Check Against Delivery!
I’m delighted to be here today to support the launch, by Chartered Accountants Ireland, of the position paper “The Reform of Ireland's Public Sector Accounting”, which outlines the benefits and implications of the Government's reforms to public financial reporting and our movement towards the adoption of International Public Sector Accounting Standards.
I’d like to thank Chartered Accountants Ireland, and especially Dr Brian Keegan and Michael Diviney for inviting me here today. I’d particularly like to thank Michael – Executive Head of Thought Leadership here at the Institute - for making this event possible today, and the excellent work of the authors in the researching and writing of this position paper. Professor Ciaran Connolly brings his expertise in public sector accounting and international reporting to the research, while Dr Elaine Stewart is also a recognised expert in this field. They have both provided an important piece of research which will be of great benefit both as a document of academic merit in its own right, and also one of practical benefit to my Department and colleagues in other Departments and indeed the wider finance community, as we move forward with our financial reforms.
I would like to take the opportunity while speaking today to acknowledge the role that the Institute plays, along with many others throughout Ireland’s accounting profession, in supporting the development and improvement of public policy.
As a Chartered Accountant myself, I am well aware that Chartered Accountants Ireland is the largest and longest established accountancy body in Ireland, having been founded as far back as 1888. With over 29,000 members and 6,500 students, the Institute is a leading voice of the accountancy profession in Ireland and your members work in senior positions both in practice, industry and across the public sector. On a personal note, as a fellow of the Institute, I’ve always found this to be a highly progressive body in both theory and practice, and it’s a particular pleasure to address you here today as Minister for Public Expenditure and Reform.
Thanks also to the officials in my own Department, particularly Ronnie Downes and the Government Accounting and Corporate Bodies Unit in PER for their preparation for this session and for their continuing work in the modernisation of financial reporting in Ireland to cohere with international best practice. Finally, I’d like to thank those who contributed to this research in the form of interviews with Ciaran and Elaine. Your perspectives and insights have greatly enriched the report as a whole.
Financial Reporting Reform
I don’t often get a chance to speak to accountants about accountancy itself. But it’s a topic that, as we know, is far more fascinating and involving than people often appreciate. The history of accounting and its development and impact is an interesting subject, whether one looks at the Roman Empire, and its systems to manage revenue and expenditure or the Italian city states in the renaissance, whose growing prosperity was the catalyst to introduce that essential concept of accountancy - double entry book-keeping.
In terms of the impact of accountancy : I think of the work by the historian Niall Ferguson, who goes so far as to attribute Britain’s triumph over France in the Napoleonic wars to that country’s successful and credible system of budgetary accounting, underpinned by the legitimacy of parliamentary democracy, which allowed Britain to take on national debt and acquire credit on a magnitude beyond that available to France, which was at face value the more populous and wealthy country.
Today, two hundred years on from that era, the credibility of Ireland’s fiscal framework has allowed our country to rise to meet the huge challenges of protecting lives and jobs through a pandemic. It is my view that the hard-won credibility we enjoy for our macro framework needs to be reflected and developed at the more micro level, by introducing modern accounting and financial reporting, stepping up our levels of capability and leveraging the professionalism that is in place across the public service.
Of course, financial numeracy and accurate reporting are ever more important when numbers fly around at the push of a button. Accountancy tries to put order in this increasingly complex world of transactions. If we take a look at the bigger picture, we’re in a time in politics and governance where accusations of ‘fake news’ have diminished public trust in how governments govern, and how the modern state relates to the citizen. Transparency should be at the heart of what we do, both as politicians, and accountants, to ensure trust is rebuilt and to sustain and strengthen that trust over the longer term. Institutions that manage and account for public money need to be as transparent as possible; it’s good for financial reporting, and for the democratic process.
My Department is currently undertaking a major reform of the accounting framework for central Government Departments. This is something in which I take a particular interest and which I am determined to progress. Our traditional cash-based system of Government accounting is reliable, and robust, but very limited in its focus and use. International bodies including the IMF and the OECD have strongly recommended that we expand and improve that system and I very much agree with those findings. These reforms will greatly assist us in delivering a new and modern system for Ireland. I don’t underestimate the scale of this task – it is quite a challenge to reform accounting rules that have their origin in legislation – still on our statute books - dating back to 1866! However, is fada an bóthar nach bhfuil aon chasadh ann – it’s a long road that has no turning, and as we embark on this journey, we can look back on a system that has served us well in the past, but needs modernisation now.
A phased approach to modernisation is well underway and this will be delivered in tandem with the Financial Management Shared Service (FMSS) from 2021 to 2025, another major whole-of-government project which is being led by the National Shared Services Office, a body under the aegis of my own Department.
The Comptroller and Auditor General has reported in recent years that the financial reporting mechanism performed by the State is not as robust as it could be. While we know what is spent and when, cash-accounting, by which Government Departments do their budgeting, does not allow for the planning and asset management that an accruals based system allows for.
The current system of accounts audited by the C&AG, are known as the appropriation accounts. Much of the underpinning legislation, as I have said, dates from the 19th Century. The need to reform is akin to the transition from analogue communications to digital, as modern reporting practices are able to better capture the ‘real’ financial picture of what’s going on in an organisation. In short, accruals accounting, and the adoption of an IPSAS-based standards approach, will enable the drilling-down for information that not only allows for greater accountability, but also for greater efficiency in how the Exchequer’s money is spent. In Westminster, our counterparts in the U.K. Treasury have found the short-term benefits of accruals-based accounting to include more accurate valuation of assets, and in the long-term, a Whole of Government Account report, making for greater ease and transparency.
European dimension
This project also aligns well with the work ongoing at EU level to consider a European system of public accounting standards, and will position Ireland to take part in the initiatives which may emerge from that project. It also will support improvements in the collection of statistical detail by the Central Statistics Office and facilitate improved returns of Irish financial data to the EU.
Progress
In terms of major project milestones, a new Conceptual Framework proposal for central government accounting standards has been delivered, along with a number of Exposure Drafts for Central Government Accounting Standards. Officials in my Department are close to completing a series of information and awareness-raising seminars with Finance officers to outline these standards, and the differences from our current approach.
Standards & Manual
Following on from those seminars, we are shortly due to commence the process of the preparation of more detailed accounting policies, which will set out in specific detail the changes that will arise in the move to IPSAS standards. It is intended that this will be managed on a collaborative basis. My own Department will prepare draft policies, which will set out the new requirements, and highlight the differences from the current approach, for consideration and review by Finance Officers. On completion of the manual of policies, the Government Accounting Unit in my Department will be the central repository for all information on procedures and guidance on IPSAS-based accounting for government departments. I want to note in this context financial assistance that Ireland has received from the European Commission in respect of this exercise, which has supported the retaining of PwC to assist in this process.
Stakeholders
As I have noted previously I am very committed to bringing these reforms forward in a collaborative manner. I want to note some of the key stakeholders who are engaged in and supporting this process.
Firstly, The Finance Officers Network – this is a grouping of Finance Officers from Civil Service Departments that meet to consider the implications of modernisation when it comes to standards implementation. These are the women and men who will be applying the IPSAS-based standards; they will be the ambassadors for change within their own organisations. They are also a source of advice and wisdom as to how best to manage this highly complex and technical change process. I’d like to welcome many of you who are in attendance; your work is greatly appreciated, and I’d like to acknowledge you here today and thank you for your ongoing work and support.
Secondly I would like to acknowledge the role of The National Shared Services Office – and welcome officials from the NSSO who are here today. The NSSO are undertaking very important work in the development of a new Financial Management Shared Services Model, which will be crucial in supporting the introduction of modern accruals based financial reports.
Finally I would like to recognise the input of The Standing Advisory Group on Modernisation of Public Reporting and Accounting – While the standards and systems in place for Government accounting are grounded in, and to some degree constrained by, the rules and laws of the past, of course Ireland’s accountancy profession are world-leaders in applying modern standards throughout businesses, large and small, in our private sector as well as in many public service organisations and in academia.
I am particularly pleased, therefore, that distinguished people from our accountancy profession have stepped forward to form the Standing Advisory Group, which provides expert advice and oversight to my Department on the accounting and financial reporting reforms, and advice on the application of financial reporting standards and principles across central Government Departments and Offices. The Group will have an important role as the detailed accounting policies are developed, especially in any instance where Ireland might consider adaptions to the international standards, for example, to reflect our own constitutional and legal context. I would like to thank all of the members of the Standing Advisory Group for their work, and in particular the Chair, Colin Feely, who is a partner in Grant Thornton and whom I know is joining the panel discussion later.
I also want to note that all of these groups have successfully migrated online since the start of the Covid emergency and have continued to be an invaluable source of advice and networking both for my officials and the members of the groups themselves.
Upskilling and Development
The Department of Public Expenditure and Reform has been acutely aware that further work in relation to skills and capabilities needs to be undertaken in parallel with this reform process. We have already looked at some of the various options that might arise in relation to up-skilling. We will be assessing online academic courses on IPSAS accounting, at various levels including certificate and diploma and partnering with other organisations to offer a range of education training opportunities to underpin the continuing professional development and capacity-building throughout our civil and public service.
I am also aware that there has been a trend in the recruitment of qualified accountants to the civil service in recent years. I understand that over the period May 2019- Oct 2020 the Public Appointments Service, have managed two service wide competitions for accountants, and two further organisation-specific competitions. PAS also reported that 10 Government Departments expressed interest in drawing from these panels. In total 28 accountants have been assigned through this process.
In this context, to further understand the needs of Government Departments and Offices in the context of the ongoing reform, and to assist in planning for implementation, a service-wide survey will shortly be undertaken, seeking information on some of the key upskilling and recruitment questions that might arise.
In summary, today’s event is, for various reasons, an important landmark in Ireland’s road to reforming our public accounting systems, and I very much look forward to this afternoon’s discussion. And with that, it’s my great pleasure to hand the proceedings back to the Chair, and wish you all an educative and enjoyable afternoon.
ENDS
Contact:
Claire Godkin - Press Officer, Department of Public Expenditure and Reform - 085 806 3969