IPSAS 24
PRESENTATION OF BUDGET
INFORMATION IN
FINANCIAL STATEMENTS
International Public Sector
Accounting Standards (IPSASs)
• The IPSASs are accounting reporting guidelines for the
preparation and presentation of general purpose
financial reports of public entities.
• The IPSASs prescribe the manner in which general
purpose financial statements should be presented to
ensure comparability both with the entity’s financial
statements of previous periods and with the financial
statements of other public entities.
• To achieve this objective, the IPSASs set out overall
considerations for the presentation (structure) and
minimum requirements (content) of financial statements,
and provide guidance on the recognition, measurement,
and disclosure of other specific transactions and events.
Accrual & Cash Accounting IPSAS
There are two sets of IPSAS. Under accrual based IPSAS
transactions and events are recorded in the accounting
records and recognized as assets, liabilities, net
assets/equity, revenue, or expenses in the financial
statements of the periods in which they occur.
Under cash based IPSAS, transactions and events are
recorded and recognized in the financial statements only
when cash or its equivalent is received or paid.
Public entities are encouraged to adopt the accrual IPSAS.
It facilitates correctly reports resource allocation between
periods and enhances transparency on total resource
costs and impact on the economy.
Scope and Authority of IPSASs
• IPSAS are designed to guide the preparation
and presentation of general purpose financial
statements of public sector entities.
• Public sector entities include national (central),
regional and local governments, and their
component entities such as departments,
agencies, boards, commissions et cetera.
• IPSAS do not apply to Government Business
Enterprises (GBE).
General purpose financial
statements
General purpose financial statements are those
intended to meet the needs of users who are not
in a position to demand reports tailored to meet
their specific information needs, e.g taxpayers
and ratepayers, members of the legislature,
creditors, suppliers, the media, and employees.
Such reports provide information about an entity’s
assets, liabilities, changes in net assets/equity,
revenue, expenses, and cash flows and may be
presented separately or within another public
document such as an annual report.
Objectives of general purpose
financial statements
To provide information that is useful for decision-making
and to demonstrate the accountability of the entity for the
resources entrusted to it by providing information:
(a) About the sources, allocation and uses of financial
resources entrusted to it;
(b) On how the entity financed its activities and met its cash
requirements;
(c) That is useful in evaluating the entity’s ability to finance
its activities and to meet its liabilities and commitments;
(d) About the financial condition of the entity and changes
in it
(e) Useful in evaluating the entity’s performance in terms of
service costs, efficiency and accomplishments.
Objectives of general purpose
financial statements (cont.)
General purpose financial statements also have a
predictive or prospective role. They provide information
useful in predicting the level of resources required for
continued operations, the resources that may be
generated by continued operations, and the associated
risks and uncertainties.
Financial reporting may also provide users with information
indicating whether resources were obtained and used
(a) in line with the legally adopted budget; and
(b) in accordance with legal and contractual requirements,
including financial limits established by appropriate
legislative authorities.
Responsibility for Financial
Statements
The responsibility for the preparation and presentation of
financial statements varies within and across
jurisdictions with some drawing a distinction between the
responsibility for preparing and responsibility for
approving or presenting the financial statements.
Consider examples of people / positions responsible for the
preparation and for the approval and presentation of
financial statements of individual public entities.
These may be the heads or chief executives for the
individual entities and the finance minister or the head of
the central finance agency (e.g., controller or
accountant-general) for the government as a whole.
Components of Financial
Statements
A complete set of financial statements comprises:
(a) A statement of financial position;
(b) A statement of financial performance;
(c) A statement of changes in net assets/equity;
(d) A cash flow statement;
(e) When the entity makes publicly available its
approved budget, a comparison of budget and
actual amounts either as a separate additional
financial statement or as a budget column in the
financial statements; and
(f) Notes, comprising a summary of significant
accounting policies and other explanatory notes.
IPSAS 24:Disclosure of budget
information
• IPSAS 24, in furtherance of IPSAS 1,
provides guidance for public entities
which publicize their approved budgets
to include budget information and a
comparison of budget and actual
amounts either in their financial
statements
Approved budget
• The approved budget is the expenditure authority
derived from laws, appropriation bills, rules,
decisions etc, for an entity to apply specified funds
from its revenue or from the treasury for agreed and
identified purposes.
• The approved budget establishes authority for
expenditure on the specified items and the legal limits
within which an entity must operate.
• In some entities, the approved budget for which the
entity will be held accountable may be the original
budget and in others it may be the final budget.
Original and final budget
• The original budget is the budget that was first
approved for application in the budget year.
• Budgetary adjustments may be necessary in the
course of the year where the original budget did not
adequately envisage actual operating circumstances.
Actual revenue may fall short of budgeted amount
and reductions or transfers on budget heads or line
items become necessary to accommodate changed
priorities and also to maintain fiscal discipline.
• The final budget is the original budget for the period
adjusted for reserves, provisions accruals, transfers,
allocations, and other authorized changes.
Budgetary process
• Most, but not all, governments prepare
and issue their annual financial budgets as
public documents, or otherwise make
them publicly available.
• There are three main stages in the
budgetary process which may be
conducted on a cash or accrual basis at
each of the levels of government (local,
regional, state, and national):
Budget formulation
• During the formulation stage, initial budgets are
developed and submitted to the legislative
bodies for consideration and spending
authorization based on the political priorities and
fiscal policies of government.
• These budgets reflect the financial
characteristics of the government’s plans for the
forthcoming period and are used to analyze the
potential consequences of those plans on the
economy
Fiscal Transparency
Fiscal transparency is a major contributor to the cause of
good governance. It leads to better informed public debate
about the design and results of fiscal policy and makes
governments more accountable for the implementation of
fiscal policy,
Some countries (i.e., Germany) have special mechanisms for
reviewing the realism of underlying economic forecasts, as
well as related revenue estimates, to assure that the public
is fully informed regarding these projections.
Fiscal transparency requires disclosure of more than just
budget (and actual) figures. It also requires disclosure of
information on the assumptions behind budget figures that
may be subject to audit or review by the external auditors.
Code of Good Practices on Fiscal
Transparency
To encourage countries to publicize their budgetary practices, the
International Monetary Fund (IMF) issued a Code of Good
Practices on Fiscal Transparency. The Code recommends the
following four key objectives:
• The roles and responsibilities in government should be clear;
• The public should be provided with full information on the past,
current, and projected fiscal activity of government in a timely
manner;
• Budget preparation, execution, and reporting should be
undertaken in an open manner; and
• Fiscal information should attain widely accepted standards of
data quality and be subject to independent assurances of
integrity.
Financial Management
Many governments provide guidance documents on the budget process
and procedures. These include the areas to be considered when
developing proposals and new initiatives, capital budgeting and
working capital management, setting user charges, and output costing.
Some professional organizations publish best practices in public
budgeting in order to encourage their members to improve their
budgeting procedures.
The following four principles are recommended
1. Establish broad goals to guide government decision making;
2. Develop approaches to achieve goals;
3. Develop a budget consistent with approaches to achieve goals; and
4. Evaluate performance and make adjustments.
Budget information reporting
• Public sector entities are typically subject to
budgetary limits in the form of appropriations or
budget authorizations (or equivalent), which may be
given effect through authorizing legislation.
• General purpose financial reporting by public sector
entities may provide information on whether
resources were obtained and used in accordance
with the legally adopted budget.
• Where the financial statements and the budget are
on the same basis of accounting, IPSAS 24
encourages the inclusion in the financial statements
of a comparison with the budgeted amounts for the
reporting period.
Budget information reporting
formats
• The use of a columnar format for the financial
statements, with separate columns for budgeted
amounts, actual amounts and for any variances
from the budget or appropriation
• A statement by the individual's) responsible for
the preparation of the financial statements that
the budgeted amounts have not been exceeded.
• If any budgeted amounts or appropriations have
been exceeded, or expenses incurred without
appropriation or authority, then details may be
disclosed by way of note to the relevant item in
the financial statements.
Presentation of a comparison of
budget and actual amounts
• Some public entities are required by law to make public their
approved budgets while others freely opt to do so to enhance
their public accountability and transparency.
• IPSAS 1 & 24 require a public entity which makes public its
approved budget to present a comparison of (original or final)
budget amount and actual amount in their primary financial
statements, and;
• by way of note, an explanation of material differences between
the budget and actual amounts, unless such explanation is
included in other documents issued with the financial
statements and a cross reference to those documents is made in
the notes.
Reasons for presentation of budget
amounts in the financial statements
• For public entities to demonstrate compliance with
the approved budget(s) for which they are held
publicly accountable and
• To enhance the accountability and transparency of the
entity by enabling the users of the financial
statements to identify whether resources were
obtained and used in accordance with the approved
budget.
• Differences between the actual the budget amounts
(variances) may also be explained in the financial
statements for completeness.
Form of presentation and disclosure of budget
amounts in financial statements
A comparison of budget and actual amounts shall be presented in
the financial statements either as:
(1) A separate additional financial statement or
(2) Additional budget columns in the financial statements.
The comparison of budget and actual amounts in the financial
statements shall present separately for each level of the entity:
(a) The original and/or final budget amounts;
(b) The actual amounts on a comparable basis; and
(c) By way of disclosure note, explanation of material
variances between actual and budget amounts.
Presentation and disclosure on
comparable basis
All comparisons of budget and actual amounts shall be presented
on a comparable basis, that is:‘on the same accrual, cash or other accounting basis, same
classification basis and for the same entities and period as for
the approved budget.’
This way, information about compliance with the budget is
disclosed in the financial statements on the same basis as the
budget itself.
Where separate budgets approved for individual controlled
entities or activities are recompiled to facilitate comparison of
consolidated budget amounts with actual amounts in the
consolidated financial statements, such consolidation does not
amount to changes or revisions to the approved budgets.
Budget and financial statements
prepared on different bases
Where the budget and financial statements are prepared
on different basis, disclose by note that the budget
and the accounting bases differ and that the Statement
of comparison of Budget and Actual Amounts is
prepared on the budget basis.
(Such disclosure and reconciliation statement is not
required where budgets are prepared on the accrual
basis and in the formats adopted for financial
statements and additional budget columns can be
included in the financial statements for presentation
of budget amounts)
Incomparable accounting and
budgeting bases
• Governments are encouraged to operate their budgeting
and accounting systems on the same basis. If the
budgetary system is on a different basis than the
accounting system, a statement should be developed to
reconcile key differences between the two systems.
Since the accrual financial reports include cash flow
statements, a reconciliation may be achieved by
ensuring these cash flow statements articulate with the
cash budget. In those instances where the budgetary
system is transitioning to accrual budgeting, a separate
reconciliation procedure with the accrual financial reports
will be necessary.
Reconciliation of actual amounts on
comparative (budget) basis and actual
amounts in the financial statements.
• Where the financial statements and the budget are not prepared
on a comparable basis, the actual amounts presented on a
comparable basis to the budget shall be:
(a) If the accrual basis is adopted for the budget, reconciled to
total revenues, total expenses and net operating, investing and
financing cash flows in the financial statements, or
(b) If a basis other than the accrual basis is adopted for the
budget, the major totals presented in the statement of budget
and actual comparison will be reconciled to net operating,
investing and financing cash flows in the financial statements.
• The reconciliation shall be disclosed as part of the statement of
comparison of budget and actual amounts or in the notes to the
financial statements.
Reconciliation of net cash flows from
operations to net surplus/(deficit) from
ordinary activities
20X2
x
20X1
x
Non-cash movements
X
x
Depreciation and amortization
X
x
Increase in provision for doubtful debts
X
X
Increase in payables and borrowings
X
X
Increase in provisions for employee costs
X
X
Gains)/losses on sale of assets and investments
X
X
Increase in receivables and other current assets
X
X
Increases due to revaluations
X
X
Extraordinary operating item
X
X
Net cash flows from operations
X
X
Surplus/(deficit) from ordinary activities
Institutions in the Budget Process
The Preparation of the central Government Budget in
Denmark is done in co-operation between several levels
of Government. The different authorities play their own
special role - not only in the preparation of the Budget
Proposal, but also in implementing the Budget, and
controlling the outcome.
The authorities and the functions they perform can be
found in every country. A closer study will however show
differences with regard to Procedures used in the Budget
preparation and appropriation Process, and during
Budget implementation, follow-up and control.
This presentation will give an introduction to the authorities
and their role in the Danish Budget and appropriation
system.
Parliament
The constitution specifies the budget preparation and presentation
process. Parliament is the central budget appropriation authority.
No public expenditure may be paid without a prior appropriation
from the Parliament, and no tax may be collected unless it is
allowed by law.
Government’s Budget Proposals are presented to Parliament at the
latest four months prior to the beginning of the fiscal year.
Parliament’s Finance Committee discusses and comments on the
detailed budget proposals and tables them in Parliament.
Parliament may amend the Budget Proposals before adopting
them.
The Parliament’s Finance Committee authorizes release of
appropriated funds for use by spending ministries.
Government
At Cabinet-level only a few general economic discussions
take place
Detailed discussions of Government Finance Policy and
Economic Programmes take place in the Cabinet’s
Economic Committee (of 6 ministers where the Minister
for Finance presides). The Committee involves the
ministers responsible spending ministries on specific
matters.
In January the Cabinet’s Economic Committee sets the
broader economic targets and decides on ceilings
(spending limits) for each ministry for the coming year.
In June the Cabinet discusses the result of the Budget
Preparation Process and decides on the Budget
Proposal for presentation to Parliament.
Ministry of Finance
• The Ministry of Finance coordinates the Budget Process.
It presents the Budget Proposal to Parliament on behalf
of all the cabinet.
To make Guidelines and Directions to be used by the
spending ministries when drafting the Budget.
To collect draft Budget Proposals from the ministries and
combine these to the final Government Budget Proposal.
To follow-up on Government revenue and spending and
make economic forecasts and calculations as
preparation for Government decisions on economic
policy.
Through the Agency for Economic Management to ensure
the preparation and presentation by ministries and
agencies.
Spending ministries
Cabinet ministers are held responsible for all the
administrative and political decisions taken within their
areas, including agencies reporting to them.
They present draft Budget Proposal for their ministries and
agencies to the Ministry of Finance.
They follow-up on the actual implementation and take
action if the ministry or agency has difficulties to keep
within given appropriations.
If a spending ministry during the Budget follow-up finds it
necessary to apply for a change to an appropriation, the
application and the financing must be approved by the
Ministry of Finance before it can be submitted to
Parliament.
Spending agencies
The spending agencies operate under ministers to whom
they report.
The Budget Process starts with the minister asking the
different agencies for draft Proposals to the Budget for
their operations. During the fiscal year the spending
agencies control spending and follow-up on the allocated
appropriations. If this follow-up shows that the given
appropriations are about to be exceeded the agency
must either take actions to reduce spending or apply for
more appropriation. Such an application must go through
the relevant minister and approved by the Ministry of
Finance before it is presented to Parliament.
Budget execution
Procedures for the execution and monitoring of approved
expenditure and for collecting revenue should be clearly
specified.
There should be a comprehensive, integrated accounting
system which provides a reliable basis for assessing
payment arrears.
Procurement and employment regulations should be
standardized and accessible to all interested parties.
Budget execution should be internally audited, and audit
procedures should be open to review.
The national tax administration should be legally protected
from political direction and should report regularly to the
public on its activities.
Disclosure on changes from Original
to final Budget
By way of note present an explanation of whether changes
between the original and final budget are a consequence of
reallocations within the budget, or of other factors:
(a) By way of note disclosure in the financial statements; or
(b) In a report issued before, at the same time as, or in
conjunction with the financial statements, and shall include a
cross reference to the report in the notes to the financial
statements.
That explanation will disclose whether changes arise as a
consequence of reallocations within the original budget or as a
consequence of other factors, such as changes in the overall
budget parameters, including changes in policy. Such
disclosures are often made in reports issued with, but not as
part of, the financial statements
Disclosures of Budgetary Basis,
Period and Scope
Disclose in notes to the financial statements, information
about the basis of preparation of the financial statements
and the significant accounting policies adopted. This
assists users to better understand the relationship
between the budget and accounting information
disclosed in the financial statements.
Disclose in notes to the financial statements the period of
the approved budget. Entities may approve budgets for
an annual period or for multi-year periods. Disclosure of
the period covered by the budget, where it differs from
the reporting period adopted for the financial statements,
assists the users of those financial statements to better
understand their relationship with the budget.
Identify in notes to the financial statements the entities
included in the approved budget.
Disclosure of comparative budget
information of the previous periods
• IPSAS 24 requires a comparison of budget and
actual amounts to be included in the financial
statements of entities which make public their
approved budgets). The disclosure of
comparative information in respect of the
previous period in accordance with the
requirements of this Standard is not required.
Effective Date
• An entity shall apply this IPSAS for annual financial
statements covering periods beginning on or after
January 1, 2009.
• Earlier application is encouraged. If an entity applies this
Standard for a period beginning before January 1, 2009
it shall disclose that fact.
• When an entity adopts the accrual basis of accounting,
as defined by IPSASs, subsequent to this effective date,
this Standard applies to the entity’s annual financial
statements covering periods beginning on or after the
date of adoption.