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Moving to accrual budgeting and accounting – the Swiss case

Moving to accrual budgeting and accounting – the Swiss case. Fritz Zurbrügg Head of Financial Planning, Budget, and Fiscal Equalization. Why the move to accruals. Provide Parliament and the public with more comprehensive information regarding the financial situation of the Federal Government.

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Moving to accrual budgeting and accounting – the Swiss case

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  1. Moving to accrual budgeting and accounting – the Swiss case Fritz ZurbrüggHead of Financial Planning, Budget, andFiscal Equalization

  2. Why the move to accruals • Provide Parliament and the public with more comprehensive information regarding the financial situation of the Federal Government. • Harmonize the accounting framework with lower levels of government to increase comparability. These started using accruals at the beginning of the 80’s. • Increase cost transparency at the level of ministries and administrative units. • Provide administrative units using performance budgeting with an adequate accounting framework. Move to accurals / F. Zurbrügg / 3-4, March 2008

  3. Key elements of the new accounting model (1) • Explicit recognition that budget management should take into account both accrual and cash views (dual approach). • Accounting standards based on IPSAS to ensure maximum transparency and comparability. • Appropriations are made on accrual basis. However, separate investment statements for administrative units to ensure control over investment spending. • Fully integrated accounting system through all levels of the federal administration. Move to accurals / F. Zurbrügg / 3-4, March 2008

  4. Key elements of the new accounting model (2) • Use of internal service charges for certain goods and services (e.g. ICT service and leasing of office and production space). • Mandatory introduction of cost accounting for all administrative units. • Revamped financial reporting. Modular approach to target different groups according to their information requirements. All reports in three languages (German, French, Italian). • Introduction of fiscal sustainability reports to complement limited time frame of standard budget cycle. Move to accurals / F. Zurbrügg / 3-4, March 2008

  5. Initial experiences • First accrual budget was for 2007 and medium term plan 2008-10. Enormous pressure on administrative units (new accounting system and IT environment)  training and preparation should not be underestimated. • Internal service charges met with significant resistance from most administrative units. • Well-received by Parliament. Increased complexity but more comprehensive information  large investment needed to educate parliamentary budget commissions. • Press and public continue to focus on cash view. Move to accurals / F. Zurbrügg / 3-4, March 2008

  6. Would we do it again? • Yes, even if cash and accrual results differ only slightly in Switzerland. • Accrual budgeting ensures consistency between the budgeting and accounting framework. • Accrual budgeting increases cost awareness and ensures better management control at the operational level. • Accrual budgeting is necessary for moving toward performance budgeting. Move to accurals / F. Zurbrügg / 3-4, March 2008

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