Question

briefly discuss the reporting requirements of IPSAS 24; presentation of budget information and justify the relevance of the standard in governmental budgeting and accountability

Answer 1

Reporting requirement -

• According to the requirements of IPSAS 24.14, a public sector entity has to present a comparison of the budget amounts for which it is held publicly accountable and actual amounts either as a separate additional financial statement or as additional budget columns in the financial statements currently presented in accordance with IPSASs.
• The comparison of budget and actual amounts must present separately for each level of legislative oversight:-

  a) The original and final budget amounts;

b) The actual amounts on a comparable basis; and

c) By way of note disclosure, an explanation of material differences between the budget for which the entity is held publicly accountable and actual amounts

• As per IPSAS 24.29, an entity must present an explanation of whether changes between the original and final budget are a consequence of reallocations within the budget, or of other factors. This can be disclosed in the notes to the financial statements or in a report issued before, at the same time as, or in conjunction with the financial statements (e.g. in the entity’s budget execution or budget implementation report). In the latter case, it must include a cross-reference to the report in the notes to the financial statements.

• The entity also needs to explain in the notes to the financial statements the budgetary basis and classification basis adopted in the approved budget.
• In addition, IPSAS 24.47 requires where the financial statements and the budget are not prepared on a comparable basis, that the actual amounts presented on a comparable basis to the budget must be reconciled to the actual amounts presented in the financial statements, identifying separately any basis, timing, and entity differences. Reconciliations must be made for the following items:

a) If the accrual basis is adopted for the budget, total revenues, total expenses and net cash flows from operating activities, investing activities and financing activities; or

  b) If a basis other than the accrual basis is adopted for the budget, net cash flows from operating activities, investing activities and financing activities.

• IPSAS 24.47 (b) requires that if a basis other than the accrual basis is adopted for the budget (which is the case here), the actual amounts as presented in the financial statements shall be reconciled to-

a) net cash flows from operating activities,

b) net cash flows from investing activities, and

c) net cash flows from financing activities.

IPSAS 24, Presentation of Budget Information in Financial Statements, was issued in 2006 and is a public sector-specific standard within IPSASB’s literature. There is no equivalent under IFRS given that budget/actual-comparisons are a unique feature of public sector budgeting/accounting. IPSAS 24 requires a comparison of budget and actual amounts to be presented in the financial statements of entities that are required to, or elect to, make publicly available their approved budget(s). IPSAS 24 is therefore an important standard in the context of the discharge of accountability obligations by public sector entities and the provision of fiscal transparency.