PSC STANDARDS PROGRAM
Research Report on Budget Reporting
Presentation to PSC
Buenos Aires, Argentina
March 2004
March 2004
PSC STANDARDS PROGRAM
Research Question
Should an international public sector
accounting standard be issued on budget
reporting?
March 2004
PSC STANDARDS PROGRAM
Composition of Steering Committee
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Australia
Belgium
China
Denmark
France
India
New Zealand
Netherlands
Norway
March 2004
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South Africa
Sweden
UK-African Focus
USA (Chair)
ACCA
FEE
World Bank
OECD (Associate)
PSC STANDARDS PROGRAM
Objectives of Research Study
• Identify current best practices in budget formulation,
execution, and reporting.
• Determine if development of an IPSAS on budget
reporting and/or other budget related matters falls
within PSC mandate.
• Determine if there is any precedent for an accounting
standard setter to deal with budget reporting issues.
• If an IPSAS is appropriate, determine the issues to be
dealt with by that IPSAS.
March 2004
PSC STANDARDS PROGRAM
Recommended Practices by International
Bodies
• IMF Code of Good Practices on Fiscal
Transparency
• OECD Best Practices for Budget Transparency
• UNDP Budget Preparation Process—Key
Factors
• World Bank Country Financial Accountability
Assessment
March 2004
PSC STANDARDS PROGRAM
OECD/World Bank Survey of Budget
Practices
• 44 of 60 countries responded
• Specific areas of concern:
– 4.2 Budgeting, Accounting and Financial
Reporting
– 5.2 Budget Documentation and Performance
Management
– 5.3 Budget Classification
– 6.5 Budgeting and Reporting
March 2004
PSC STANDARDS PROGRAM
Current/Recommended Practices in Select
Countries
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Australia
Belgium
Denmark
Finland
France
Germany
Ghana
Honduras
Italy
Kenya
Netherlands
March 2004
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New Zealand
Nigeria
South Africa
Spain
Sweden
Switzerland
Tanzania
Uganda
United Kingdom
United States
Zambia
PSC STANDARDS PROGRAM
Objective of the PSC
“Develop programs aimed at improving public
sector financial management and accountability
including developing accounting standards and
promoting their acceptance.”
(Preface to IPSASs)
March 2004
PSC STANDARDS PROGRAM
IPSAS 1. Presentation of Financial
Statements
“General purpose financial statements are those
intended to meet the needs of users who are not
in a position to demand reports tailored to meet
their specific information needs.”
(Paragraph 2)
March 2004
PSC STANDARDS PROGRAM
IPSAS 1. Presentation of Financial
Statements (continued)
“Financial reporting may also provide users with
information:
a) Indicating whether resources were obtained and
used in accordance with the legally adopted
budget; and
b) Indicating whether resources were obtained and
used in accordance with legal and contractual
requirements, including financial limits
established by appropriate legislative authorities.”
(Paragraph 14, underlining added)
March 2004
PSC STANDARDS PROGRAM
IPSAS 1. Presentation of Financial
Statements (continued)
“Where the financial statements and the budget
are on the same basis of accounting, this
Standard encourages the inclusion in the
financial statements of a comparison with the
budgeted amounts for the reporting period.”
(Paragraph 22, underlining added)
March 2004
Budget Reporting Model
PSC STANDARDS PROGRAM
Cash
Budgetary
Basis
Modified
Full Accrual
Central
Government
Agencies
State
Local
National
Levels of Government
March 2004
ExAnte
Types of
Budget
Reports
PSC STANDARDS PROGRAM
Key Recommendation
The PSC should issue an IPSAS on Budget
Reporting since it falls within the mandate
identified in the Preface to the PSC.
March 2004
PSC STANDARDS PROGRAM
General Recommendations
• Budget reports (both ex-ante and ex-post)
should meet qualitative characteristics of
financial reporting.
• Budget reporting should be incorporated into
the Conceptual Foundation for IPSASs.
March 2004
PSC STANDARDS PROGRAM
Key Recommendations on Ex-Ante Budget
Reports
IPSAS on Budget Reporting should require that
legally approved budget and prospective
budgetary information be published with
appropriate supporting budget documentation.
(meets transparency criteria)
March 2004
PSC STANDARDS PROGRAM
Key Recommendations on Ex-Post Budget
Reports
IPSAS on Budget Reporting should require the following:
– Budget to Actual Comparative Statement should be
part of the general purpose financial statements.
– Comparative Statement should include original, as
well as final approved, budget.
– If difference between budget and accounting bases,
reconciling statement should be prepared.
(meets accountability criteria)
March 2004
PSC STANDARDS PROGRAM
Other Key Recommendations
IPSAS on Budget Reporting should encourage
the following:
– Integration of budget and accounting
systems to maximum extent possible
– Use of commitment accounting procedures
(addresses other budget related matters)
March 2004
PSC STANDARDS PROGRAM
Issues To Be Resolved
• Clear definition of budget reporting
• Inclusion of ex-ante budget reports in an IPSAS
• Inclusion of ex-post budget reports as part of
general purpose financial statements
• Requirement for a reconciling statement where
differences between budget and accounting
bases exist
• Coverage of budget execution and control
procedures in an IPSAS
March 2004
PSC STANDARDS PROGRAM
Issues To Be Resolved (continued)
• Specification of procedures to meet qualitative
characteristics of financial reporting
• Inclusion of budget reporting in the Conceptual
Foundation
March 2004
Structure of Pronouncements Issued by the IAASB
IFAC Code of Ethics for Professional Accountants
ISQCs 1-99 International Standards on Quality Control
International Framework for Assurance Engagements
Audits and Reviews of Historical
Financial Information
ISAs 100-999
International Standards
On Auditing
IAPSs 1000-1999
International Auditing
Practice Statements
Related Services
Framework
Assurance Engagements Other Than
Audits or Reviews of Historical Financial Information
ISREs 2000-2699
International Standards
On Review
Engagements
ISAEs 3000-3699
International Standards
On Assurance
Engagements
ISRSs 4000-4699
International Standards
On Related Services
IREPSs 2700-2999
Reserved for
International Review
Engagement Practice
IAEPSs 3700-3999
Reserved for
International Assurance
Engagement Practice
Statements
IRSPSs 4700-4999
Reserved for
International Related
Services Practice
Statements
Structure of Pronouncements Issued by the IAASB
As Applied in the Public Sector
IFAC Code of Ethics for Professional Accountants
ISQCs 1-99 International Standards on Quality Control
International Framework for Assurance Engagements
Audits and Reviews of Historical
Financial Information
ISAs 100-999
International Standards
On Auditing
IAPSs 1000-1999
International Auditing
Practice Statements
Accrual
Standards
(IFRSs &
IPSASs)
Related Services
Framework
Assurance Engagements Other Than
Audits or Reviews of Historical Financial Information
ISREs 2000-2699
International Standards
On Review
Engagements
ISAEs 3000-3699
International Standards
On Assurance
Engagements
ISRSs 4000-4699
International Standards
On Related Services
IREPSs 2700-2999
Reserved for
International Review
Engagement Practice
IAEPSs 3700-3999
Reserved for
International Assurance
Engagement Practice
Statements
IRSPSs 4700-4999
Reserved for
International Related
Services Practice
Statements
IPSAS
Budget to Actual
IMF
Cash
Comparative
Statistical
Standard
Statement
Statements
Legally
Approved
Budget
Prospective
Budgetary
Information
PSC STANDARDS PROGRAM
Framework for Assurance Engagements and Related
Assurance Engagements
Related Services
Services
Nature of
service
Audits and Reviews
of Historical
Financial
Information
(includes year end
reports)
Other Assurance
Engagements
(includes ex-ante
budget reports)
Agreed-upon
Procedures
Compilation
Level of
assurance
provided by
the auditor
Reasonable or
limited, but not
absolute, assurance
Reasonable or
limited, but not
absolute, assurance
No assurance
No assurance
Report
provided
Positive or negative
assurance on
assertion (s)
Positive or negative
assurance on
assertion (s)
Factual
findings of
procedures
Identification
of information
compiled
March 2004
PSC STANDARDS PROGRAM
END
Dr. Jesse Hughes
[email protected]
March 2004