OECD Public Sector Accruals Symposium - Ken Warren

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TIME TO LOOK AGAIN AT ACCRUAL BUDGETING

Ken Warren

Chief Accounting Advisor New Zealand Treasury

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© The Treasury

© The Treasury

Designed for decision-making

• Generally Accepted Accounting Principles (GAAP)

• Principles for the faithful representation of financial results for accountability purposes and to provide relevant information for decision-making purposes.

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Arguments to use GAAP in budgets:

• More consistency • Greater relevance • Better accountability • Greater Coverage

Presenter

Presentation Notes

The accrual budgeting approach will reflect economic decisions in a standard way (as determined by generally accepted accounting principles) The increased consistency leads to greater understandability and more reliable budget reports. Readers of budget documents can focus on what the budget reports say, rather than investing effort in trying to determine how they are prepared. Cash budgets document just the cash flow. Accrual budgets also document the activity that generates the cash flow. To the extent that users of budget document are interested in the activities of the Government, accrual budget information provides more relevant information. The accrual budgeting approach improves accountability in two ways. First, it makes transparent the full financial implications of policy decisions and proposed programs. Second, it provides a basis for comparison with audited financial statements prepared in accordance with generally accepted accounting practice. Therefore the accrual budget process provides a better basis for holding the government of the day accountable f for its stewardship as a financial manager. Cash budgeting can only be relied on to show information on the cash and debt flows of the bank accounts and borrowings that are stipulated to be within the budgetary system. Accrual budgeting integrates such information with the forecast financial and operating position of the entity

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Arguments Against

Too complex BUT no worse than cash

Overloads budgeting BUT can simplify

Doesn’t fit with rules BUT and rule for surplus/deficit

Puts cash control at risk BUT strengthens cash control

Integration with appropriations BUT variety of appropriation approaches

Requires depreciation funding BUT it allows doesn’t require that

More prone to manipulation BUT there are standards

More pressing problems BUT foundational issue

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Years of experience suggests it works

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© The Treasury

© The Treasury

© The Treasury

© The Treasury

© The Treasury

© The Treasury

© The Treasury

© The Treasury

© The Treasury

TIME TO LOOK AGAIN AT ACCRUAL BUDGETING

Ken Warren

Chief Accounting Advisor New Zealand Treasury

News & Politics

OECD Public Sector Accruals Symposium - Ken Warren