CURRENT STATE OF PLAY OF THE DISCUSSION OF ACCRUALS ACCOUNTING AND/OR IPSAS
With a view to align accounting procedures with certain reporting requirements of the European Union and the international financial institutions, and as part of the initiated budget reform started modernizing of Bulgaria’s public sector accounting system. The Eurostat’s methodology - ESA 95 as well as GFSM 2001 have been followed as a fundamental accounting framework in the process of developing the budget entities reporting methodology.
A uniform Chart of Accounts (CoA) for the budget sector was developed and was adopted in 2001 and by the end of the same year was fully implemented in the public sector. A Chart of Accounts Implementation Manual and an Account Transformation Table with guidelines were prepared to help the transition to the new CoA and to make familiar the financial officers with the basic concepts, principles and approach used in his developing, as well as to explain the new aspects in accounting, as compared to prior practices in the public sector.
The structure of the accounts, the principles and rules for recognition, valuation and classification of assets, liabilities, revenues and expenditures in the Chart of Accounts are based on the methodological principles and the accounting framework of the ESA 95 and GFSM 2001. Thus, conditions have been created for consolidation of the financial and accounting information on an accrual basis and for provision of data for the needs of macroeconomic and fiscal analyses in compliance with the requirements of the main users of financial information for the Bulgarian public sector – National Assembly, Council of Ministers, BNB, NSI, EUROSTAT, international institutions and organizations, banks and other financial institutions, rating agencies, etc.
The Accountancy Act which came into force as from 01.01.2002 established the legal framework of the budget sector accounting and defined its scope. The law regulates:
ü definition of the budget entity for accounting and reporting purposes;
ü application of accrual accounting under uniform CoA and accounting rules and guidelines for all budget entities approved by the Minister of Finance;
ü the MoF consolidates the data on accrual and cash basis for the whole public sector under terms and conditions determined by the Minister of Finance.
Accountancy Act (since 2005) regulates the maximum extension of the basis for drawing up and updating the secondary legislation concerning budget sector accounting as following:
ü EU requirements for reporting, statistics and budgeting;
ü the accounting framework, principles and concepts of the GFSM issued by the IMF;
ü International Public Sector Accounting Standards;
ü requirements of Bulgarian legislation concerning budgeting, execution and reporting of the Consolidated Fiscal Program, management and control of funds and expenditure in budget entities.
The existing public sector accounting principles and concepts are preserved and the prerequisites are created for complying with the requirements of both international institutions and organizations, and the national legislation concerning public sector accounting.
On the whole, public sector accounting in Bulgaria is built upon the same fundamental and generally applied accounting concepts, principles and rules (the accrual principle, the principle of going concern, prudence, revenue and expenditures compatibility, the substance over form principle, consistency of the accounting policy and the requirement that the operations have a good documentary ground, valuation and recognition rules etc.) that underlie both our national accounting legislation, and the International Public Sector Accounting Standards (IPSAS). These accounting principals have been applied as much as possible in the design of the Bulgarian CoA and accounting rules and guidelines for budget entities to the extent in which they are consistent with the adopted ESA 95 and GFSM 2001 framework.
Implementation of the new accounting framework provides consolidated data on an accrual basis for the Bulgarian public sector. The quality of statistical data is improved considering the significance of the public sector accounting system as a main source of data in the process of compilation of government finance statistics as well as of assessment of the overall fiscal position, according to the methodology of the ESA 95. Conditions are created for the practical application of data on an accrual basis for purposes other than the statistics (such as assets and liabilities structural analysis, delay in payment of receivables and liabilities, drawing up short-term forecasts and analysis, management decisions, budgeting, etc.)
IPSAS: How far should we go?
Having in mind the legislative framework for the structure and organization of public finance in Bulgaria, the budget process in particular, and the Government’s commitments to comply with IFI accounting principles, concepts and requirements, it is not realistic to consider readjustment of accounting practices in direct incorporating of IPSAS especially before the alignment of the existing differences between IPSAS and the ESA 95 and GFSM 2001 framework.
Institutional Setting
The Ministry of Finance is the authority responsible for developing the national methodology for reporting on the consolidated fiscal programme. The Treasury Directorate, MF is in charge of developing accounting methodology for the budget entities, coordinates budget execution and cash management, develops concepts, principles, rules and procedures of the Single Treasury Account, and drafts related normative acts and guidelines.
The accounting and reporting activities and the budgetary discipline of budgetary entities are subject to internal audit as well as to external audit by the National Audit Office.