Gerhard Steger, Director General Budget and Public Finance Austria - IFAC Sovereign Debt Seminar

1. From Cash to Accrual Accounting Budgeting in
Government – The Austrian Case
Gerhard Steger
Vienna, 19 March 2012

2. Budgetary Reform in Austria
Primary motivation: Improved budgetary decision-making
Addresses the following weaknesses of the current system:
– No binding medium-term perspective
– Prevailing focus on inputs
– Dominant Cash Perspective
The budget as a comprehensive steering instrument for resources
& outputs & outcomes
Implementation in two stages: 2009 and 2013
Unanimous decision in Parliament
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3. Austrian Federal Budget
Reform - Overview
 Budgetary discipline and planning:
binding medium term expenditure framework
Result-oriented  Flexibility for line ministries through
management of full carry-forward of unused funds
administrative units
Performance Budgeting
including
Gender Budgeting
New budget structure: Accrual budgeting and
„lump-sum budgets“ accounting
new budget principles: impact-orientation; efficiency; transparency; true and fair view
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4. Accounting system: 1986 – 2012
Cash budget (with some accrual modifications)
Incomplete accrual accounting system:
• No appropriate valuation rules
• No management impact
• IT-infrastructure in place
• Some practical experience of staff with accruals
Cost accounting:
• Implementation in central units of the ministries from 2000 – 2005
• No steering function
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5. Conceptual ideas for accruals in
Austria
Part of a comprehensive reform addressing the whole system and not
only specific elements  focus in discussion on performance budgeting,
relieved from discussion about accruals in general and in detail
Pragmatic approach with long-term perspective: Systematic recording and
appropriate valuation of assets
Avoid hyper bureaucracy: Concentration on practical needs for steering the
budget!
Alignment with statistics (reduce duplication)  Convergence of
Maastricht deficit and deficit in Austrian system
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6. Reporting entities in the federal
accounting system
Federal accrual system is obligatory for Federal Level:
• Ministry of Finance
• All line ministries
• All federal agencies
Separate reporting:
• Regional level (9 provinces/states)
• Local level (municipalities)
• Off-budget corporatisations
Efforts to develop an aligned framework for regional and local level
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7. Accrual budgeting & accounting
as of 2013
Operating Statement
(~profit and loss
statement)
Statement of
Financial Position Cash Flow
(~Balance Sheet) Statement
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8. Regulations for the
accounting system
Standard set of rules defined by the Ministry of Finance and the Court of Audit
• Basis is laid in the Austrian Federal Constitution: true and fair view as new
budgetary principle as of 2013
• Main features of the accrual system are defined in the organic budget law,
enacted by the Parliament
• Details on the accrual system can be found in detailed regulations
- Regulation on the opening balance sheet issued by the Ministry of Finance
- Accounting regulation issued by the Court of Audit in consultation with the
Ministry of Finance
- Budget regulation issued by the Ministry of Finance in consultation with the
Court of Audit
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9. Standard setting
Austria
IPSAS is the reference standard
Concentrate on Standards which are relevant for Austria
SAP-standard as reference for best booking practices; reduce
implementation complexity
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10. Standards not applicable
Number Name Reason
IPSAS 10 Financial Reporting in Hyperinflationary Economies Austria: no hyperinflationary economy
Mostly delegated to off- Budget Corporations:
Austrian railways (ÖBB), federal real estate
IPSAS 11 Construction Contracts management (BIG), ASFINAG (highway
construction and operation)
Not relevant: investment in property to earn
IPSAS 16 Investment property
rentals is minor in Austria
No management of agricultural assets by the
IPSAS 27 Agriculture
federal administration
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11. Deviating Standards
Number Name Reason
Consolidated and Separate Financial
Full consolidation not by 2013, in a 3rd phase of
IPSAS 6-8 Statements/Investments in Associates/Investments
the reform
in Joint Ventures
Simplicity: measurement by lower of cost principle
IPSAS 12 Inventories
(no options)
Simplicity: measurement by acquisition costs (no
IPSAS 17 Property, Plant and Equipment
options)
IPSAS: assets in respect of taxes are recognised
Revenue from Non-Exchange Transactions (Taxes when taxable event occurs. Austria: tax
IPSAS 23
and Transfers) recognition at cash basis, minor steering
possibility
Retirement benefits: no provision (reason:
IPSAS 25 Employee Benefits Maastricht), but estimation of future benefits in
the annex of the federal financial statement
Simplicity: No activation of internally generated
IPSAS 31 Intangible assets
intanglible assets
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12. Asset valuation
Opening balance sheet
Buildings
• Historical acquisition and production costs
• If not available – 3 options
• Overall refurbishment costs
• Average construction costs of comparable buildings
• Expert opinion if available
• Straight-line depreciation
Property
• Acquisition and production costs
• Asset accounting records used
• Straight-line depreciation
• Impairment
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13. Asset valuation
Heritage assets
• IPSAS ED as reference
• Recognition if acquisition costs are available or if
• Expert opinion is available
 If not: Registration in asset accounting without value and disclosure on
aggregate level in final report
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14. Asset valuation
Opening balance sheet
Subsidiaries and associated entities
• More than 130
• Wide variety
• Equity method
• No full consolidation (later stage, 3rd phase of the reform)
• IT tool for systematic data management
Examples:
- unemployment service (AMS) – 100% - 134 Mio. € (2010)
- ASFINAG (highway construction and operation) – 100% -1.871 Mio. €
(2010)
- University of Vienna – 100%- 151 Mio. € (controlling function)
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15. Challenges of project management
and implementation
Standard setting:
• by Ministry of Finance, Court of Audit
• Information of Parliament (specific parliamentary committee)
Budget transition:
• Use of non-cash elements (depreciation, provisions) as steering information is
challenging for accountants at federal level
Opening balance sheet:
• Use of information of „old accounting system“ if existing
• Specific problems: valuation of cultural heritage/historic buildings. Many
paintings, pieces of art in the museums, many other historical sites (monuments,
furniture, etc.)
New accounting system:
• IT-system is crucial!
• Tests and concurrent operation in 2011 and 2012 (f.e. budgeted balance sheet)
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16. Advantages of Accruals
True and fair view established: Is the country poorer or richer than a year
ago?
Transparency: deeper insight of Parliament and public in federal finances:
clearer picture where we stand
Enhanced quality of public staff: To cope with the new system staff needs
additional skills
Helps better steering: As it is clear, where we stand, it‘s easier to identify
the necessary steps to improve the financial state
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17. Thank you for your attention!
Contact address:
Dr. Gerhard Steger
Director General
Directorate for Budget and Public Finance
Austrian Federal Ministry of Finance
Tel: +43 1 514 33 50 2000
gerhard.steger@bmf.gv.at
www.bmf.gv.at