Accrual information not being widely used, OECD research finds

9 Mar 17

Stakeholders are still not using governments’ accrual-based financial information in a meaningful way, a senior policy analyst from the OECD has warned.



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Speaking at a conference in Washington DC organised by IPSASB, the International Monetary Fund and the World Bank, Delphine Moretti, a senior policy analyst at the OECD’s budgeting and public expenditures division, outlined the results of a 2016 survey into the adoption of accrual accounting in OECD countries, published last month.

While she explained that adopting governments reported to be “very satisfied” with outcomes in regards to improving transparency and accountability, they are “still struggling” to get external stakeholders beyond the financial industries to use the information they generate.

“So there is less satisfaction with the use of accrual information for meaningful financial analysis,” she continued, with this including evaluation of areas such as assets and liabilities management or the efficiency of business processes.

A number of governments reported that accrual information was not used, or only used in “limited ways” for fiscal forecasting, and many said they do not even use it for their own fiscal targets, with these still being set on a cash basis.

“In short while the consensus on the benefits of accruals reforms is pretty clear when it comes to transparency and accountability, [consensus on] the ways of using this information is less so,” said Moretti. ““[Governments] still have a way to go to fully achieve their objectives.”

In light of this, Moretti said the event, held at the IMF’s Washington DC office, was particularly timely, in that it hoped to discern the next steps in the global adoption of accruals accounting, including by addressing challenges such as the way the information is used.

The survey also found a number of "nuances" in the way accruals has been adopted across the OECD. Speaking alongside Moretti, Jón Blöndal, head of budgeting and public expenditures at the OECD, said it was important to recognise this diversity.

While the majority of OECD countries (75%) are compliant with accrual accounting, and all that haven’t still produce some accrual data, there remain significant differences in reporting practices. 

Core financial liabilities and assets are reported by almost all adopting countries, but information on elements such as public-private partnerships, derivatives, pensions or social benefits is often still not disclosed.

Respondents reported a number of reasons for this, including reluctance to report on liabilities, differences in accounting rules and continuing debates on accounting principles despite the existence of international standards.

Whatever the reason, Moretti noted that the disparities show that “comparability is still an objective more than a reality”.

The report also compared adopting countries’ approach to auditing, budgeting and appropriation – which the majority still conduct on a cash basis – and the challenges that arose during adoption.

Moretti highlighted that everywhere, these challenges were overcome: “No country said it was impossible and we gave up.”

Speaking in the same session as Moretti, Ian Carruthers, chair of IPSASB, noted that adoption is a trend set to continue. Within five years, it is projected that 71% of countries will be accounting on an accrual basis.

As IPSASB celebrates its 20th birthday this year, its board will be focusing on supporting this with a new focus on implementation.

In the coming years, it will look to define IPSASB’s approach to some “hugely emotional” and public sector-specific issues such as heritage assets, social benefits and non-exchange expenditure in areas like defence and education.

He also emphasised a focus on cultivating collaboration with other institutions and standard setters, both in promoting IPSAS and improving public financial management around the world more broadly. He also said the board would be looking to bridge the gaps in the current framework, its implementation and benefits.

The board will be consulting on such issues this year and putting together a new strategy and work plan in the next, which will guide its priorities for five years from 2019. 

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