Global survey onaccounting and financialreporting by centralgovernments (2nd edition)

14 September 2015

www.pwc.com

PwC

Our ambition

14 September 2015

Why?

What?

How?

Covering four areas:

• Accounting practices• Budgeting practices• IT environment• Finance function

Update on progress since 2012

120 countries surveyed

Part I

Accounting practices

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There is still great diversity in the current governmentaccounting landscape

Cash basis

Modified Cash

Modified Accrual

Accrual basis

31%

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But the 5-year trend toward accrual accounting is clear

Cash basis

Modified Cash

Modified Accrual

Accrual basis

71%14 September 2015

Do not know (6)

PwC

The dynamic for accrual accounting

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31% of governments apply accrualaccounting now as compared to26% in 2012.

71% of governments will applyaccrual accounting in five years’time (as compared to 63% in2012).

The trend towardsaccrual accounting isconfirmed and evenreinforced

+8%14 September 2015

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The trend is visible across all continents, with the biggestshift expected in Africa, Latin America and Asia

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50%

100%

49%

21%

30%

16%

20%

38%

45%

68%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

North America (n=2)

Oceania (n=3)

Europe (n=35)

Asia (n=29)

Latin America & Caribbean (n=20)

Africa (n=25)

Now

5 years

PwC

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The proportion of governmentsapplying accrual accounting thatwill apply IPSAS or similarstandards (IFRS, IPSAS-like)within the next five yearsincreases from 59% to 77%(+18%).

This is particularly remarkable innon-OECD countries.

The use of IPSAS asreference frameworkis expected tofurther increase

+18%

A trend towards international accounting harmonisation

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PwC

+18%

The European case - Key learnings from the EPSAS(European Public Sector Accounting Standards) study

14 September 2015

Critical analysis of IPSASas a basis for developing EPSAS2

Proposals for implementation3

Costs and benefitsof implementing EPSAS1

Country visits, questionnaire and interviewswith the 28 EU Member States

PwC

+18%

The European case - Key learnings from the EPSAS study -Benefits

14 September 2015

Accountabilityand

transparency

Betterdecision-making

Controls andadministrative

processes

Labourmarket

PwC

+18%14 September 2015

AM ≥ 70%

40% ≤ AM ≤ 70%

AM ≤ 40%

The European case - Key learnings from the EPSAS study -Central governments

PwC

+18%14 September 2015

AM ≥ 70%

40% ≤ AM ≤ 70%

AM ≤ 40%

The European case - Key learnings from the EPSAS study -State governments

PwC

+18%14 September 2015

AM ≥ 70%

40% ≤ AM ≤ 70%

AM ≤ 40%

The European case - Key learnings from the EPSAS study -Social security funds

PwC

+18%14 September 2015

AM ≥ 70%

40% ≤ AM ≤ 70%

AM ≤ 40%

The European case - Key learnings from the EPSAS study -Local governments

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+18%14 September 2015

Cost to implementEPSAS at the EUlevel assessedbetween

0,009% and 0,053%of the GDP

1,2 and 6,9billion

Decision/need toinvest or not in anew IT system has asignificant impact

Net cost/benefitassessment needed

The European case - Key learnings from the EPSAS study -Cost

PwC

+18%

The European case - Key learnings from the EPSAS study -Suitability of IPSAS for developing EPSAS

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Governments areoverall ratherpositive about IPSAS

Limited number oftopics for whichsome amendmentsor further guidancemay be needed

Governments withadvanced accountingpractices do not wanta step back

IPSAS already usedas a source ofinspiration by mostgovernments

PwC

The European case - Key learnings from the EPSAS study -The way forward

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23%

Diagnostic in eachMember State orgovernment, tailoredroadmap

Continuousimprovementprocess

Best implementationpractices, pragmaticapproach

Focus standard-setting on key issues

Part II

Budgeting practices

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Cash budgeting is still largely used, but accrual budgeting isprogressing

The number of governments reporting under accrual budgeting isexpected to increase from 18% now to 48% in five years (versus from31% to 71% for accrual accounting).

Budgets largelyremain on a cashbasis…

82%

… although an upwardtrend towards accrualbudgeting is identified

+30%

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Part III

IT environment

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A trend towards greater IT integration

The use of ERP-systems is seenas best practice to manage theaccounting, budgeting andreporting processes.

Greater integration of IT systemsis a key priority and a keychallenge for most governments.

% with ERP systemsin next 5 years

64%

15% 20% 15% 11%

Very fragmented Very harmonised

39%

Neither nor

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Part IV

Finance function

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Governments indicate a desire to improve their financefunction

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Desire to improveover the next fiveyears

Major areas forimprovement arefixed assetmanagement,cost accounting,performancemanagement andlong-term planningand forecasting

Main focus oncompliance andcontrol

PwC

Government priorities in the next 5 years

Moving along the maturity spectrum of the government finance function is ajourney and government priorities for the next 5 years depend on their levelof maturity along that spectrum.

lAccrual accounting(based on IPSAS orsimilar) adoption

Greater integration ofIT systems

Capacity building Improvement ofmanagementinformation systems

14 September 2015

PwC

Thanks!

Patrice Schumesch,Global Public Finance and Accounting partner,patrice.schumesch@be.pwc.com

PwC global survey on accounting and reporting bycentral governments (2nd edition)http://www.pwc.be/en_BE/be/publications/pdf/global_ipsas_survey_2015.pdf

PwC EPSAS studyhttp://ec.europa.eu/eurostat/documents/1015035/4261806/EPSAS-study-final-PwC-report.pdfhttp://www.pwc.be/en/publications/2014/epsas_oct_2014.pdf

14 September 2015