Government finance statistics and public sector accounting nexus: ESA and IPSAS Seminar «Accounting reforms in the Public Sector: IPSAS/EPSAS» Brussels, 13 May 2016 Jan Smets Governor of the National Bank of Belgium
Overview Introduction: macro government finance statistics (ESA 2010- GFS) vs. micro public accounting standards (IPSAS) GFS and the European budgetary and economic governance ESA 2010 The Belgian context Data flow and importance of IPSAS standardization 2/23
Introduction 3/23
Government finance statistics (GFS) vs. public sector accounting IPSAS = micro accounting standards for public entities GFS = macro accounting standards for the public administration accounts European reference micro framework = EPSAS European reference macro framework = European System of national and regional Accounts (ESA 2010) GFS data cover financial transactions (via financial instruments as loans, bonds, deposits) and non financial transactions (receipts, expenditures) of the public administration according to a standardized system of accounts. Focus on the deficit and the debt and transmitted to Eurostat 4/23
GFS and European budgetary and economic governance 5/23
GFS and European budgetary and economic governance [1/2] Economic and monetary Union (EMU) Monetary policy exclusive competence of EU Economic policy competence of the Member States Asymmetry between the monetary and the economic competences: requires a macroeconomic convergence between the Member States of the Euro zone Convergence ensured by the coordination of the budgetary and economic policies with restrictive rules and tools Reference criteria for public deficit and debt Excessive deficit procedure Stability and growth pact 6/23
GFS and European budgetary and economic governance [2/2] Important need for harmonized statistics Budgetary balance (deficit) of general government Debt of general government Macroeconomic imbalances Tax pressure Reference framework for statistics is the European system of accounts (ESA) Until now and waiting for EPSAS and/or as far as Member States are in different stages of IPSAS, there will be no harmonized rules in European countries for public accounting For better macroeconomic statistics, there is a need for better and harmonized micro data: shift towards standardized public accounting rules (IPSAS / EPSAS) must be stimulated 7/23
ESA 2010 framework 8/23
Basic objectives of ESA ESA = long history (ESA 1970, 1979, 1995 and currently 2010 ) and existed ahead of the crisis and the Maastricht criteria, ) ESA = systematic and detailed description of the economy of the European countries (structure, development, interdependency, ) in an accounting framework for the EU ESA 2010 concepts are internationally compatible coherent with SNA 2008 (United Nations) EU Members States: ESA 2010 is a regulation (EU 549/2013), compulsory transmission of national & regional accounts data. ESA 2010 measures: the economic activity generated during one year of one quarter (gross domestic product - GDP, national income,...) the interrelations and operations between economic actors: financial and non-financial corporations, households, NPI s, general government and the rest of the world 9/23
Institutional sectors & the sector of general government sector (S13) TOTAL ECONOMY (S1) Households (S14) Non-financial corporations (S11) REST Financial corporations (S12) OF THE WORLD (S2) General government (S13) Non-profit institutions (S15) ESA determines the criteria for inclusion of the units in the respective sectors, including the general government sector (S13) 10/23
Recording of the transactions in ESA 2010 Double entry accounting Recording at the time of the transaction (facturation or delivery) Not cash basis ESA is used as the reference framework for public finance policy Stability and growth pact Maastricht Treaty Excessive deficit procedure (EDP) High Council of Finance 11/23
Institutional sector accounts S13 EU-Member States must apply a budgetary discipline in respecting 2 criteria: A maximum deficit of 3%-GDP A maximum debt of 60%- GDP These references are based on statistical ESA-concepts of public finance The deficit refers to the net borrowing of general government according to ESA 2010 The Maastricht debt corresponds to the sum of liabilities (deposits, securities, loans) of the sector S13 against the remaining institutional sectors and the rest of the world measured at face value ( total liabilities ESA 2010) Verification by the EC of the criteria via EDP-Notifications 12/23
National Accounts Institute 13/23
The National Accounts Institute (NAI) [1/4] Creation of the National Accounts Institute by law of 21 December 1994, modified by the laws of 8 March 2009, 28 February 2014 and 18 December 2015. In charge of the compilation of a series of statistics. The NAI is not in charge of the evaluation of the norm The NAI has no staff and the statistical processes (concepts over compilation to dissemination) are carried out by the NAI-partners. Initially the NAI was composed of 3 partners: National Bank of Belgium Federal Planning Bureau Statistics Belgium (formerly NSI ) 14/23
The National Accounts Institute (NAI) [2/4] The competences of the NAI were enlarged a first time in 2009 for the inclusion of the price observation and analysis. New competences on regional budget analysis followed in 2014 Full access to the NAI for the Regions on 01/01/2016. The federated entities participate in the NAI Council and in the Scientific Committees. The creation of the Interfederal Statistical Institute. From the outset the NAI is a national statistical authority in charge of official European statistics. During the compilation the NAI takes decisions on the correct application of the statistical regulations and manuals. The NAI can also consult Eurostat -the European statisical authority- for those interpretations. 15/23
The National Accounts Institute (NAI) [3/4] Creation of the NAI-Scientific Committee for general governement accounts ( bringing the number of NAI-Scientific Committees to 4) Continues the work carried out by a task force of the NBB Analyses and formulates advices at the request of the governments Analyses the perimeter of the general government Composed of experts in public finance of each of the Regions, the NBB, the FPB and Statistics Belgium. 16/23
The National Accounts Institute (NAI) - [4/4] Competences by partner National Accounts Institute (NAI) National Bank of Belgium (NBB) Federal Planning Bureau (FPB) Each of the Regions FPS Economy -Statistics Belgium - Price Observatory - Non-financial accounts - Financial accounts - Quarterly accounts - Regional accounts - Foreign trade statistics - Economic budget (federal & regional) - Input-output tables - Environmental accounts - Data provider - Price observation & analysis - Yearly & Quarterly accounts of the public administration/edp Notification, in collaboration with FPB. 17/23
Missions on government finance statistics of the NBB as partner of the NAI Data collection, compilation and communication of the government finance statistics in accordance with the Transmission programme and the EDP notification Transmission to Eurostat end March and September (national publication can occur a few weeks later) Quarterly transmission (on t+90 jours days) Compilation of the conditional engagements (Six pack) Decisions on * the sectorclassification of institutional entities * the treatment of transactions in national accounts and government accounts. 18/23
Data flows and importance of EPSAS standardization 19/23
Relationship between the NAI & reporting agents [1/2] Datatransmission: aiming for better standardization Ongoing detailed description of the data requirements and the planning of the introduction of new requirements Existing communication channels are used to the maximum possible (f.i. General Documentary Base created by the Cooperation Agreement of 1 octobre 1991) The reporting authorities transmit the data according to the format, periodicity and quality-criteria lead down in the EU regulations. The NAI is authorised to ask for additional data and information 20/23
Relationship between the NAI & reporting agents [2/2] Currently : 9 supervising authorities (the federal government and 8 Communities & Regions) 20 different accounting systems in place (local authorities: cities, local centre for social welfare, provinces, etc.) Some do still use cash basis. The NAI develops conversion tables from these separate accounting systems into the ESA definitions. Way forward: realizing longstanding need for harmonized microdata IPSAS / EPSAS for all entities of the general government Leading to a single conversion table to ESA? 21/23
Some conclusions form a user s perspective The International Public Sector Accounting Standards leading to better harmonised data are a very relevant subject which merits all of our attention. They contribute in a substantial way to the improved quality of the micro data contributing in their turn to better quality statistics on the economic and financial positions of the general government sector and its components. Data for economic analysis and for policy decision making will be more transparant not only across Member States but also across governments within a single Member State. Therefore we encourage their implementation. The further speeding up of EPSAS should be considered. We do favour standards which are ESA compliant as this will further reduce the statistical burden on Member States. 22/23
Thank you for your kind attention