Federal Department of Finance FDF Federal Finance Administration FFA

Moving to accrual budgeting and accounting – the Swiss case

Fritz ZurbrüggHead of Financial Planning, Budget, andFiscal Equalization

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Federal Department of Finance FDF

Federal Finance Administration FFA Move to accurals / F. Zurbrügg / 3-4, March 2008

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.

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Federal Department of Finance FDF

Federal Finance Administration FFA Move to accurals / F. Zurbrügg / 3-4, March 2008

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.

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Federal Department of Finance FDF

Federal Finance Administration FFA Move to accurals / F. Zurbrügg / 3-4, March 2008

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.

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Federal Department of Finance FDF

Federal Finance Administration FFA Move to accurals / F. Zurbrügg / 3-4, March 2008

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.

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Federal Department of Finance FDF

Federal Finance Administration FFA Move to accurals / F. Zurbrügg / 3-4, March 2008

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.