Adopting international recommendations will underpin confidence in Ireland's public finances and unlock value from state assets, says Minister Donohoe
The Government has recently [15th October] agreed to an ambitious series of reforms to Ireland’s public financial standards, based on recommendations from an OECD Report. These reforms will move Ireland to the forefront of international best practice in public accounting, and will underpin global confidence in Ireland’s public finances, according to Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD.
The OECD Review of Financial Reporting in Ireland sets out a “roadmap” for introducing accruals accounting, which is the standard approach to accounting used in the private sector and internationally, and for the upgrading of financial reporting systems across all Government Departments. The OECD report notes that accrual data will be a “building block” for richer, more reliable financial information, strengthening the country’s fiscal forecasts and our ability to identify fiscal risks. Accrual accounting, which was also recommended by the International Monetary Fund (IMF) in its 2013 Fiscal Transparency Assessment of Ireland , will still allow for the presentation of clear, cash-based budget information with which the Irish public is familiar.
Welcoming the OECD report, Minister Donohoe said: “These reforms will ensure that Ireland’s system for financial reporting and accounting can be at the forefront of global best practice. This is not just an academic exercise. Adopting international standards for financial reporting will further strengthen the credibility and resilience of our public finances, and help us to unlock the benefits of Ireland’s national assets” A recent IMF Report found that ‘active balance sheet management’, i.e. generating optimal returns on assets and efficient management of long term liabilities such as pensions and contingent liabilities, can generate significantly higher revenues each year (up to 3% of GDP in some cases) while also reducing fiscal risks.
Minister Donohoe added: “Ireland’s accountancy profession is highly regarded internationally and is undoubtedly one of the jewels in our crown, which helps to make Ireland one of the most competitive locations in the world in terms of attracting investment and jobs. Many of those accounting professionals work in our civil and public service, but we are not getting full value from their skills at present. While our public cash-based accounting standards have served the country well, all of the national and international experts agree that they are now rather dated, and certainly aren’t in line with the modern professional standards such as IPSAS (International Public Sector Accounting Standards) that are in use the world over. By migrating our systems in a steady manner onto these standards, our public service professionals will be able to apply their skills as they have been trained to do, adding value to financial reports and improving rigour in financial management.”
The Minister acknowledged the technical complexity of the reforms and said that the reforms would be introduced progressively, on the basis of consultation among stakeholders and financial managers across the public service, and drawing on additional expertise from industry practitioners and academics. The Minister added:- “Reforms to financial reporting and accounting are highly technical in nature, but as far as the general public is concerned, our budgets will look much the same in future. The real benefits will be felt indirectly, as we promote a culture of professional financial management, more timely financial reporting, and a general up-lift to our economic and fiscal performance.”