A report produced by an IMF team, which visited Dublin last March to investigate the level of fiscal transparency, both praises and damns Ireland. While the International Monetary Fund says [pdf] that "Ireland is approaching best practice in fiscal reporting and forecasting," the content makes clear that the accounting systems currently in place are closer to the times of Queen Victoria than the computer age.
At the MacGill Summer School in July 2009, Enda Kenny, then leader of the Opposition, asked why do we have a budgetary system in place that is unfit to run a corner-shop, let alone a nation of 4m people?
Today if Taoiseach Enda Kenny requests data on the total public spending on legal services in 2012, wonder how long it would take to provide an estimate? Ditto for information technology and so on.
Weeks at least if Freedom of Information requests are a guide. Usually, information is released before all central government departments respond. Some ignore internal requests for data. Add in agencies/ quangoes and local government, and there would be lots of trawling.
Kenny could not be given accurate information in a reasonable time span as there is no common chart of accounts!! This is shoe-box accounting.
So much for the corner shop and while its bad enough that there is little public transparency, ministers are often as ignorant.
The IMF says that the government "prepares two sets of annual accounts which are audited and published within nine months of year-end, but neither provides a comprehensive overview of the central government finances or follows international accounting standards though they do conform with domestic legal requirements.
Ireland’s consolidated government balance sheet data currently excludes the €116.8bn (73.5% of GDP) in fixed assets of central and local governments, the €116bn (73.0% of GDP) in liabilities associated with public service pensions, €4.0bn (2.5% of GDP) in liabilities under PPPs, and the €324.7bn (204.3% of GDP) in assets and liabilities held by public corporations
Monthly Exchequer returns only include part of revenues and spending; the charts of accounts for central government departments, extra-budgetary funds and other non-market agencies, local governments, and public corporations are not able to automatically generate summary fiscal data in line with international reporting standards; there is no permanent official or unit in the Irish administration responsible for setting and enforcing financial reporting standards across the public sector. As a result, there is no uniform set of accounting rule and procedures applying to government departments, extra-budgetary funds, semi-state bodies, local governments, and public corporations. "This makes consolidating government-wide financial information and promoting system-wide improvements in financial reporting practices very costly and time consuming."
The report adds that collection and consolidation of ESA95 (European System of Accounts 1995 standard) general government data for fiscal surveillance purposes cannot be done directly from the accounting systems used by central government departments, local governments, and other general government entities. "Instead it requires extensive manual manipulation to reclassify data and consolidate out intra-governmental stocks and flows. This increases the risk of double counting of assets and liabilities across general government units, as happened in the case debt issued by the NTMA to the Housing Finance Agency which was mistakenly counted as being held outside the general government between 2007 and 2011. This resulted in Ireland’s general government gross debt being overstated by €3.6bn (2.3% of GDP) at the end of 2011.
"Detailed control reviews and improvements have occurred since then, including three published reports into the error. The lack of a comprehensive and exhaustive program classification also blurs the line of sight between policy objectives, resource allocations, expenditures, and outcomes and makes it difficult to prepare COFOG (Classification of the Functions of Government) based statistics on the functional distribution of expenditure without resort to estimation."
The IMF recommends that the government should publish its own version of a debt-sustainability analysis, demonstrating the interaction of the new fiscal rules, extending out 10–20 years.
It should augment the internal long-term fiscal projection model and publish its projections at least every two-to-three years. This model will demonstrate the impact of ageing and health related expenditure pressures, and by including detailed entitlement data, will allow the impact of alternative expenditure policy changes on the long-term fiscal gap to be assessed.
The Fund team also recommends that the 2009 public staff pension cost accrual be updated on a regular basis.
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