accrual budgeting and fiscal policy - oecd. accrual and cash • accrual budgeting...

Download Accrual Budgeting and Fiscal Policy - OECD. Accrual and Cash • Accrual Budgeting –Forecasting,

Post on 29-Mar-2019

223 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

The Treasury

Accrual Budgeting and

Fiscal Policy

The Treasury

Session Outline

Fiscal Strategy and Accrual Budgeting

Why NZ went to Accrual Budgeting

Did it work?

What are the Challenges?

Presenting the fiscal strategy

Appropriations management

Capital Management

2

The Treasury

Roles of fiscal policy

Fiscal stabilisation tends to be a short-term role, whats been happening to the economy recently and in the next few years. (Likely to be stabilisation issues in

the future but deal with them when they happen).

Fiscal sustainability tends to be a medium- to long-term issue except that big shocks or big policies can occur in the short-term that have on-going effects.

Fiscal structure tends to be a medium- to long-term issue because tax and spending programmes are typically adjusted at the margins in each Budget. But

have to start somewhere.

The Treasury

Roles of budgeting

Aggregate Fiscal discipline Effective control of budget totals to ensure fiscal objectives. Necessary to ensure that goals of stabilisation, sustainability and desired financial structure are met.

Allocative Efficiency Maximise effectiveness of comparative initiatives. Ensure strong aggregate fiscal discipline doesnt freeze lower quality old activity in and new higher quality activity out.

Productive efficiency Maximise the relationship of

budget resources to purposes.

Accountability - Establish expectations for holding democratic governments to account

The Treasury

Accrual and Cash

Accrual Budgeting Forecasting, for the government

entity, revenues when they will be earned and received,

expenses when they will be incurred and settled, and the

resulting balances of assets and liabilities

Cash Budgeting Forecasting receipts and payments

into designated government bank accounts.

Memorandum information on supplementary items

5

The Treasury

Accrual and Cash Accounting

Aim: Assessment:

Stabilisation Accrual accounting builds in assessment of probability of risks,

contingent liabilities. Seen as supplement to cash accounting.

Sustainability Balance Sheet information provides more complete information

on rights and obligations, useful when considering sustainability.

Structure Balance sheet information facilitates analysis of fiscal structure

Aggregate Control Control being exercised when obligations are occurred more

likely to be more effective

Effectiveness Accrual approach facilitates matching of costs to outputs,

Efficiency Accrual information on costs useful, ensures financing costs

separately and fully considered. Integrated system efficiencies.

Accountability Accrual provides richer suite of information to assess

performance, and compare against actual,

6

The Treasury

Did it work? Fiscal Aggregates

7

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1980 1985 1990 1995 2000 2005

Gross Debt as % of GDP

Net Debt as % of GDP

Accrual budgeting

introduced

The Treasury

Operating Balance

8

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18 19/20 21/22

% GDP

Fiscal Year

Historical

Years

Forecast

Years

Projected

Years

Oper ating Balance to GDP

The Treasury

Debt

9

0%

10%

20%

30%

40%

50%

60%

70%

80%

93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18 19/20 21/22

Fiscal Year

% GDP

Historical

Years

Forecast

Years

Projected

Years

Gross Debt to GDP

The Treasury

Demographics

10

0.0

0.1

0.2

0.3

0.4

0.5

0.6

1880 1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 2100

Older (65+)Projection

Ra

tio

to

po

pu

latio

n a

ge

d 1

5-6

4

Source: Statistics New Zealand

2009

Ratio of those aged 65+ to 15-64

The Treasury

Will accrual budgeting help ?

Maybe ?

Requires more complete recognition of costs

Integrated system = simpler system to

operate

Compliance with GAAP, and a single (but

comprehensive) forecasting/reporting

template reduces concern over form and

focuses on content

11

The Treasury

Survey of Users of Fiscal Reports

If you step back and look at the system its really fine. The level of

disclosure is something to be proud of

Whats required of the Government under the Fiscal Responsibility Act

and what weve got is great. It goes far beyond other countries in

terms of accessibility.

Over the 34 years Ive been looking at this 35 perhaps, theyve got a

lot better

Other than looking at the headline stuff I dont do any analysis at all ...

I just use Treasurys figures. Theres no reason to do any more

We trust their data and its 99.9% reliable

12

The Treasury

Challenges

Presenting the fiscal strategy

Appropriations management

Capital Management

13

The Treasury

Presenting the Fiscal Strategy

Accrual Financial Statements do not

present the fiscal strategy:

Report on financial performance, position and

cash flows, values comprehensiveness,

comparability.

Fiscal Strategy communication is critical to

Government,

Focuses on important, desire for a compelling

narrative

14

The Treasury

NZ Solution: Fiscal Reconciliation

15

Year to date

Amounts in $ millions December December

Fiscal Strategy Financial Statements 2008 2008

Actual Forecast

Taxation as a % of GDP 30.0% 31.1%

Taxes Taxation 26,917 27,883

combined with other revenue Core Crown other revenue (344) 3,328

fund core crown expenses Core Crown expenses (30,044) (29,873)

and with the results of entities outside the budget process Net surpluses/(deficits) of SOEs

and Crown entities(2,753) 850

results in a surplus or deficit Operating balance (6,224) 2,188

part of which is due to gains or losses set aside for fiscal purposes Other (gains)/losses 6,322 (987)

and so we have an operating indicator excluding these items. OBEGAL 98 1,201

Some of this is income retained that is not available for fiscal purposesNet return on NZS Fund (excl.

gains and losses)(186) 30

" " " " " " Net retained surpluses of SOEs

and Crown entities(561) (512)

and some is income and expenses not impacting cashNon-cash items and working

capital movements(3,273) (3,892)

The operating cash flow that results, needs to provide sufficient funds to:Core Crown Cash flow from

Operations(3,922) (3,173)

- build up assets in NZ Superannuation Fund Contribution to NZS Fund (1,123) (1,122)

- meet the capital expenditure budget, and Purchase of physical assets (793) (824)

- make advances (e.g. to students and DHBs) Advances and Capital injections (2,423) (2,286)

with a residual impact on debt that allows it to remain at prudent levels Residual Cash (8,261) (7,405)

and as a percentage of GDP -4.6% -4.1%

The Treasury

Appropriations Management

Accrual appropriations:

Provide authorisation to incur expenses and

capital expenditure

Require focus on internal control systems

Integrate with forecasts and reports

Legislature may grant flexibility

Cash disbursements:

Integrated with but separate from

appropriations16

The Treasury

Capital Management

Different processes for approving Capital Expenditure between Core

Crown, Crown Agencies and SOES (only 27% of the Governments

property plant and equipment is held by the Core Crown)

Imperfect transmission of capital items from the Crown to Crown

entities (e.g. An investment made by the Crown to a Crown entity for

Capital Expenditure purposes will not always equal the capital the

Capital Expenditure that entity makes)

Budget processes can be affected by different methods of funding the

capital expenditure (e.g. from pre-funded depreciation, from a capital

budgeting allowance, from hypothecated revenue, from commercial

revenue, from borrowing, and perhaps from PPPs)

17

The Treasury

Capital Management cont.

Some capital items from an national economic perspective,

are not capital items from a Government perspective, as they

are not reported as assets on the Government balance sheet

(e.g. local government infrastructure)

The lack of a bright line between capital and operating,

particularly between maintenance expenses and capital

Recommended

View more >