPFRs Financial position Financial Performance Liquidity and solvency Budget information and compliance with legislation Achievement of service delivery objectives Prospective financial and nonfinancial information Use of this information by different users for accountability and decision-making processes Lenders, Creditors, Donors Legislative bodies and other similar bodies: Advocacy groups, bond rating agencies, credit analysts, public interest groups Regulatory and oversight bodies, statisticians Citizens 7

8 2.3. Financial reporting transparency as a combination of qualitative aspects IPSAS CF IMF s fiscal transparency code s perspective 7 qualitative characteristics of GPFRs permit to fulfil their users 'needs Applied at the level of individual governments/reporting entities Financial reporting as the 1st pillar of the Code of fiscal transparency Applied at the level of the public sector as a whole = MSs as a whole Efforts must be made to make the data contained in GPFRs accessible and useable Less than 1 in 5 Europeans say they are sufficiently informed about public finances ( and ICAEW, 2014) 8

9 2.4. From a theoretical definition to practical indicators A theoretical definition of financial reporting transparency Sources Comprehensiveness (coverage) Comparability Qualitative aspect inspired by the IPSAS CF Qualitative aspect inspired by the IMF s code Consistency Faithful representation Verifiability Qualitative aspect inspired by s perspective Timeliness Frequency Understandability Relevance Accessibility 9

10 2.4. From a theoretical definition to practical indicators Identification of measurable qualitative aspects for the construction of indicators (1/2) Only measurable qualitative aspects of FRT are meant to be a basis for the definition of practical indicators. 3 criteria to select measurable qualitative aspects : absence of excessive complexity(1), absence of excessive subjectivity (2), absence of redundancy (3) From 10 theoretical aspects (cf previous slide) to 7 measurable qualitative aspects (cf next slide) of FRT 16 indicators to measure these 7 measurable qualitative aspects (8 indicators for reporting entities, 8 for Member States as a whole) 10

11 2.4. From a theoretical definition to practical indicators Identification of measurable qualitative aspects for the construction of indicators (2/2) 11

12 2.4. From a theoretical definition to practical indicators Institutional scope and focus of indicators Types of indicators Reporting entity (E) indicators Member State (MS) indicators Institutional scope Any reporting entity defined by national legislation and included in the general government sector (as defined by ESA onwards), except the general government sector as a whole defined as a single reporting entity by national legislation. The general government sector as a whole (as defined by ESA onwards). 12

13 2.4. From a theoretical definition to practical indicators Generic content of indicators Relevance for the measurement of a measurable aspect of financial reporting transparency Explanation on why this indicator is relevant to measure a given measurable qualitative aspect of financial reporting transparency. N.B: To reflect the dimension of financial reporting transparency that each indicator is meant to measure, each table has the same colour as this dimension of financial reporting transparency such as it appears in Figure 2 (section , page 9). Sources Construction Limits List of the sources necessary to build the indicator. Values 0 (Low) 1/1.5 (Intermediate) 2 (High) 3 (Advanced) Description of what the value of indicator E(x) or MS(x) reflects. Explanation of the content of the Values table (definition of some notions if applicable). Description Explanation of the possible limits of the indicator (if applicable). Description of the situation in which a value of 0 (if applicable) is given to the indicator. Description of the situation in which a value of 1 or 1.5 is given to the indicator. Description of the situation in which a value of 2 (if applicable) is given to the indicator. Description of the situation in which a value of 3 is given to the indicator. 13

14 3. Section 3 : Definition of practical indicators September 5th - Progress Meeting 14

15 3.1. Indicators of comprehensiveness Reporting entities Indicator E1: Index of compliance with paragraph 21 of IPSAS 1 IPSAS 1 defines 6 financial statements which constitute a complete set of financial statements. How many are published by the entity? Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) 0 statements published 1 or 2 3 or 4 5 or 6 Member States Indicator MS1: Rate of expenses reported on an accrual basis of accounting in the general government sector Value 0 (Low) Value of 1.5 (Intermediate) Value of 3 (Advanced) No more than a third ( 33%) More than a third (>33%) and up to two thirds ( 66%) More than two thirds (>66%) Indicator MS2: Level of consolidation of accounts in the general government sector Are consolidated statements of financial position and performance published for one or several subsectors of general government defined by ESA 2010? Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) For 0 subsectors For 1 subsector For at least 2 subsectors 15

16 3.2. Indicators of comparability (1/2) Reporting entities Indicator E2: Legal scope of application of accounting standards How many other entities legally apply the same accounting standards as the reporting entity i.e., what is the legal scope of application of the accounting standards of the reporting entity? Value 0 (Low) Value of 1.5 (Intermediate) Value of 3 (Advanced) Same subsector of government in a MS Several subsectors of government in a MS 1 or several other national jurisdiction(s) Indicator E3: Compliance of financial statements with IPSAS 1 concerning comparative GPFSs According to the legal requirements in place for the entity, how many of the 4 relevant financial statements listed by paragraph 53A of IPSAS 1 have to include comparative information regarding the preceding budgetary period? Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) At least 3 16

17 3.2. Indicators of comparability (2/2) Member States Indicator MS3: Legal scope of application of the most widespread set of accounting standards in the general government sector Is there a set of accounting standards covering at least 50% of the expenses of the GG sector? If so, how many different entities share this set of standards i.e. what is the legal scope of application of this set of standards? Construction Set of standards covering at least 50% of the expenses of the GG sector? Legal scope of application of this set of standards Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) No Yes Yes Yes - 1 subsector of government in a MS Several subsectors of government in a MS 1 or several other national jurisdiction(s) Indicator MS4: Compliance of financial statements with IPSAS 1 concerning comparative financial statements in the general government sector What is the % of expenses of the GG sector reported in financial statements required to comply with paragraph 53A of IPSAS 1 regarding the publication of comparative information for the previous period? Value 0 (Low) Value of 1.5 (Intermediate) Value of 3 (Advanced) No more than a third ( 33%) More than a third (>33%) and up to two thirds ( 66%) More than two thirds (>66%) 17

18 3.3 Indicators of verifiability Reporting entities and Member States Indicator E4 (and MS5): Type of financial audit carried out on financial statements (in the general government sector) Construction of E4 Reporting entity subject to mandatory independent audits? Compliant with national/regional/ local/sectorial standards? Construction of MS5 At least 50% of expenses subject to mandatory independent audits? Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) No Yes Yes Yes Idem - Yes Yes Yes Audit opinion? Idem - No Yes Yes Compliant with international standards? Idem - No No Yes 18

19 3.4. Indicators of timeliness and frequency (1/2) Reporting entities Indicator E5 : Frequency of publication of financial statements within a year How frequently is the reporting entity legally required to publish financial statements within a year? Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) Not legally required to publish FSs Annually On a semi-annual and/or quarterly basis On a monthly basis Indicators E6 : Timeliness of the publication of financial statements According to IPSAS 1, an entity should issue its financial statements within six months of the reporting date. Is the entity required to publish annual audited and unaudited FSs 6 months after the end of the year they refer to? Value 0 (Low) Value of 1.5 (Intermediate) Value of 3 (Advanced) Neither unaudited nor audited FSs Either unaudited or audited annual FSs Both annual unaudited and audited FSs 19

20 3.4. Indicators of timeliness and frequency (2/2) Member States Indicator MS6: Frequency of publication of financial statements within a year in the general government sector Construction of MS6 At least 50% of the expenses required to be published in financial statements? How frequently must these financial statements be published? Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) No Yes Yes Yes - Annually On a semi-annual and/or quarterly basis On a monthly basis Indicator MS7: Timeliness of the publication of financial statements in the general government sector Description Value 0 (Low) Value of 1 (Intermediate) Value of 3 (Advanced) At least 50% of the expenses required to be published in FSs? Annual unaudited FSs required to be published within 6 months? No Yes Yes - Yes Yes Annual audited FSs required to be published within 6 months? - No Yes 20

21 3.5. Indicators of understandability and accessibility Reporting entities and Member States Indicator E7: Availability of explanatory information about financial statements Value 0 (Low) Value of 1.5 (Intermediate) Value of 3 (Advanced) Not provided at all Provided by the reporting entity or (an) official external source(s) Provided by the reporting entity and (an) official external source(s) Indicators E8 and MS8: Online accessibility of GPFRs and other complementary information (about the general government sector) Construction Value 0 (Low) Value of 1 (Intermediate) Value of 2 (High) Value of 3 (Advanced) Publication of GPFRs (for the general government) online? No Yes Yes Yes Complementary information? - No Yes Yes Content made more accessible by visualisation devices/tailored reports? - No No Yes 21

22 4. Section 4 : Application of indicators September 5th - Progress Meeting 22

23 4. Application of indicators 23

24 4.1. Data collection and definition of the value of indicators Financial statements/reports and websites publishing them Questionnaires sent to public sector accounting standards setters Questionnaires sent to public sector auditing standards setters Data sets and/or aggregates published by statistical offices E indicators E and MS indicators E and MS indicators (audits on FSs) MS indicators 24

25 4.2. Aggregation of indicators and definition of a financial reporting transparency score Reporting entity (example) Indicator Value E1: Index of compliance with paragraph 21 of IPSAS 1 2 Aggregation of the value of indicators = 16/24 E2: Legal scope of application of accounting standards 2 E3: Compliance of financial statements with IPSAS 1 concerning comparative financial statements 1 Financial reporting transparency score of the entity (%) 66.6% 25

26 4.3. Definition of a maturity level of financial reporting transparency Example of a 66% FRT score (cf. previous slide) 26

27 Any questions?