EUROPEAN COMMISSION EUROSTAT. Task Force EPSAS Governance Main points from the second meeting, 13 February 2014 in Luxembourg

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1 EUROPEAN COMMISSION EUROSTAT Directorate C.TF.EPSAS TF EPSASG 14/02 Task Force EPSAS Governance Main points from the second meeting, 13 February 2014 in Luxembourg BECH Building, Room QUETELET DRAFT 1. Introduction/ approval of the agenda The agenda and the main points from the first meeting were approved. Eurostat expressed its gratitude to the members of the Task Force, from Germany (Land Hessen), Finland, Italy, Austria and the Netherlands, who, following the first meeting, had contributed to the final elaboration of the public consultation paper, in particular the section on governance principles. Eurostat hoped that their contributions would also serve as an example of the cooperation to establish with Task Force participants and the future EPSAS Working Group. 2. Public consultation on future EPSAS governance principles and structures Eurostat presented a statistical overview of the responses received to the EPSAS governance public consultation up to 7 February The public consultation would be open until 17 February These first tentative results showed the strong interest of German local government authorities in the EPSAS project. 3. Evaluation of the IAS Regulation DG MARKT presented the on-going work for the evaluation of the IAS regulation. The purpose of this evaluation was, taking in consideration the objectives of the legislation, to check if the objectives were met and if they were still valid. The evaluation should be presented by the end of For conducting the evaluation of the IAS regulation a contractor would survey companies regarding their views of the standards and their validity. It was planned to seek the views of public administrations via a questionnaire to be filled in by the Member States regarding the 10 years of implementation of the regulation. Furthermore DG MARKT plans to organize other activities such as round-tables, and to hold a wrap-up conference to discuss the results of the evaluation. DG MARKT explained that the Commission had welcomed the so-called Maystadtreport of October The purpose of the report was to structure the IFRS adoption 1

2 process in the EU also with a view to enhancing the European contribution to the IASB. Mr Maystadt had been called to assist by DG MARKT with the implementation of his proposal aimed at reinforcing the structure and the accountability of EFRAG towards public authorities along the lines of option 1 in the Maystadt-report 4. State of play on IPSAS governance review IMF, in its capacity as co-chair of the review group, was invited by Eurostat to present the public consultation paper concerning the future governance & oversight of IPSASB. Three options were put forward by the review group: Extending the scope of the IFRS Foundation s Monitoring Board and Trustees activities Establishing separate monitoring and oversight bodies for the IPSASB while it remained under the auspices of IFAC Re-establishing the IPSASB outside of IFAC with its own monitoring and oversight bodies The IPSASB reiterated the importance of governance and oversight for the credibility of its work and welcomed the proposals put forward by the review group, outlined previous debate on the issue and stressed the need to resolve the governance issue as soon as possible. Eurostat also stressed the importance of governance and oversight issues, not only from an EPSAS perspective but also for the Commission as a preparer of IPSAS compliant consolidated financial statements. The deadline for the submission of responses was 30 April 2014 and Eurostat encouraged the Task Force participants to contribute to the public consultation via the OECD website. 5. Discussion of governance issues for the proposed Commission Communication The expected structure of the Communication and SWD Eurostat outlined the planned table of contents of the Commission Communication on EPSAS. The Communication would be accompanied by a Staff Working Document providing a preliminary impact assessment. The Communication was planned to reiterate key points of the Commission report on the suitability of IPSAS discuss potential impacts and further elaborate on costs and benefits describe the main elements of EPSAS explain objectives, legal basis, governance, and standard-setting identify issues needing further analysis draw conclusions Comments, questions and main issues seen in the public consultation 2

3 Eurostat reviewed the main aspects and options outlined in Eurostat s public consultation paper. The discussion focused on the role of the proposed EPSAS Governance Advisory Board, the organisation of the technical/drafting work, and above all on the role and powers of Member States in the decision-making process for EPSAS standard-setting. Some delegates expressed the view that the final standard-setting decisions should remain with the national standard-setters and outlined the idea of a standard-setting committee managed exclusively by the Member States. One delegate suggested working with the instrument of basic legal acts only; some others suggested that EPSAS standard-setting could be a one off-exercise, with all relevant standards in a single basic act, at least for the start of EPSAS. It was agreed that a separate session would be organised at the next TF governance meeting in order to provide more information and background on EU Comitology procedures as amended following the Lisbon Treaty. It was also suggested that, for better understanding, the creation of a schema showing the flow of the standard-setting procedure in practice would be helpful. The stability of the future suite of EPSAS standards, in particular with respect to revisions, was an important issue for many delegates, also by reference to the planned review of existing IPSASs, whether made as a consequence of maintaining its relationship to IFRSs or as a consequence of the conceptual framework for IPSAS currently being developed by IPSASB. The degree of detail of the future EPSAS standards and their potential impact on existing IT systems and Charts of accounts, if and where this might be necessary in order to ensure the public sector accounting systems generate the accrual data that are necessary for ESA purposes were also raised as issue. In this context the French delegation stressed that its IT system had cost around 1 billion euro over ten years. In particular the French delegation restated their position from the previous day meeting of TF Standards that they were strongly opposing any reference to IPSAS in a legal text, in which case they would rather opt for a set of core principles and key definitions, leaving it to the Member States to define their own public sector accounting standards. Eurostat explained that, as outlined in the Commission report, it was in favour of a principled approach to developing EPSAS with an agreed core set of European public sector accounting principles guiding the development of individual standards. Eurostat reminded the Task Force delegates that TF EPSAS Governance was an informal think-tank, the purpose of which was to assist the Commission (Eurostat) in developing its ideas rather making decisions at this early stage of the preparation process. Eurostat stressed that the decision-making process would start at the time when the first draft legal act would be put forward by the Commission. Some delegates, in particular the German delegation, raised the issues of subsidiarity, proportionality and the legal basis of EPSAS. Some delegates expressed the view that EPSAS were in fact about statistics and thus did not have a sufficient justification, and that if EPSAS was about accounting it should be left to accountants and national standard-setters. 3

4 Eurostat clarified that no matter which Commission service was leading the work on the EPSAS project, EPSAS was about a Commission initiative being developed on the grounds of the EU Treaties. The IPSAS assessment report invited by the Budgetary Frameworks Directive 2011/85/EU was considered as a necessary step of reflection before embarking on an EU-wide accruals reform of public sector accounting systems. The Directive recognised that complete and reliable public sector accounting practices, for all sub-sectors of general government, were a precondition for the production of comparable high-quality statistics and financial reporting more generally. Eurostat clarified that in its view Art 338 TFEU on statistics offered an appropriate legal basis for project, which, in addition, did not constrain the scope of EPSAS standards to a single policy objective and at the same time guaranteed the EPSASs would be binding and applicable in each Member State, for all sectors of general government, without exceptions, unless they would be put in place for example for smaller and less risky public entities. As there were many valid reasons for the project, in Eurostat s view, the EPSAS framework regulation should also refer to other Treaty provisions, each of which could potentially also offer a sufficient legal basis either individually or in combination. The IPSAS assessment report also argued that the diversity of public sector accounting systems implemented in the Member States, and the pace of implementation of national reforms, clearly suggested that EU action was necessary. EPSAS are aimed at ensuring EU-wide comparability with respect to public sector accounting and financial reporting and not to go beyond what is considered as necessary in order to achieve this objective. The Commission proposed, for instance, that the potential benefits of budget accounting reforms, such as accruals budgeting, should be left to the discretionary powers of the Member States. On the question whether, according to Eurostat s EPSAS governance proposal, private sector representatives would have voting rights on the future EPSAS standards, Eurostat clarified that according to the law-making and Comitology procedures in place this did not seem legally possible. In fact the role of the proposed EPSAS Technical Advisory Group was to ensure input and due consideration of stakeholders views in the standard setting process, while the role of the proposed EPSAS Governance Advisory Board was to monitor compliance with the proposed good governance principles. However, the representation of State and Local government level should be given due consideration in the standard setting process. Furthermore, Eurostat also clarified that if EPSAS were to be applicable in future to the Commission s own accounting and financial reporting system the European Court of Auditors would need to be consulted. 6. Any other business Eurostat considered convening the next meeting of TF EPSAS Governance provisionally on 27 or 28 March Depending on the contributions received after the meeting from participants to the TF EPSAS Standards meeting, Eurostat could also consider organising a TF EPSAS Standards back-to-back with the next meeting of TF EPSAS Governance. 4

5 ANNEX TF EPSAS Governance, 13 February 2014, Participant List Austria: Bernhard Schatz (Ministry of Finance) Belgium: Bart Menschaert (Ministry of Finance) Czech Republic: Michal Svoboda (Ministry of Finance) Croatia: Ivana Jakir Bajo (Ministry of Finance) Cyprus: Demetris Mavrommatis (Treasury of the Republic of Cyprus) Denmark: Erik Hammer (Agency for the Modernisation of Public Administration) Finland: Juha Halonen (Ministry of Finance), Niko IJAS (Ministry of Finance), Jaakko Eskola (Court of Auditors) France: Danièle Lajoumard (Ministry of Finance), Stéphanie Ledoux (Ministry of Finance), Isabelle Collignon-Joffre (Ministry of Finance) Germany: Martin Korczak (Ministry of Finance), Ralf Olheide (Court of Auditors), Jan Finken (Ministry of Finance), Jutta Kalabuch (Ministry of Finance), Jens Hamer (Court of Auditors) Hesse (German Federal State): Dr. Anja Ranscht-Ostwald (Hessian Court of Auditors) Hungary: Judit Adácsi-Horvathne (Ministry for National Economy), Petra Birkas (Ministry for National Economy) Italy: Marcello Bessone (Ministry of Economy and Finance), Giovanna Dabbicco (ISTAT) Lithuania: Ingrida Mukute (Ministry of Finance), Daiva Zibutiene (Ministry of Finance); Malta: Michael Zammit-Munro (Ministry of Finance), Noel Camilleri (Ministry of Finance) The Netherlands: Paul NEELISSEN (Court of Auditors), Patrick Lubach (Court of Auditors); Poland: Michał Bareja (Ministry of Finance), Jacek Koscielniak (Court of Auditors) Portugal: Luis Viana (Ministry of Finance), Óscar Figueiredo (Comissão de Normalização Contabilística) Romania: Georgeta Alecu (Ministry of Finance), Lidia Baros (Ministry of Finance), Carmen Bragadireanu (Court of Auditors) Slovac Republic: Peter Ivanek (Ministry of Finance); Slovenia: Vesna Milanovic (Ministry of Finance), Mateja Oman (Ministry of Finance) 5

6 Sweden: Anne-Marie Ögren (Swedish National Financial Management Authority), Curt Johansson (Swedish National Financial Management Authority), Alexandra Popovic (Court of Auditors), Kurt Gutberg (Ministry of Finance) United Kingdom: Philip Trotter (HM Treasury), Ross Campbell (HM Treasury), Steve Milton (ONS) IPSAS Board (observers): Andreas Bergmann, Ian Carruthers, Thomas Müller- Marqués Berger European Court of Auditors (observers): Peter Welch, Elisa Gomez European Central Bank (observers): Julia Catz European Commission, DG Budget: Martin Köhler European Commission, DG Markt: Didier Millerot PwC: Patrice Schumesch, Jean-Philippe Duval, Anton De Greef European Commission, Eurostat: Alexandre Makaronidis, Keith Hayes, Norbert Gaspar, Anabela Rodrigues, Graham Lock, Istvan Varjas, Per Christensen 6