Eamon Ryan
Question:5 Mr. Eamon Ryan asked the Taoiseach if his Department's annual accounts are currently done on a full accrual accounting system; and if not, if there is a timescale for the implementation of such an accounting method. [26329/02]
Ceisteanna – Questions. - Departmental Accounting System.
The annual accounts for my Department are prepared in the format of the Appropriation Account, which is the format prescribed by statute required for the presentation of accounts to the Comptroller and Auditor General and for publication in the annual report of the Comptroller and Auditor General , which is laid before the House. The Appropriation Account is a cash based account.
My Department recently implemented a new financial management system as part of the work being undertaken on the management information framework. My Department is among the first Departments to implement such a system. This system supports the accounting and reporting for transactions on both a cash and accruals basis. Work is ongoing in my Department on the preparation of annual accounts on an accruals basis and it is intended that accruals accounts will be prepared in my Department for the 2003 financial year which will be the first full year of operation of the accruals system.
I have asked each Minister about this system and the Taoiseach's Department is the third to use any form of accrual accounting. The vast majority appear to have expressed no interest in their deliberations on this. The method of cash accounting in Departments relates to a statute going back to 1866, which is unbelievable. If any other organisation did their accounts on a cash basis they would be struck out by the accountancy bodies. Does the Taoiseach agree that this is a serious problem for the Government? One of the great failures of the Government in recent years has been in bringing Departments in under budget on current and capital spending.
Does the Taoiseach agree with the cash accounting system which encourages the end of year gorging of Departments to make sure they use budgets, even though the actual expenditure may not in reality occur in that year? Is that the right system? When the Minister for Finance answered my question on this he did not seem particularly interested in his Department switching systems and said if it did it would be on a non-statutory basis. Is it not time that every Department, including the Taoiseach's, switches to a full accrual accounting system to try to get some form of proper financial management in each Department?
This question refers specifically to the Taoiseach's Department.
This debate has been going on for a long time and Deputy Ryan will be aware that anyone using the accrual accounting system finds Government accounting systems a change. That is the way it has always been.
Many logical reasons have been put forward both for and against it. It is a cash based system. It creates its own advantages in that everything is written off on a year one basis which is alien to systems other than that employed by the Government.
There is a difficulty with the end of year issue. There would be better value for money and a better organised purchasing mechanism if the accrual system was used instead of the system of purchase and invoice having to be dealt with at the end of the year. On the other hand, there is the advantage of the finality of end of year records and it is extremely transparent. Within four or five days of the end of the year the Department of Finance publishes the accounts for the year and there are no hidden figures. The appropriations of aids is the only place where something can arise but they are easily queried. The concept of the Comptroller and Auditor General and the system of audit is a very good system.
Many Departments come in under budget and their balances help to offset overspend in other Departments and that is a useful system from the point of view of the Exchequer. I accept that it is a totally different system to that which applies in business. My Department is moving to use this system and I believe other Departments will also do so. Our management information framework which was designed in the Department of the Taoiseach is now being used by other Departments. I am pressing for its use because I think it is useful.