Transcript Strategic Report – [Insert Board/Committee Acronym here]

International Public Sector
Accounting Standards Board
Fiscal Sustainability: the role of accounting standards
Ron Salole
Deputy Chair
IPSASB
Astana Economic Forum
24 May 2013
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Astana Economic Forum 2013
Session coverage
• Background
• Focus areas
– IMF|FAD, Fiscal Transparency, Accountability and Risk,
August 2012
– G20 – Communiqué of Finance Ministers February 2013
Meeting
– IPSASB, Long-Term Sustainability of a Public Sector Entity’s
Finances
• Wrap-up
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Background
• Fiscal transparency is critical for effective fiscal
policymaking and managing fiscal risk.
• Advances made in public financial reporting not sufficient.
• Understanding government’s underlying fiscal position
remains inadequate:
– Emergence of previously unreported fiscal deficits and debts
– Gaps and discrepancies in adherence to standards
– Lack of effective multilateral monitoring of compliance
• Need to guard against resurgence of fiscal opacity in the
face of growing pressures in government finances.
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IMF | FAD
Fiscal Transparency, Accountability and Risk
•
•
•
•
Fiscal transparency does matter
Harmonization of Accounting and Statistics needed
ROSC initiative should be followed up
Fiscal transparency standards need to address gaps and
inconsistencies
• IMF needs to adopt a more modular, analytical and
calibrated approach to evaluate country compliance
• Institutions need to strengthen incentives for
improvements in fiscal transparency practices
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IMF | FAD
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G20 Finance Ministers Communiqué
• Goal of strengthening the public sector balance sheet
• Need to better assess risks to public debt sustainability
– take into account country-specific circumstances,
– look at transparency and comparability of public sector reporting,
and
– monitor the impact of financial sector vulnerabilities on public debt
Paragraph 10 of Communiqué, February 15-16, 2013
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IPSASB – Reporting Long-Term Sustainability
• Purpose is to report projected long-term sustainability of
finances over a specified time horizon with transparent
assumptions.
• Long-term sustainability is the ability of a government to
meet service delivery and financial commitments both now
and in the future.
• Time horizon is “fact and circumstance” specific and is
selected by the government.
• Transparent assumptions based on current policy and
future economic and other conditions.
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IPSASB – Reporting Long-Term Sustainability
• What information do users need?
– Can current level of services provided by governments be sustained or will
they have to be reduced?
– Can governments collect sufficient revenue to sustain the current level of
services?
– Can governments borrow to fill in any shortfall between revenues and the
provision of services?
• Report should have narrative discussion on three
dimensions of long-term sustainability
– Service dimension
– Revenue dimension
– Debt dimension
• Dimensions are inter- related and changes in one can
affect the others.
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IPSASB – Reporting Long-Term Sustainability
Can entities collect
sufficient revenue to
maintain current services
given debt constraints?
Debt Dimension
Capacity to meet financial
commitments or refinance or
increase debt
Vulnerable to market and lender
confidence and interest rate risk
How sustainable is
projected debt, given
current service and
revenue policies?
Revenue Dimension
Capacity to vary existing
taxation levels or introduce
new revenue sources
Vulnerable to viability of
increases in taxation levels or
dependence on revenue
sources outside the entity’s
control
Service Dimension
Capacity to maintain or vary
services and entitlements
Vulnerable to viability of
reductions in services and
entitlements
Can current services be
maintained or varied given
current revenue policies and
debt constraints?
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Service dimension
• Measures the volume and quality of services to recipients
and entitlements to beneficiaries.
• Focuses attention on the capacity to maintain or vary the
volume and quality of services and programs.
• Costs have a tendency to rise, especially on entitlement
programs, more steeply than general operating costs.
• Asks about whether the government is vulnerable if there
has to be a reduction in services or entitlements.
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Revenue Dimension
• Measures taxation and other revenue sources.
• Focuses attention on the capacity of a government to
increase taxation, introduce new revenue sources.
• Experience in collecting these revenues plays a major
role.
• Asks about the vulnerability of the government if taxation
levels had to be increased or, in certain cases, the extent
of dependence on revenue sources outside its control or
influence.
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Debt Dimension
• Measures debt levels of governments.
• Focuses attention on the capacity of the government to
meet its financial commitments or to refinance or increase
debt as necessary.
• Asks about the vulnerability of the government to market
and lender confidence.
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IPSASB – Reporting Long-Term Sustainability
• A Recommended Practice Guideline (RPG) on reporting
long-term sustainability will be reviewed for approval by
IPSASB in June 3013.
• The RPG
– defines terminology used
– discusses the three dimensions
– sets out recommended disclosures
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Wrap-up
• The standards and regulations governing sovereign
issuers are not of sufficient quality to protect investors and
ensure the stability of capital markets.
• Need to significantly enhance the quality of financial
reporting by governments.
• Urge the global bodies to require governments to adopt
accrual–based accounting and budgeting in public sector
finances, which will promote greater transparency and
accountability in public sector finances and allow for
monitoring of government debt and liabilities for their true
economic implications.
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Questions and discussion
• Visit the webpage http://www.ipsasb.org
• Or contact us by e-mail
Chair IPSASB
[email protected]
Deputy Chair IPSASB [email protected]
Technical Director [email protected]
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