I welcome the OECD Report of Financial Reporting in Ireland. My officials are currently considering the report and the recommendations, to consider options for implementation.
The OECD Review of Financial Reporting in Ireland builds on the experience and knowledge acquired by the Budgeting and Public Expenditures Division of the OECD Directorate for Public Governance over past decades through its Network of Financial Management and Reporting Officials across OECD countries.
The aim of the review was to assist in assessing opportunities and challenges associated with adopting accruals, the accounting basis used by a large majority of OECD countries, and more generally to provide recommendations for the modernisation of the central government financial reporting framework. This OECD mission was organised in the broader context of the work underway in the European Union for developing a single set of harmonised accrual-based accounting standards.
Despite having recognised strengths, the Irish financial reporting framework is not fully aligned with the OECD Recommendation on Budgetary Governance, which advises that countries present a comprehensive account of public finances. Compared to other OECD countries, in Ireland, information on government assets and liabilities is very limited; time lags for publishing reports are among the longest in the OECD; and institutional coverage of the accounts is particularly narrow.
The OECD report notes that accrual data would be a “building block” for richer, more reliable fiscal information, which would help Ireland formulate improved assumptions for fiscal forecasts to be better equipped to identify fiscal risks. In this context it is also important to preserve and maintain the cash-based presentation of budgetary information with which stakeholders in Ireland are familiar.
The OECD identify financial reporting as one of the foundations of good fiscal management. High quality financial reports are essential to ensure that the government’s fiscal decisions are based on the most up to date and accurate understanding of its financial position. Financial reports are a mechanism to hold governments accountable for their financial performance and a critical source of information for stakeholders to understand the government’s financial operations and their implications for economic decisions.
The Financial Management Shared Service (FMSS) project and the Civil Service Renewal Plan offer timely opportunities for moving forward the central Government accounting and financial reporting modernisation agenda. The FMSS is a modern IT system to facilitate effective financial management and it is designed to support the introduction of accrual accounting.