Federal Department of Finance FDF Federal Finance Administration FFA Moving to accrual budgeting and accounting – the Swiss case Fritz Zurbrügg Head of Financial Planning, Budget, and Fiscal Equalization

2 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.

3 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.

4 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.

5 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 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.

6 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.