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An Roinn Caiteachais PhoibH agus Athchoirithe Department of Public Expenditure and Reform Oifig An Ard-Runai Office of the Secretary General Committee of Public Accounts Leinster House Dublin 2 Email: pac@oireachtas.ie 02 November 2021 Dear Mr. Keenan, I refer to your correspondence of 19th October 2021 in relation to the provision of information for the Committee in respect of the rollout of accounting reforms.
The Committee had requested a timeline for the completion of the implementation of the OECD recommendations regarding the incorporation of accrual accounting principles.

I attach a short background note on the project, and a timeline as requested .

The committee had also requested an annual update on this progress, and the Department will provide a further update by end Q3 2022.
I am very aware that issues relating to the format and presentation of appropriation accounts are of particular interest to the Committee of Public Accounts.

Officials of my Department would be happy to engage further with the Committee, or the secretariat, to discuss the reform process in general, or to consider any particular aspects thereof.
Yours sincerely David Moloney Secretary General Tithe an Rialtais, Sraid Mhuirfean Uacht, Baile Atha Cliath 2, D02 R583, Eire Government Buildings, Upper Merrion Street, Dublin 2, D02 R583, Ireland T +353 1 604 5587 LoCall 1890 66 10 10 www.gov.ie R0868 PAC33 Background note - Reform oflreland's Government Accounting Framework Ireland has a distinctive approach to financial management and reporting.
It is grounded in legislation dating to 1866 and a system of administrative financial principles and procedures maintained by the Department of Public Expenditure and Reform.

While this system has served Ireland well, it is timely and important that it is revised and updated in line with international developments and with the broader Civil Service modernisation agenda.
The appropriation accounts, showing the financial transactions of Government Departments, are prepared in accordance with the Exchequer and Audit Departments Act 1866 (as amended by the Comptroller and Auditor General (Amendment) Act 1993) and w ith accounting rules and procedures laid down by the Minister for Public Expenditure and Reform.

The accounts are a cash-based record of the receipts and payments in the year compared with the amounts provided under the Appropriation Act.
The appropriation accounts also show prior year figures for comparison purposes.

technically At central government level, Ireland uses cash-based accounting system - referred to as a 'modified cash' system as information of an accruals nature is included in the notes to the appropriation accounts.

This is in contrast to the local authorities and agencies, and indeed the entirety of the private sector domestically and international ly, which are based on standard accrual accounting rules.
Key differences between cash and accrua l accounting are (a) cash accounting records transactions wh ich move cash into and out of the budget line, whereas accrual accounting is based upon economic events, i. e. transactions which involve an exchange of value (including obligations and commitments), irrespective of when cash changes hands; and (b) accrual accounting entails the maintenance of a balance sheet, showing the organisation's 'net worth' as well as a cash flow statement which reflects the organisation's available liquid assets.
International Public Sector Accounting Standards (IPSAS) Government has previously agreed to use the International Public Sector Accounting Standards (IPSAS) as the basis for the future Government accounting framework, subject to any amendments requ ired to take account of particular legal, policy or other requirements relating to Ireland .

Financial Management Shared Services System (FMSS).
The development of the new accounting framework is also taking place at the same time as the introduction of the new FMSS.

The two projects are being developed in close collaboration so as to ensure that the new system will be capable of meeting the needs of the new accounting framework, and to manage the alignment of the implementation of both project s. R0868 PAC33 Progress Update Current Status Additional Notes Project Inception and Set-up 1.

Memo for Government approved in October 1.


Completed 2019 2.

Governance Arrangements and Road Map 2.

Comp leted Figure Part 1.

Roadmap for Implementation of Central 1.

Government Financial Reporting Reforms Project Inception and Set-up Phase One 2019 1.

Document reform objectives, outcomes and estimated costs (new framework) in a concept document/Memorandum for Government seeking Government approval.

2.

Define governance arrangements and finalise 3.


Establish project governance arrangements/Steering Committee/Standing Group/ Working Groups 4.

Survey financial maturity and accounting capability across Government Depaitments to assess accounting skills gaps project organisation and road map defined 3.

Standing Advisory Group Established 1 3.

Completed 4.

A survey of the accounting capabilities and training needs by Finance Officers 4.

Completed (June 2021) 5.

Completed 5.


Redefine accounting gap assessment/ finalise 5. project organisation and roadmap.

Initial accounting assessment Gap completed by OECD - will be supplemented by development of accounting manual in phase two.

1 Membership attached at Appendix A R0868 PAC33 Definition of framework 1.

Develop Conceptual Accounting Reform the New IPSAS Accounting I Definition of the New IPSAS Accounting Framework for I 1.

Conceptual Framework developed framework 2.


Adopt, Adapt or develop the first set of IPSAS accounting standards, policies and procedures covering initially priority areas2 ( and all accounting areas at a later stage) 2.

IPSAS based standards initially reviewed, Accounting Manual Development (policies) has commenced 1.

Draft framework completed 2.

In progress Q4 2022 I Ql 2023 - priority standards prepared for review with Finance Officers 3.
Identify changes to internal financial controls and develop instructions.

3.

Changes are being identified as Accounting Standards and Accounting Manual are developed.

3.

In Progress 4.

Determine with Comptroller and Auditor General new audit arrangements (transitional and longer term) under new framework 5.
Assessment of FMSS current chart of accounts to suppo11 a multi-dimensional chm1 suppo11 a cash-based to of accounts, budgetary accounting repo11ing, accrual based financial accounting repo11ing under the IPSAS accounting framework and under EU ESA 2010 4.

Ongoing engagement with the C & AG in policy standards and the relation to development 4.

In progress 5.

Assessment completed by consultants 5.


Completed Q2 working on the project 2021 Consultant's review found FMSS suitable for introduction of accruals based accounting R0868 PAC33 6.

Proposed Pilot in 2022/2023 first stage of new I 6.

Planned 2022/23 framework in a small number of Government Depaiiments ( early adopters of FMSS).

for Training 7.
for Training 7.

Currently developing a strategy to implementing · standards for delivery of training for priority remammg requirements and for standards Q2/Q3 2022 standards subsequently the I 7.

Not Commenced Planned for commencement Q2/Q3 - 2023 8.

Work has commenced on identifying any I 8.

In progress legislative requirements that may be required as well as legislative framework.

to modernise the 6.
to modernise the 6.

Pilot in 2021/2022 first stage of new framework in a small number of Government Depaiiments (early adopters of FMSS).

7.

Deliver training on new IPSAS accounting standards, policies and financial controls to finance professionals in two phases.

Priority accounting standards 2021 and remaining accounting standards 2022.

8.

Identify legislative changes required.


2 See appendix B for details of the priority and other standards R0868 PAC33 Implementing the IPSAS Accounting Framework I Implementing the IPSAS Accounting Framework Additional Notes I.

Preparation of accounts using the first set of I IPSAS accrual accounting standards 2.

Preparation of opening balance sheets using I first set of IP SAS accounting standards.

Intermediary Project Assessment I Intermediary Project Assessment 1.
Realise a formal post implementation review 2. Review progress to date and validate, or if necessary revise the plan for completion of the reforms 11.

Not Commenced 12.
Not Commenced 12.

Not Commenced QI 2024 (subject to satisfactory development of policies from phase 2 above and rollout of FMSS) Ql 2024 (subject to satisfactory development of policies from phase 2 above and roll out of FMSS) Phase Four 2024 Q3 -2024 Q3 -2024 Finalising Implementation of the New Framework I Finalising Implementation of the New Framework Phase Five 2025 1.

Complete the process of reform by IPSAS remammg implementing the accounting standards 2.
For all central Government entities using the new framework prepare an opening balance sheet IPSAS accounting standards.

in compliance with the 1.To commence QI - 2025 and thereafter rolling out 2.

QI - 2025 and rolling out thereafter R0868 PAC33 Appendix A Membership of Standing Advisory Group Government Accounting and Financial Reporting Chair of Group 1.

Colin Feely - Partner in Grant Thornton - Head of Financial Services Audit Academics 2.
Barbara Flood - Professor of Accounting at Dublin City University (DCU) Accountancy Bodies/Industry Experts Government Departments 3.

Gerard Mc Hugh - Associate Professor, Trinity Business School (TCD) 4.

Derarca Dennis - Partner in EY 5.

Aileen Hughes - Internal Audit Analyst ESB & Chair of the Chartered Institute of Public Finance & Accountancy (CIPFA) Finance Officers 6.

Kevin O'Brien - Finance Officer, DPER 7.

Joan Curry-Finance Officer, DTTAS 8.


Vacancy- Finance Officer, D/Finance Relevant Stakeholders 9.

Andy Harkness-C&AG 10.

Stephen McDonagh-CSO 11.

Edel McCormack - NSSO DPER 12.

Ronnie Downes -Assistant Secretary, DPER Secretariat Government Accounting Unit, DPER R0868 PAC33 Appendix B IPSAS standards The full set of IPSAS standards have been designed to take into account the needs of diverse types of Government and public administration.
As such some of the standards will be very relevant to Ireland's central Government operations and some much less so.

The OECD in their review of Ireland's accounting framework identified certain priority standards of most immediate relevance to Ireland.

These have been prioritised in the timelines set out above.

The remaining standards will be developed as a second part of the project.
Priority standards IPSAS No Standard Name 1 2 3 12 13 17 19 21 26 31 32 39 Presentation of Financial Statements Priority Cash Flow Statements Priority Accounting Policies, Changes in Accounting Estimates and Priority Errors Inventories Leases Property, Plant, and Equipment Provisions, Contingent Liabilities and Contingent Assets Impairment of Non-Cash-Generating Assets Impairment of Cash-Generating Assets Intangible Assets Service Concession Arrangements: Granter Employee Benefits Priority Priority Priority Priority Priority Priority Priority Priority Priority Remaining standards IPSAS Standard Name No 4 5 9 10 11 14 16 18 20 The Effects of Changes in Foreign Exchange Rates Borrowing Costs Revenue from Exchange Transactions Financial Reporting in Hyperinflationary Economies Construction Contracts Events after the Reporting Date Investment Property Segment Reporting Related Party Disclosures Other Other Other Other Other Other Other Other Other R0868 PAC33 the General Other (Taxes and Other 22 23 24 27 28 29 30 ., ., ,.,,., 34 35 36 37 38 Information about from Non-Exchange Transactions Disclosure of Financial Government Sector Revenue Transfers) Presentation of Budget Information in Financial Statements Agriculture Financial Instruments: Presentation Financial Instruments: Recognition and Measurement Financial Instruments: Disclosures First-time Adoption of Accrual Basis IPSASs Separate Financial Statements Consolidated Financial Statements Investments in Associates and Joint Ventures Joint Arrangements Disclosure of Interests in Other Entities Other Other Other Other Other Other Other Other Other Other Other R0868 PAC33