IPSAS vs. GFS IPSAS – practical use for budgeting and benefits in terms of how GFS statistics and fiscal indicators can be extracted from the budgetary system

New Public Finance Act (PFA) Previously, the focus was on next year/detailed appropriations Fiscal policy was relatively poor The new PFA is looking to at least 5 years regarding policies on expenditure areas, revenues and taxes The focus in not the only on BCG (budgetary central government), but also on CG, LGs (local governments) and the public sector. Statement of Fiscal Policy (SFP) - When government is formed, a SFP should be submitted to Althingi for approval - The Policy is based on following principles: substainabitity, prudence, stability, predicatabilty and transparency - Fiscal conditions for both SFP and Fiscal Strategy Plan (FSP). FSP is based on SFP - Objectives for the scope, fiscal balances and development of assets and liabilities for GG and PS. - A Report on how the principles should be followed - SFP and FSP should be presented in accordance with GFS - Long-term outlook and development at least every three years Fiscal Strategy Plan for at least next 5 years - FSP for CG, LG and public sector – no later than 1 April each year - Targets for fiscal balances and balance sheet positions, revenues and expenditure (economic type), etc. - Targets for ca. 30 expenditure areas Budget bill for BCG for the next year in the authumn - Appropriations for expenditure areas (ca. 30) and expenditure functions (ca. 200) - Revenue estimations Fiscal Council - Form an opinion as to whether the fiscal policy and fiscal strategy are in accordance with the principles - The opinions of the Fiscal Council shall be made public

The Concept Hugmyndafræðin The Policy is based on following principles: (1) substanability, (2) stability, (3) prudence, (4) predicability and (5) transparency Health, Old age, Environmental issues, Education, Liabilities, etc 30 years/ underlying analysis 5 years Statement of Fiscal Policy – fiscal balances and debt 5 years Fiscal Strategy Plan – Fiscal policy and expenditure plans Fiscal Strategy Plan / Public sector finance / BCG finances Fiscal Policy of general government sector The Policy of the Public Corporations BCG‘s policy on expenditure areas Fiscal balances Public order and safety Key indicators: Revenue, Expense Operating balance Investment Net lending/borrowing Nonfinancial assets Financial assets Liabilities Net worth Education Revenue and tax policy Tertiary education Employee and wage policies Secondary education Subsidies; corporate support Other education Health Benefits, households support Medical products Grants; LGs&foreign support Outpatient services Investment policy Hospital services Nursing homes Fjármögnunarstefna Management & surv. Social protection Finance and debt policy Environmental prot. 2.11.2019

GFS references in PFA CHAPTER II: Fiscal policymaking – Article 4 Fiscal Policy Statement Whenever a government has been formed, it shall formulate a Statement of Fiscal Policy to be submitted by the Minister to the Althingi in the form of a proposal for a parliamentary resolution as soon as possible, no later than concurrently with the submission of the next Budget Bill. The Statement of Fiscal Policy shall be divided into the following components: Objectives for the scope, fiscal balances and development of assets, liabilities and long-term obligations of public entities as a whole and of the general government for a period of at least five years. The objectives shall be presented as a ratio of gross domestic product. Definitions of objectives regarding fiscal performance, such as fiscal balances and the balance sheets, shall take account of international statistical standard (GFS). Article 5 – Fiscal Strategy Plan No later than 1 April each year, the Minister shall submit to the Althingi a proposal for a parliamentary resolution on a Fiscal Strategy Plan for at least the next five years. ………………………… …………………….. The presentation of the Fiscal Strategy Plan shall be in accordance with the international standards specified in Chapter V. CHAPTER V: Financial statements and fiscal reporting Article 50 – Central government activities and programmes ……………The classification of central government activities is based on international statistical standard for public sector (GFS). Article 52 – Preparation and presentation of financial statements The financial statements for Group A of the central government as a whole shall be prepared and presented in accordance with international accounting standards for public sector (IPSAS), which are on accrual basis.

Fiscal strategy for General Government Policy on taxation and other revenues to 5 years Employment and wage policies and policy on government consumption to 5 years. Part of finance policy Policy on subsidizing the corporate sector Policy and foreign grants and GG subsectors Policy on social benefits / households Investment policy Finance policy

Accounting vs GFS frameworks Flows Transactions * Operating result ** operating balance *** net lending / borrowing Revenue transactions Revaluation Volume change Revenue Expense Opening balance Other economic flows Closing balance Expense Transactions Revaluation Volume change Revaluation / Volume change ** Opening Balance Sheet Closing Balance Sheet Non- financial assets NFA NFA NFA NFA * *** Assets and liabilities Non-financial Financial assets Assets and liabilities Financial assets FA FA FA FA Liabilities Liabilities Liab Liab Liab Liab Net worth Change in net worth Net worth

GFS versus Accounting (IPSAS or IFRS) Transactions between units Revaluations and other volume changes (calculated figures) Transactions between units

Projections on net financial worth and net worth Supports projections on net financial worth and debt

Consistency between Budgeting, Accounting and Statistics Same terminology Comparability of figures Efficiency and timesaving Reduced timeliness of data provision Fiscal policy vs. monetary policy Common understanding by various compilers, producers and users

Ministers’ Annual Reports Reporting practice Monthly Statement of Operations Central govenment Cash basis Quarterly Statement of Operations General govenment Public sector Accrual basis Annual Statement of Operations General govenment Public sector Accrual basis Ministers’ Annual Reports