Accounting Standards For Government Accounts Towards implementing harmonised primary public finance accounting in EU Member States Alexandre Makaronidis GFS quality management and government accounting - Eurostat bruegel Finance Focus Breakfast, 26 January 2012 1
Towards Implementing Harmonised Public Finance Accounting Standards in EU MSs The Excessive Deficit Procedure (EDP) The role of Eurostat in EDP Eurostat reaction to crisis Revision of EDP Regulation 479/2009 Towards robust Quality Management for European statistics Preventive approach to EDP verification The 6-pack on economic governance in particular: Budgetary Frameworks Directive Eurostat projects on public sector accounting and auditing Assessment of the suitability of IPSAS for MSs Sum-up 2
EXCESSIVE DEFICIT PROCEDURE (EDP) EU fiscal surveillance and budgetary discipline are based on the Maastricht Stability and Growth Pact the basic rule is that Member States shall avoid excessive government debt and deficit; Member States need to comply with two criteria: a deficit to GDP ratio and a debt to GDP ratio not exceeding reference values of 3% and 60% respectively; Statistics related to EDP are based on European Government Finance Statistics (GFS) concepts and definitions; GFS are produced in accordance with the European System of Accounts 1995 (ESA95), the EU manual for national accounts supplemented by further interpretation and guidance from Eurostat. 3
THE ROLE OF EUROSTAT IN EDP Eurostat is responsible, on behalf of the Commission, for assessing the quality of the data and for providing the data to be used within the context of the EDP for past years. The verification of EDP statistics is one of the most important and sensitive tasks of Eurostat, notably in the context of the recent financial crisis. 4
REACTION TO CRISIS Revision of regulation 479/2009 (EDP) Communication COM (2011)211 Six-pack on EU economic governance of which: - Council Directive 2011/85/EU on requirements for budgetary frameworks of the Member States 5
REVISION OF REGULATION 479/2009 Enhanced powers to Eurostat Art 12: Access to data sources; Enhanced powers to NSIs Art 16(1): Access to all relevant data sources; Enhanced obligations to MS Art16(2): Clear responsibilities and accountability. 6
COMMUNICATION (2011)211 Towards Robust Quality Management For European Statistics - Communication from the Commission to the European Parliament and the Council First action line: Further strengthening the governance of the European Statistical System (ESS) Second action line: Preventive approach to EDP verification - enhanced verification of EDP statistics (including upstream public finance data) 7
PREVENTIVE APPROACH TO EDP VERIFICATION EDP statistics are the result of re-compiling primary public finance data, referred to as upstream data. Recent experience has shown that we need to assess the quality - of upstream data, and - of their translation into ESA. At national level, national statistical authorities are responsible for ensuring that reported data comply with legal provisions. At EU level, Eurostat is responsible for - providing the methodology for EDP statistics, and - assessing the quality of EDP data reported by MS. 8
PREVENTIVE APPROACH TO EDP VERIFICATION Country risk assessment and risk management More focus on quarterly data Upstream dialogue visits Quality management of EDP processes Promote accrual based accounting in public finance 9
WHAT IS THE 6-PACK ABOUT It provides a new framework that seeks to extend and improve surveillance of fiscal policies, macroeconomic policies and structural reforms: New enforcement mechanisms planned in the event of non-compliance by MS; These mechanisms rely on high quality statistics, produced under robust quality management; Role of Eurostat to provide reliable statistical data for decision makers and the public. 10
6-PACK BUDGETARY FRAMEWORKS Art 3 MSs shall have in place public accounting systems covering all sub-sectors of General Government (GG), that provide accrual data for ESA95. Those public accounting systems shall be subject to internal control and independent audits. In particular MSs shall publish both: (a) cash-based fiscal data (b) a detailed reconciliation table showing the methodology of transition between public accounting data and data translated into ESA95 standards. 11
6-PACK BUDGETARY FRAMEWORKS Art 16 Moreover the Directive states that: By 31 December 2012, the Commission (Eurostat) shall assess the suitability of IPSAS (International Public Sector Accounting Standards) for the MSs. This is in line with the Communication COM(2011)211 according to which Eurostat will support the implementation of public accounting standards for all sub-sectors of general government. 12
EUROSTAT PROJECTS ON PUBLIC SECTOR ACCOUNTING AND AUDITING Comparison of accounting and auditing systems in the 27 EU Member States - Eurostat needs a detailed and systematic overview of the existing arrangements in the 27 EU MSs and of their future plans for reform of accounting and auditing systems. 13
EUROSTAT PROJECTS ON PUBLIC SECTOR ACCOUNTING AND AUDITING (cont) Assessment of the suitability of IPSAS for MSs Description of IPSAS standards; Current state of play in public accounting and auditing practices in the EU MSs; Overview of the links between IPSAS and GFS/EDP statistics; The process of first time adoption; Available information on the benefits, obstacles and costs experienced by countries from IPSAS adoption. 14
RELATED IPSAS BOARD PROJECTS First time adoption and IPSAS vs GFS Recognition of likely benefits from converging GFS and IPSAS as far as possible - New IPSAS/GFS project launched by the Board (2011-2013): review convergence progress since 2005, promote reconciliation and harmonization of IPSAS and statistical reporting, taking into account the ESA and the System of National Accounts (SNA). 15
ACCRUALS IMPLEMENTATION: BENEFITS AND COSTS Harmonised (hence comparable) accounting standards for all sub-sectors of General Government is a precondition for the production of high quality statistics; Implementation of harmonised accrual based standards in MSs would be a challenging and potentially high cost project that would need time; Benefits for GFS: transparency, accountability, budgetary efficiency, better policy making decisions (EU fiscal monitoring, including data on contingent liabilities, pensions etc, EU budget control...). 16
SUM-UP Our key aims: Reinforce the professional independence of ESS members and Eurostat; Move from a corrective to a preventive approach Implement effective Quality Management approach at EDP process level; Promote the implementation of accruals based public sector accounting standards. 17
CONTACT ADDRESS: Alexandre Makaronidis Head of Unit GFS quality management and government accounting EUROSTAT D4 Tel: (+352) 4301-34792; Fax: (+352) 4301-30770 alexandre.makaronidis@ec.europa.eu 18