## _cr13209 ## Source details **Canonical URL:** [_cr13209](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13209.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13209.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13209.pdf.json) --- ### Mission, scope, and methodology - A Fiscal Affairs Department (FAD) IMF mission visited Dublin during March 12 to 25, 2013 to conduct a pilot Fiscal Transparency Assessment. - Mission team: Richard Hughes (leader), Jason Harris, Tim Irwin, Sailendra Pattanayak (FAD staff); Mick Lucey and David Watkins (FAD experts). - Consultations held with: Department of Finance; Department of Public Expenditure and Reform; Department for Environment, Community, and Local Government; Central Statistics Office; Office of the Revenue Commissioners; Central Bank of Ireland; National Treasury Management Agency; Comptroller and Auditor General’s Office; Irish Fiscal Advisory Council; Oireachtas (Parliament). - Report based on information available at completion in March 2013; findings and recommendations represent the IMF mission team’s views and non-binding advice. ### Executive summary — context and high-level findings - Historical practice: - Budgeting and accounting inherited from the UK (since 1922) and until the 1990s: - confined to budgetary central government (the Exchequer), - covered only cash transactions and debt, - did not follow an internationally recognized classification system. - Budget documentation historically: - focused on the year ahead, - excluded own-source revenues of departments, - provided little information about outputs or outcomes. - Fiscal forecasts historically provided point estimates with little discussion of alternative scenarios or fiscal risks. - Reforms and current standing: - Maastricht Treaty and ESA95 adoption expanded reporting toward general government and some accrual flows. - Post-2008 crisis reforms: new Fiscal Responsibility Law (FRL) and Irish Fiscal Advisory Council (IFAC). - Ireland is approaching best practice in fiscal reporting and forecasting and meets the basic requirements for fiscal risk disclosure under the IMF’s Fiscal Transparency Code. ### Current fiscal reporting — scope, fragmentation, and reliability - Coverage and gaps: - Fiscal statistics cover all general government entities and 81 percent of public sector expenditure but exclude public corporations with net expenditure of 12 percent and assets and liabilities of 204 percent of GDP. - General government balance sheet in fiscal statistics: 39 percent of GDP in financial assets and 106 percent of GDP in liabilities. - Additional information exists but is scattered for: - 74 percent of GDP in fixed assets, - 75 percent of GDP in liabilities from public service pensions and PPPs, - 1.1 percent of GDP in associated accrual flows. - Reporting frequency and formats: - Cash-based Exchequer reports: monthly, cover the Exchequer only, use traditional classification not aligned with ESA95-based fiscal rules. - Detailed ESA95 fiscal statistics: published annually; general government deficit and debt available quarterly. - Two sets of annual accounts audited and published within nine months of year-end; neither provides a comprehensive overview of central government finances nor follows international accounting standards. - Reliability and consistency: - CSO and C&AG are independent and follow EU/international standards. - Summary fiscal data pass two of three key internal consistency checks; historical revisions disclosed and modest on average. - Significant reporting issues: - Fragmentation across documents, agencies, accounting bases; reconciliation requires manual reclassification. - Example of a double-counting error: debt issued by NTMA to Housing Finance Agency incorrectly counted outside general government between 2007–2011, overstating general government gross debt by €3.6 billion (2.3 percent of GDP) at end-2011. ### Fiscal forecasting, budgeting, and medium-term framework - Fiscal rules and forecasts: - 2012 FRL sets fiscal rules (budget balance/structural targets, debt rule, medium-term expenditure rule). - Fiscal projections published twice a year, based on credible macro forecasts, independently evaluated by IFAC. - Budget documentation: - Distinguishes impact of current vs. new policies; provides distributional impacts; states objectives and outputs under each program. - Coverage limitations: - Budget documents exclude central government entities outside the Exchequer with self-funded expenditures of 4.3 percent of GDP. - No comprehensive reconciliation of forecast changes between fiscal strategies and budgets. - Long-term fiscal projections not regularly published despite age-related pressures of 7.4 percent of GDP by 2050. - Timeliness and parliamentary process: - Expenditure estimates submitted early/mid-December; Finance Bill legislates tax changes in February. - Government plans to bring forward the budget submission to mid-October (to meet EU Six Pack and Two Pack requirements). ### Fiscal risks — magnitude, disclosure, and management - Scale and disclosure: - Quantified contingent liabilities and other specific fiscal risks total 137 percent of GDP, with reporting fragmented across many documents and agencies. - Government guarantees worth 77 percent of GDP (alternative figures reported: 73 percent of GDP; detailed tables show 92.2 percent of GDP amounting to €146.6 billion at end-2011 depending on definition and inclusion). - Financial sector exposures: - Government financial-sector support reported to Eurostat and in C&AG reports, but no single government assessment of fiscal risks from the financial sector. - NTMA publishes portfolio information (including derivatives) but not a consolidated report of whole-portfolio strategy. - PPPs and long-term commitments: - Central government recorded PPP commitments estimated at about 2 percent of GDP in 2011 (CSO estimate €5.049 billion or 3 percent of 2011 GDP noted as higher). - Projected payments by year over remaining contract lives not published. - Subnational and public corporations: - Local government borrowing tightly controlled; total local government debt contribution to general government liabilities is less than 1 percent. - Public corporations’ liabilities account for 53 percent of total public liabilities; transfers and dividends disclosed but no comprehensive combined reporting for the sector. ### Recent public-sector financial position changes (post-crisis) - Key movements: - General government financial liabilities triple in the wake of the crisis. - Financial assets rise by 40 percent. - Contingent liabilities rise to over 136 percent of GDP. - Selected public-sector and sectoral figures (2011, preserved exactly as presented): - Exchequer total transactions: Revenue 23.6; Expenditure 35.4; Balance -11.7 (percent of GDP). - Central Government total transactions: Revenue 33.0; Expenditure 46.6; Balance -13.6. - General Government total transactions: Revenue 35.0; Expenditure 48.6; Balance -13.6. - Public Sector total transactions: Revenue 49.6; Expenditure 60.5; Balance -10.9. - Total Assets (percent of GDP): Exchequer -47.8; Central Govt 64.9; Local Govt 112.7; General Govt 11.8; Public Non-Fin Corps 192.4; Public Fin Corps 316.9. - Financial Assets (percent of GDP): General Govt 39.2; Public Sector 228.8. - Total Liabilities (percent of GDP): Public Sector 385.7. - Public Service Pension: General Govt 73.0 percent of GDP. - Net Worth (percent of GDP): Public Sector -68.7. - Memo: General government Gross Debt (ESA95) 106.4; Net Debt 94.9. ### Fiscal reporting and accounting classification issues - Multiple inconsistent charts of accounts across central government departments, extra-budgetary funds, non-commercial semi-state bodies, local governments, and public corporations. - Consequences: - Consolidation cannot be automated; manual reclassification required. - Risk of errors and delays; harmonization needed to produce timely, comparable ESA95/GFSM2001-aligned reports. - Accrual adjustments and impacts (selected figures, Percent of GDP, preserved exactly): - Receipts (2011) cash-to-accrual: 0.4 (ESA 95: 0.4; taxes: 0.3; accrued interest on contingent capital in banks: 0.1). - Payments: 2011 total 0.4; within ESA95 -0.2; outside ESA95 0.7 (net accrued pension liabilities 0.7). - Fiscal balances: Cash Balance 2011 -13.8; ESA95 Balance 2011 -13.3; Full Accrual Balance 2011 -13.9. - Other Economic Flows 2011 -6.5; Change in Net Worth (full accrual) 2011 -20.5. ### Tax expenditures and revenue foregone - Revenue foregone reporting limited: Revenue Commissioners reports list income and corporation tax foregone for 2009 only; other taxes’ targeted exemptions not fully covered. - Independent estimate (Collins and Walsh (2010)) estimated net revenue foregone from all direct and indirect tax allowances at around 6 percent of GDP or 18 percent of the total tax take in 2006. ### Reform agenda, milestones, and implementation timeline - Main planned steps and targets: - Publish quarterly general government fiscal statistics (CSO from April 2013). - Bring forward budget submission to mid-October to meet EU requirements. - Coalition commitments: public sector bodies to publish balance sheets and move to accrual accounting; establish NewERA to advise on major public corporations. - Five-year delivery pathway (selected milestones): - Comply with EU Six Pack and Two Pack requirements in 2013. - Publish first fiscal sustainability report and statement of fiscal risks in 2014. - Publish a trial consolidated Central Government Financial Statement for 2015. - Begin publishing fiscal statistics covering the entire public sector by 2016. - Adopt IPSAS (or European variants) by 2017. - Ten key reforms (preserved wording): i. expand the institutional coverage of budgets, statistics, and accounts; ii. recognize a wider range of assets and liabilities in balance sheets; iii. incorporate the corresponding accrued flows into fiscal reports; iv. modernize the budget classification and chart of accounts; v. accelerate the timetable for the submission of the annual budget and accounts; vi. provide a more detailed reconciliation of changes to fiscal forecasts; vii. regularly publish long-term fiscal projections; viii. produce a comprehensive statement of fiscal risks; ix. publish a medium-term asset and liability management strategy; and x. harmonize financial reporting standards and practices across the public sector. - Implementation aims to be achieved by end-2017, including consolidation of publicly controlled entities into summary fiscal reports and alignment with ESA95, GFSM2001, EU Six Pack/Two Pack, ESA 2010, and IPSAS. ### Key findings and prioritized recommendations (selected) - Coverage and consolidation: - Expand institutional coverage to include the €6.8 billion (4.3 percent of GDP) of central-government extra-budgetary self-funded expenditures and the entities accounting for at least €16.8 billion (11.7 percent of GDP) outside general government statistics. - Combine Finance and Appropriation Accounts into a consolidated Central Government Financial Statement. - Assets, liabilities, and accruals: - Recognize fixed assets (€116.8 billion; 73.5 percent of GDP), accrued pension liabilities (€116 billion; 73.0 percent of GDP, 2009 estimate), PPP liabilities (€4.0 billion; 2.5 percent of GDP), and public corporations’ assets/liabilities (€324.7 billion; 204.3 percent of GDP) in consolidated balance sheets. - Incorporate associated accrued revenues and expenses (estimated unrecognized expenses could amount to 1 percent of GDP per year; annual net accrual of pension liabilities estimated at €1 billion or 0.7 percent of GDP in 2011). - Classification and systems: - Modernize and harmonize charts of accounts; reorganize Exchequer Statement to present gross revenues/expenditures and separate financial/nonfinancial transactions; develop program classification mappable to COFOG and output indicators. - Timeliness and audit: - Accelerate budget submission to Parliament to October; require audited annual accounts to be submitted earlier (submit accounts for audit by March; C&AG to submit audited accounts to Parliament by June) to inform budget preparation. - Fiscal risk reporting and asset/liability strategy: - Publish a comprehensive annual statement of fiscal risks as part of budget documentation covering macroeconomic risks, contingent liabilities, financial-sector exposures, assets/liabilities valuation risks, and specific revenue risks. - Publish an annual asset and liability management strategy (debt, NPRF, shares). - Institutional arrangements: - Establish a permanent government financial reporting unit in DoF or DPER headed by a Chief Financial Officer/Director of Government Accounting to set and enforce public-sector accounting standards and prepare consolidated Central Government Financial Statements for audit. ### Selected tabular and appendix highlights (preserved exactly) - Public-sector entities (2011): - Total public sector entities: 624. - General Government (consolidated) entities: 562; Gross Revenue 44.9; Intra-PS receipts 9.9; Net Revenue 35.0; Net Expenditure 48.6; Net Balance -13.6 (Percent of GDP). - Public Corporations: 62 entities; Gross Revenue 15.4; Intra-PS receipts 0.2; Net Revenue 15.2; Net Expenditure 11.9; Net Balance 3.3. - Quantified contingent liabilities (selected entries from Table 3.3): - Eligible Liabilities Guarantees: 45.0 percent of GDP; 72.8 billion euros; 2012. - Exceptional Liquidity Assistance: 7.1 percent of GDP; 11.5 billion euros; 2011. - National Asset Management Agency: 18.0 percent of GDP; 29.1 billion euros; 2011. - Deposit Guarantee Scheme: 50.7 percent of GDP; 82.0 billion euros; 2011. - Callable capital in European Financial Stability Facility: 4.6 percent of GDP; 7.5 billion euros; 2011. - Total (quantified): 136.0 percent of GDP; 219.8 billion euros. - Fiscal balances and accruals (selected exact figures): - Cash Balance 2011 -13.8 (percent of GDP). - ESA 95 Balance 2011 -13.3. - Full Accrual Balance 2011 -13.9. - Change in Net Worth (full accrual) 2011 -20.5. - Public sector balance-sheet snapshot (Appendix 1E, Percent of GDP, 2011): - Total Assets: Public Sector 317.0. - Financial assets: Public Sector 228.8. - Liabilities: Public Sector 385.7. - Net worth: -68.7. ### Anticipated benefits of proposed reforms - More comprehensive, timely, and reliable data for fiscal decision-making. - Clearer demonstration and management of fiscal risks. - Improved public debate and market reassurance about sustainability of public finances. - Facilitated compliance with EU current and future fiscal reporting requirements. *Source: IMF Fiscal Transparency Assessment mission report (completed March 2013).* ### Preface ................................................................................................................ ### Preface ### Mission and scope - A mission from the Fiscal Affairs Department (FAD) of the International Monetary Fund (IMF) visited Dublin, Ireland during the period March 12 to 25, 2013 to conduct a pilot Fiscal Transparency Assessment. - The mission was led by Richard Hughes and included Jason Harris, Tim Irwin, and Sailendra Pattanayak (all FAD staff) and Mick Lucey and David Watkins (both FAD experts). - The objective was to evaluate Ireland’s fiscal reporting, forecasting and budgeting, and fiscal risks analysis and management practices against the standards set by the IMF’s newly revised Fiscal Transparency Code. ### Methodology and consultations - The mission was organized around discussions with representatives from: - Department of Finance - Department of Public Expenditure and Reform - Department for Environment, Community, and Local Government - Central Statistics Office - Office of the Revenue Commissioners - Central Bank of Ireland - National Treasury Management Agency - Comptroller and Auditor General’s Office - Irish Fiscal Advisory Council - Oireachtas (Parliament) ### Data, timing, and responsibility - The report is based on the information available at the time it was completed in March 2013. - The findings, recommendations, and action plan represent the views and non-binding advice of the IMF mission team and do not necessarily reflect the views of or a commitment by the government of Ireland. - Unless otherwise specified, the data included in the text, figures, and tables in the report are estimates of the IMF mission team and not official estimates of the government of Ireland. ### Acknowledgements - The mission expressed thanks to the Irish authorities for collaboration and open exchanges. - Particular thanks were given to Garrett O’Neill and Fiachra Quinlan for supporting the work before, during, and after the mission. ### Executive Summary — key historical context and high-level finding - Ireland maintained the traditional system of government budgeting and accounting inherited from the UK at independence in 1922. - Until the 1990s, fiscal reports: - confined themselves to budgetary central government (the Exchequer), - covered only cash transactions and debt, - did not follow an internationally recognized classification system. - Budget documentation historically: - focused exclusively on the year ahead, - excluded own-source revenues of departments, - provided little information about outputs or outcomes. - Fiscal forecasts historically provided point estimates with little discussion of alternative scenarios or fiscal risks. - Since the early 1990s, European integration and the recent financial crisis have catalyzed significant improvements in fiscal transparency in Ireland: - Maastricht Treaty reporting requirements led the government to produce fiscal statistics covering the general government, capture some accrual flows, and adopt the European System of Accounts 1995 (ESA95). - The pace of transparency-related reforms accelerated after the 2008 crisis with the passage of a new Fiscal Responsibility Law (FRL) and establishment of the Irish Fiscal Advisory Council (IFAC). - Ireland is now approaching best practice in fiscal reporting and forecasting and meets the basic requirements for fiscal risk disclosure under the IMF’s Fiscal Transparency Code (Table 0.2). *Source: IMF Fiscal Transparency Assessment mission report (completed March 2013).* ### introduction of a medium-term expenditure framework (MTEF), and regular reporting of the ### _cr13209 - introduction of a medium-term expenditure framework (MTEF), and regular reporting of the government’s financial sector interventions in the form of capital injections, guarantees, and other exposures. ### Current fiscal reporting: scope, fragmentation, and reliability - Fiscal statistics cover all general government entities and 81 percent of public sector expenditure but exclude public corporations with net expenditure of 12 percent and assets and liabilities of 204 percent of GDP. - Fiscal statistics include a balance sheet of the general government’s 39 percent of GDP in financial assets and 106 percent of GDP in liabilities. - Information about the general government’s 74 percent of GDP in fixed assets, 75 percent of GDP in liabilities from public service pensions and PPPs, and 1.1 percent of GDP in associated accrual flows is available but scattered across multiple documents, produced by multiple parties, on a range of different accounting bases, with varying frequencies. - Cash-based budget execution reports are published monthly but cover only the Exchequer and use a traditional classification which does not correspond to the government’s new ESA95-based general government fiscal rules. - Detailed ESA95-based fiscal statistics are only published annually, although general government deficit and debt figures are available each quarter. - Two sets of annual accounts are audited and published within nine months of year-end, but neither provides a comprehensive overview of the central government finances or follows international accounting standards, though they do conform with domestic legal requirements. - Despite fragmentation and different source-data bases, Ireland’s general government fiscal data are generally reliable: the CSO and Comptroller and Auditor General (C&AG) are independent and follow relevant EU and international standards. - Summary fiscal data are subject to two of three key internal consistency checks and revisions to historical data are disclosed and relatively modest on average. ### Fiscal forecasting, budgeting, and medium-term framework - The government’s fiscal rules are set out in its 2012 FRL which, together with European rules and the new MTEF, determine the fiscal targets and expenditure limits for the budget year and medium term. - Fiscal projections are published twice a year, based on credible and detailed macroeconomic forecasts, and independently evaluated by the Irish Fiscal Advisory Council (IFAC). - The budget document: - distinguishes the impact of current and new policies; - provides extensive information about their distributional impact; - states the objectives to be achieved and outputs to be delivered under each expenditure program. - Gaps and limitations: - Budget documents do not include information about financial plans of central government entities outside the Exchequer whose self-funded expenditures amount to 4.3 percent of GDP. - There is no comprehensive reconciliation of changes to the fiscal forecast between fiscal strategies and budgets. - The government does not regularly publish comprehensive long-term fiscal projections, despite age-related expenditures pressures of 7.4 percent of GDP by 2050. ### Fiscal risks: magnitude, disclosure, and management - Fiscal risks are relatively large and disclosure/management are diffuse. - Quantified contingent liabilities and other specific fiscal risks total 137 percent of GDP, with reporting scattered across many documents and agencies. - Government guarantees worth 77 percent of GDP have been extended at the discretion of the Minister of Finance and are disclosed in the annual Finance Accounts. - Central government borrowing is controlled by the MoF and managed by the National Treasury Management Agency (NTMA), which publishes information on individual portfolios (including derivatives) but not a consolidated report on the whole portfolio and strategy. - Central government nominal commitments under PPPs are disclosed in various reports, but projected payments by year over the remaining lives of the contracts are not published. - Government support to the financial sector is reported to Eurostat and discussed in the C&AG’s report, but the government does not provide its own assessment of potential fiscal risks created by the financial sector. - Borrowing by local governments is tightly controlled; their total debt contributes less than 1 percent to general government liabilities. - Transfers to and dividends from public corporations are disclosed in the budget, but there is no comprehensive combined reporting for a sector whose liabilities account for 53 percent of total public liabilities. ### Recent changes in public-sector financial positions (post-crisis context) - In the wake of the recent crisis: - general government’s financial liabilities triple; - financial assets rise by 40 percent; - contingent liabilities rise to over 136 percent of GDP. ### Reform agenda, milestones, and timeline - The government plans to: - begin publishing quarterly general government fiscal statistics; - bring forward the submission of the budget by two months to mid-October to meet EU Six Pack and Two Pack requirements. - Coalition Government commitments: - All public sector bodies to publish balance sheets and move from cash to accrual accounting. - Establishment of NewERA to provide financial and commercial advice on interests in five major public corporations. - Consolidation of existing information into comprehensive fiscal statements would require actions to: - expand institutional coverage of budgets, statistics, and accounts; - recognize all assets, liabilities, and corresponding flows in fiscal reports; - modernize the budget classification and chart of accounts; - speed up the submission and approval of the annual budget and accounts; - provide a detailed analysis of fiscal forecast changes and long-term trends; - improve the reporting and management of fiscal risks; - harmonize financial reporting standards and practices across the public sector. - Five-year delivery pathway: - forecast and monitor in-year performance against national and EU-wide fiscal rules and comply with the EU Six Pack and Two Pack requirements in 2013; - publish first fiscal sustainability report and statement of fiscal risks in 2014; - publish a trial consolidated Central Government Financial Statement for 2015; - begin publishing fiscal statistics covering the entire public sector by 2016; - adopt accrual-based International Public Sector Accounting Standards (IPSAS) or their European variants by 2017. ### Anticipated benefits of improved fiscal disclosure - Provide more comprehensive, timely, and reliable data for fiscal decision-making. - Demonstrate the government’s awareness and management of fiscal risks. - Promote a more informed public debate on fiscal policy challenges and choices. - Reassure markets of the overall sustainability of the public finances. - Facilitate compliance with EU current and future fiscal reporting requirements. ### Key summary statistics and fiscal picture (based on available data for 2011) - Central government deficit is 1.9 percent of GDP larger than that of the Exchequer owing to rundown of assets by extra-budgetary entities. - The general government’s net liabilities are 37.7 percent of GDP lower than its gross debt owing to its 73.5 percent of GDP in fixed assets and 39.2 percent of GDP in financial assets, which are partially offset by its 75.5 percent of GDP in public service pension and PPP liabilities. - The public sector has net liabilities of 68.7 percent of GDP, which is 37 percent of GDP higher than Canada, about the same as the UK, but 29 percent of GDP lower than that of the US Federal Government. - Additional figures from the public sector financial overview (2011): - Exchequer total transactions: Revenue 23.6; Expenditure 35.4; Balance -11.7. - Central Government total transactions: Revenue 33.0; Expenditure 46.6; Balance -13.6. - General Government total transactions: Revenue 35.0; Expenditure 48.6; Balance -13.6. - Public Non-Financial Corporations total transactions: Revenue 6.0; Expenditure 5.6; Balance 0.4. - Public Financial Corporations total transactions: Revenue 8.6; Expenditure 6.3; Balance 2.3. - Public Sector total transactions: Revenue 49.6; Expenditure 60.5; Balance -10.9. - Total Assets (percent of GDP): Exchequer -47.8; Central Govt 64.9; Local Govt 112.7; General Govt 11.8; Public Non-Fin Corps 192.4; Public Fin Corps 316.9. - Non-financial Assets (percent of GDP): General Govt 63.6; Public Non-Fin Corps 3.5; Public Fin Corps 14.2; Public Sector 88.1. - Financial Assets (percent of GDP): Central Govt 38.0; Local Govt 1.2; General Govt 39.2; Public Non-Fin Corps -2.3; Public Fin Corps 191.9; Public Sector 228.8. - Total Liabilities (percent of GDP): Exchequer -179.4; Central Govt 2.0; Local Govt 181.4; General Govt 11.8; Public Non-Fin Corps 192.4; Public Fin Corps 385.7. - PPPs: Public Non-Fin Corps 2.5 percent of GDP. - Public Service Pension: General Govt 73.0 percent of GDP. - Other liabilities: General Govt 103.9; Public Non-Fin Corps 2.0; Public Fin Corps 11.8; Public Sector 310.2. - Net Financial Worth (percent of GDP): Exchequer -141.4; Central Govt -0.7; Local Govt -142.2; Public Non-Fin Corps -14.2; Public Fin Corps -0.5; Public Sector -156.8. - Net Worth (percent of GDP): Public Sector -68.7. - Memo: General government Gross Debt (ESA95) 106.4; Net Debt 94.9. *Source: IMF staff summary of the content unit.* ### 4. Ireland’s public sector comprises 624 separate institutional entities. Table 1.2 ### _cr13209 - 4. Ireland’s public sector comprises 624 separate institutional entities. Table 1.2 ### Institutional composition of the public sector (2011) - Total public sector entities: 624. - Central Government (total): 171 entities; Gross Revenue 39.7; Intra-PS receipts 6.7; Net Revenue 33.0; Net Expenditure 43.4; Net Balance -10.4 (all figures expressed as Percent of GDP). - Exchequer (Budgetary Central Government, BCG): 43 entities; Gross Revenue 26.2; Intra-PS receipts 0.6; Net Revenue 25.6; Net Expenditure 34.1; Net Balance -8.5. - Social Security: figures listed as 26.1 (Gross Revenue), 1.1 (Intra-PS receipts), 25.0 (Net Revenue), 5.7 (Net Expenditure), -0.7 (Net Balance). - Social Insurance Fund: 5.9; 0.9; 4.9; 5.7; -0.7. - National Training Fund: 0.3; 0.2; 0.1; 0.0; -0.7. - Other Extrabudgetary Funds: 43 entities; 2.6; 0.5; 2.1; 3.3; -1.2. - National Pension Reserve Fund: 0.5; 0.0; 0.5; 2.5; -1.2. - Local Govt. Fund: 0.7; 0.1; 0.6; 0.0; -2.1. - Non-market semi-state agencies: 83 entities; 34.8; 4.1; 0.7; 3.4; -2.7. - National Roads Authority: 0.9; 0.8; 0.1; 0.0; 0.0. - Higher Education Authority: 0.8; 0.8; 0.0; 0.5; -0.5. - Enterprise Ireland: 0.2; 0.2; 0.1; 0.2; -0.1. - Irish Rail: 0.3; 0.2; 0.1; 0.3; -0.2. - RTE: 0.2; 0.1; 0.1; 0.2; -0.1. - National Oil Reserve Authority: 0.1; 0.0; 0.1; 0.1; 0.0. - Rail Procurement Agency: 0.0; 0.0; 0.0; 0.0; 0.0. - Local Government: 391 entities; Gross Revenue 5.2; Intra-PS receipts 3.2; Net Revenue 2.1; Net Expenditure 5.2; Net Balance -3.2. - Local Governments: 124 (entities count field appears). - Local Government Enterprises: 233 local public enterprises (noted as subsidiaries of local authorities elsewhere in text). - General Government (consolidated): 562 entities; Gross Revenue 44.9; Intra-PS receipts 9.9; Net Revenue 35.0; Net Expenditure 48.6; Net Balance -13.6. - Public Corporations: 62 entities; Gross Revenue 15.4; Intra-PS receipts 0.2; Net Revenue 15.2; Net Expenditure 11.9; Net Balance 3.3. - Non-Financial Public Corporations: 57 entities; Gross Revenue 6.2; Intra-PS receipts 0.2; Net Revenue 6.0; Net Expenditure 5.6; Net Balance 0.4. - Electricity Supply Board: 1.9; 0.0; 1.9; 1.6; 0.3. - Bord Gais: 1.0; 0.0; 1.0; 1.0; 0.1. - Dublin Airport Authority: 0.4; 0.0; 0.4; 0.4; 0.0. - Financial Public Corporations: 5 entities; Gross Revenue 9.2; Intra-PS receipts 0.0; Net Revenue 9.2; Net Expenditure 6.3; Net Balance 2.9. - Central Bank of Ireland: 2.3; 0.0; 2.3; 0.8; 1.5. - Allied Irish Bank: 2.9; 0.0; 2.9; 3.0; 0.0. - Irish Life and Permanent: 1.5; 0.0; 1.5; 0.9; 0.6. - Public Sector (aggregate): 624 entities; Gross Revenue 60.2; Intra-PS receipts 10.6; Net Revenue 49.6; Net Expenditure 60.5; Net Balance -10.9. - Non-Financial Public Sector: 619 entities; Gross Revenue 51.1; Intra-PS receipts 10.0; Net Revenue 41.0; Net Expenditure 54.2; Net Balance -13.2. - Unknown / Commercial bodies operating on a non-market basis noted but not quantified in table. ### Distribution of public expenditure and reporting coverage (2011) - Public sector expenditure accounted for around 60 percent of GDP in 2011. - Central government expenditure: 43 percent of GDP total. - Of this, 30 percent of GDP flows through the central government budget (Exchequer). - 6 percent of GDP from the two social security funds. - 3 percent of GDP through various extra-budgetary funds (principally National Pension Reserve Fund). - 3 percent of GDP spent by non-market semi-state agencies (e.g., National Roads Authority, Irish Rail, RTE). - Local government accounts for 5 percent of GDP (direct expenditure of authorities only, excluding enterprises). - General government (consolidates central and local governments): 48.6 percent of GDP. - Public corporations: 12 percent of GDP (6 percent by financial corporations; 6 percent by non-financial corporations). - Coverage in reports: - CSO quarterly and annual fiscal statistics (general government) account for 81 percent of public sector expenditure. - Monthly Exchequer cash reports cover 70 percent of public sector expenditure. - Expanding coverage from general government to entire public sector: - Public corporations add 12 percent of GDP to expenditure and 15 percent of GDP to revenue, changing overall balance from -13½ percent of GDP to -11 percent of GDP. ### Assets, liabilities, and balance-sheet coverage - Public sector asset holdings (2011): estimated around 317 percent of GDP. - Public sector liabilities (2011): estimated around 386 percent of GDP. - Within that: - General government financial assets: 39 percent of GDP; recognized liabilities: 106 percent of GDP (bulk central government debt). - Unrecognized additional liabilities (central and local governments): 73 percent of GDP in unfunded public service pension and PPP obligations (estimate dates to 2009). - Central government recorded fixed assets: 9 percent of GDP (likely underestimated due to historic cost accounting). - Local government fixed assets: 64 percent of GDP (roads 35 percent; housing 13 percent). - Public corporations liabilities to the private sector: 192 percent of GDP, matched by 192 percent of GDP in fixed and financial assets. - Intra-public sector holdings (government equity, public corporations’ holdings of government and NAMA bonds, CBI Emergency Liquidity Assistance) amount to 170 percent of GDP. - Net public sector liabilities estimated at 69 percent of GDP in 2011. - Note: central and local government pension liabilities were last estimated in 2009 (prior to pension reforms), and fixed assets may be undervalued at historic cost. - Reporting gaps: - Annual Finance Accounts include separate statements (loans outstanding, shareholdings, guaranteed liabilities, debt) but no consolidated balance sheet. - Appropriation Accounts include balance sheets for Vote-funded departments/agencies (assets at historical cost) but are not consolidated. - CSO’s consolidated financial balance sheet covers general government only (28 percent of public sector liabilities and 36 percent of assets). - CSO plans to publish a quarterly general government financial balance sheet from April 2013. - Financial sector support and transactions with large balance-sheet effects: - 2011 C&AG Audit Report identified €43 billion (27.5 percent of 2010 GDP) in capital provided to government-controlled credit institutions between 2008 and 2010, and a need for a further €18.8 billion (12 percent of GDP) in capital injections. - Government agreed to sell its 100 percent equity stake in Irish Life in exchange for €1.3 billion (0.8 percent of GDP) in cash (subject to approvals). - Current fiscal reports cover only general government and provide a partial view of fiscal implications of such transactions. ### Accrual adjustments, other flows, and reporting of flows - Core fiscal reports are primarily cash-based, with some accrual flows captured in fiscal statistics and departmental disclosures. - DoF monthly Exchequer Statements and annual Finance Accounts: cash inflows/outflows of Central Fund only. - Appropriation Accounts: primarily cash-based but include some accruals (payables/receivables, depreciation, inventories, provisions). - CSO quarterly and annual general government fiscal statistics: include payables, receivables, depreciation (ESA95). - Net impact of accrual adjustments in 2011: - Added 0.4 percent of GDP to revenue. - Reduced expenditure by 0.2 percent of GDP. - Reduced net lending by 0.6 percent of GDP (see Table 1.3 summary). - Cash-to-accrual adjustments table (selected figures, Percent of GDP): - Receipts: 2010 0.0; 2011 0.4. - Within ESA 95: 2010 0.0; 2011 0.4. - Taxes: 2010 0.0; 2011 0.3. - UMTS licences: 2010 0.0; 2011 0.0. - Accrued interest on contingent capital in banks: 2010 0.0; 2011 0.1. - EU transfers: 2010 0.0; 2011 0.0. - Payments: 2010 1.5; 2011 0.4. - Within ESA 95: 2010 0.4; 2011 -0.2. - Accrued but unpaid interest: 2010 0.9; 2011 0.0. - Other voted expenditure: 2010 -0.2; 2011 0.0. - Military expenditure: 2010 0.0; 2011 0.0. - Farm Waste Management Scheme: 2010 -0.2; 2011 0.0. - Departmental balances: 2010 0.0; 2011 0.0. - Capital carryover system: 2010 0.1; 2011 -0.1. - Payment to Departmental holding account: 2010 -0.1; 2011 0.0. - HSE accrual: 2010 -0.1; 2011 -0.1. - Outside ESA 95: 2010 1.1; 2011 0.7. - Net accrued pension liabilities: 2010 0.7; 2011 0.7. - Construction of PPP projects: 2010 0.4; 2011 0.0. - Fiscal balances: - Cash Balance: 2010 -30.4; 2011 -13.8. - ESA 95 Balance: 2010 -30.9; 2011 -13.3. - Full Accrual Balance: 2010 -32.0; 2011 -13.9. - Other Economic Flows: 2010 10.3; 2011 -6.5. - Change in value of financial assets: 2010 0.5; 2011 -3.4. - less change in value of financial liabilities: 2010 -9.8; 2011 3.1. - Change in Net Worth (full accrual): 2010 -21.7; 2011 -20.5. - Significant accrued flows outside summary fiscal data or based on statistical models: - Annual net accrual of public service pension liabilities estimated by staff at €1 billion (0.7 percent of GDP) in 2011 (not reflected in summary fiscal reports). - Annual investments in PPPs under construction estimated at €0.7 billion (0.4 percent of GDP) in 2010; fell to zero in 2011 as projects completed. - CSO estimated depreciation of €2.5 billion (1.6 percent of GDP) in 2011 general government fiscal statistics (based on perpetual inventory model, not fixed asset registers). Difference between model and register amounted to 1.4 percent of GDP in 2011. - Valuation changes on government financial assets: loss of €5.4 billion (3.4 percent of GDP) in 2011 (captured in financial statistics but not in Finance or Appropriation Accounts). ### Tax expenditures - Revenue foregone reporting: - Revenue Commissioners’ Annual Statistical Reports list revenue foregone for income and corporation tax allowances, reliefs, deductions for 2009. - Costs of targeted exemptions, reduced rates, credits, or allowances for other taxes (VAT, CGT, stamp duty) not included in that list. - Independent estimates: - Comprehensive independent estimates (Collins and Walsh (2010)) put net revenue foregone from all direct and indirect tax allowances, reliefs, deductions, and rebates at around 6 percent of GDP or 18 percent of the total tax take in 2006. - Noted policy relevance: - Significant reliefs (e.g., CGT exemption on principal private residences, mortgage interest income tax relief, property investment incentives) likely contributed to the residential property boom preceding 2008 crisis and have since been substantially curtailed or abolished. ### Frequency and timeliness of fiscal reporting - In-year reporting frequency and timeliness: - DoF’s cash-based Exchequer statements: produced monthly and within two days of the end of each month. - General government fiscal aggregates on ESA95 are available quarterly across multiple publications. - From April 2013, CSO to publish an accrual-based general government flow statement and balance sheet on a quarterly basis with a three-month lag. - In line with EU Six Pack, DoF plans to publish monthly cash-based general government flow data from 2014. - Reporting quality: - Monthly Exchequer statements are timely but cover only the Central Fund (cash basis). - Annual Finance and Appropriation Accounts provide limited consolidated balance-sheet information; CSO consolidation covers only part of public sector assets/liabilities. *Source: Staff estimates derived from Ministry of Finance internal data and company annual reports.* ### 17. Ireland’s audited annual accounts of central government are published within ### _cr13209 - 17. Ireland’s audited annual accounts of central government are published within ### Timeliness of annual accounts - Ireland produces two sets of audited annual accounts: - Appropriation Accounts: prepared for each Vote by the respective Accounting Officers by end-March and audited by the C&AG by end-September each year. - Finance Accounts: produced by end-June and audited by the C&AG and published by end-September each year; they provide a record of cash receipts and issues of the Exchequer Central Fund and the issuance and redemption of national debt. - Current publication lag: - Annual central government accounts published within nine months of the end of the financial year. - The current nine-month lag, while in accordance with the statutory timetable, is longer than other developed countries and offers limited opportunity to inform next year’s budget, which under the government’s revised timetable, will be submitted to Parliament in October from this year. - Local government audit timeliness: - Audit of local government accounts is performed by the Local Government Audit Service and there is currently a 15-month lag between the end of the financial year and the completion of the audit. - Authorities’ intentions: - The Irish authorities intend to improve the timeliness of annual central government accounts, but no formal decision has been taken. ### Classification, charts of accounts, and coverage - Compliance and formats: - Fiscal statistics comply with ESA95 classifications for aggregates reporting despite multiple and inconsistent charts of accounts being used by different general government entities. - CSO statistics under the EDP (e.g., Maastricht Returns) meet ESA95 classification requirements; CSO also produces data largely complying with GFSM 2001 economic classification for IMF GFS Year Book inclusion. - The Exchequer Statement and Finance Accounts present data using a traditional presentation which conflates financial (below the line) and nonfinancial (above the line) transactions, complicating reconciliation with ESA95 statistics for general government. - Annual departmental Appropriation Accounts present information in two formats: one following the administrative and economic categories in their budget Estimate and one following an adaptation of private sector Financial Reporting Standards for the UK and Ireland. - Fragmented charts of accounts: - Local governments follow the Local Authority Accounting Code of Practice. - Non-commercial semi-state bodies and public corporations have their own charts of accounts which do not map directly to those used by either central or local government. - Consequences and coverage gaps: - The lack of harmonization between charts of accounts across general government entities is an obstacle to producing more detailed, timely, and reliable fiscal data for general government. - Collection and consolidation of ESA95 general government data cannot be done directly from constituent accounting systems; extensive manual reclassification and consolidation is required. - Risk of double counting: debt issued by the NTMA to the Housing Finance Agency was mistakenly counted as being held outside general government between 2007 and 2011, resulting in Ireland’s general government gross debt being overstated by €3.6 billion (2.3 percent of GDP) at the end of 2011. - Lack of a comprehensive program classification blurs linkages between policy objectives, resource allocations, expenditures, and outcomes and makes COFOG-based functional statistics difficult without estimation. ### Internal consistency and reconciliations - Published reconciliations: - Ireland regularly publishes two of the three internal consistency checks called for under the Code: - The April SPU and September MTFS include a reconciliation of the difference between the Exchequer borrowing requirement (EBR) and the annual change in the stock of general government debt for the current year and the next five years. - The NTMA’s Annual Report includes a complete reconciliation of the Exchequer surplus and the net Exchequer borrowing for the two previous years. - Missing reconciliations and risks: - The Central Bank of Ireland collects and publishes issuance of central government debt and reported holdings by other sectors, but there is no published reconciliation between issuance and reported holdings. - In the absence of a harmonized chart of accounts, publishing such a reconciliation would help identify and correct double-counting issues like the €3.6 billion error noted above. ### Historical consistency and revisions - Revision reporting and timing: - Ireland discloses revisions to fiscal aggregates in later vintages; revisions to debt and deficit have generally been in a downward direction. - Ireland is required to report EDP-related data to Eurostat twice a year (in April and October) with any updates to previously reported general government deficit and debt. - The CSO has up to four years to provide final data on government deficit and debt figures in relation to first releases. - Magnitude of historical revisions (2005–2011): - Between 2005 and 2011, Ireland’s general government deficit and debt have been revised down by an average of 0.2 and 0.5 percent of GDP respectively. - EU country average revisions for the same period: deficits revised up by 0.1 percent of GDP and debts revised up by 0.5 percent of GDP. - Supplementary information: - In reporting revisions to Eurostat, the CSO provides a supplementary table with an item-wise breakdown of changes between old and new time series; this supplementary table is not published domestically or by Eurostat. ### Statistical independence, external audit, and reliability - Statistical independence: - Fiscal statistics are independently produced and disseminated by the CSO, whose independence is guaranteed by the 1993 Statistics Act. - CSO responsibilities include methodology, professional standards, content and timing of statistical releases, and access to administrative records for statistical purposes subject to conditions. - CSO is part of the European Statistical System and regulated by the European Statistics Code of Practice. - External audit: - Annual Appropriation and Finance Accounts of central government and annual financial statements of local governments are audited independently by the C&AG and the Local Government Audit Service respectively. - The C&AG is appointed under Article 33 of the Irish Constitution and can only be removed for misbehavior or incapacity following a resolution by both houses of Parliament. - The C&AG conducts financial audits based on ISSAI-compliant standards set for UK and Ireland; Local Government Audit Service audits are based on the Accounting Code of Practice set by the Department of the Environment, Community and Local Government. - Reliability and audit opinions: - Ireland’s fiscal statistics meet the IMF’s SDDS and its annual accounts are subject to minor qualifications based on a “properly presents” standard. - Upon audit completion, the C&AG attaches to each department’s account a certificate stating whether, in his opinion, the accounts properly present the receipts and expenditure related to the Vote and are prepared in accordance with accounting rules and procedures laid down by the Minister for Public Expenditure and Reform. - Some issues of record keeping (e.g., Department of Social Protection) have led to minor audit qualifications in recent years. - Because Ireland’s government accounts do not follow an internationally recognized standard, the C&AG offers a “properly presents” audit opinion rather than a “give a true and fair view” opinion applicable to IFRS or IPSAS-based accounts. - At local government level, the auditor expresses an opinion as to whether the annual financial statement “presents fairly” in accordance with the Accounting Code of Practice and Regulations. - There is no practice of preparing consolidated central government year-end financial statements for audit; therefore, no audit opinion on the reliability of consolidated fiscal data exists. ### Key findings, gaps, and recommendations (summary) - Key findings and quantitative gaps highlighted: - Accounts and fiscal statistics limit their coverage to the Exchequer and general government respectively and do not fully reflect the significant financial activity of publicly-controlled corporations. - Summary balance sheet data do not include the government’s significant fixed assets, public service pension liabilities, and PPP obligations. - Associated accrual-based flows are missing from summary fiscal reports and estimates of revenue loss from tax expenditures are incomplete. - General government entities use multiple and inconsistent classification systems and charts of accounts which complicate and delay collection, consolidation, and reporting of general government fiscal data. - The timetable for submission and audit of annual financial statements is protracted and does not provide audited outturn figures in time to inform preparation of the annual budget which will need to be submitted in October starting this year. - Quantitative context from Table 1.5: - Publicly-controlled entities with net expenditure of 12% of GDP are outside fiscal statistics. - Public liabilities of 279% of GDP are outside fiscal reports. - Accrued general government expenses of 1.1% of GDP are outside fiscal statistics. - Some estimated 6% of GDP in revenue lost through tax expenditures is not reported. - Frequency of in-year fiscal reports: Advanced — monthly; published within 2 days. - Timeliness of annual financial statements: Good — published within 9 months of the end of the financial year; concern that audited outturn is too late to inform next year’s budget. - Internal consistency: Good — includes two of three key reconciliations; but lack of internal consistency has resulted in overstatement of general government debt by 2.3% of GDP. - Historical consistency: Basic — material revisions reported; average revision to historical debt data -0.5% of GDP. - Statistical independence: Advanced — CSO independent and observes international standards. - External audit: Advanced — independent supreme audit institution; C&AG independence protected by the constitution. - Reliability: Good — financial statements are unqualified and fiscal statistics meet SDDS+; minor qualifications due to social security fraud and error. - Recommended directions (as reflected in the chapter and cross-referred to Chapter IV): - Consolidate available fiscal information into a new set of more comprehensive summary fiscal reports that better cover publicly-controlled corporations, fixed assets, pension liabilities, and PPP obligations. - Automate collection of additional data through modernization of underlying government accounting systems and harmonize charts of accounts across general government entities to reduce manual reclassification and consolidation risks. - Improve timeliness of audited annual accounts to ensure audited outturn figures can inform the preparation of the annual budget. - Publish fuller reconciliations (including issuance vs. holdings of government debt) to detect and prevent double-counting and other inconsistencies. *Source: IMF country report excerpt provided in the content unit.* ### 29. This chapter assesses the quality of Ireland’s current fiscal forecasting and ### This chapter assesses the quality of Ireland’s current fiscal forecasting and budgeting practices ### Focus and scope - The chapter assesses Ireland’s fiscal forecasting and budgeting practices relative to the IMF Fiscal Transparency Code, focusing on: - i. the comprehensiveness of the budget and associated documentation; - ii. the timeliness of the budget and its passage; - iii. the policy orientation of budget documentation; and - iv. the credibility of the fiscal forecasts and budget proposals. ### Comprehensiveness of budget documentation - Budget unity (Basic) - Annual budget documentation focuses primarily on the cash revenues and expenditures of the Exchequer, with some contextual information about general government fiscal developments. - The Finance Bill and Exchequer Estimates present cash flows in and out of the Central Fund and their financing. - After excluding “below the line” financial transactions such as repayment of loans, the Exchequer accounted for 91 percent of the revenue and expenditures of the consolidated central government in 2011. - Net expenditure is split between voted (87 percent of Exchequer spending) and non-voted expenditure (13 percent of Exchequer spending), where non-voted includes debt service, EU-related spending, and various capital expenditures, appropriated on the basis of standing legislation. - Extra-budgetary and central government entities not presented in Estimates - 58 extra-budgetary bodies receive 60 percent of their funding as grants from central government departments; their own financed expenditure accounted for an additional €6.8 billion (4.3 percent of GDP) in 2011 and is not presented to Parliament in the annual budget estimates. - Notable extra-budgetary or central-government entities discussed: - National Pension Reserve Fund (NPRF): - Had €16.1 billion in assets in 2008. - Used €13 billion (10.1 percent of GDP) in capital injections into troubled banks over the last three years. - Government plans to use some of the NPRF’s €6 billion in non-Irish bank assets to fund investments in strategic industries and small and medium enterprises in Ireland. - Eligible Liabilities Guarantee Scheme: - Funded through €1.2 billion (0.8 percent of GDP) in guarantee fees; fees decreasing annually as the scheme is wound down. - National Roads Authority: - Funded primarily through a €1.6 billion (1 percent of GDP) contribution from the Exchequer and €100 million in toll fees. - Non-market semi-state bodies (e.g., Irish Rail and RTE) classified within the central government boundary. - While these entities’ revenues and expenditures are not included in the Exchequer Estimates approved by Parliament, they are captured in the overall general government fiscal aggregates. - Reconciliation and presentation issues - In line with EU requirements, annual estimates presented to Parliament include forecasts of the general government fiscal aggregates and a reconciliation (“walk”) from the Exchequer balance to general government balance. - There is no information provided on how Exchequer revenue and expenditure aggregates (which include a mixture of nonfinancial and financial transactions) relate to the ESA95 general government expenditure and revenue aggregates that underpin Ireland’s EU and domestic fiscal rules. - Gross budgeting (Basic) - The bulk of government revenues and expenditures are presented on a gross basis. - Domestic tax revenues and Exchequer expenditures are presented on both net and gross bases. - Appropriations-in-aid (non-tax revenues collected by departments and agencies) are presented on a gross basis for spending but appropriations-in-aid and social contributions are not included within the revenue estimates. - Ireland’s non-tax revenues are reported as 7.5 percent of GDP, or 23 percent of revenue. - The government now presents revenue on a gross basis in the revised estimates and in the Alternative Presentation of the monthly Exchequer Statement, but this gross presentation has not yet been extended to the annual budget documentation. - Macroeconomic forecasts (Advanced) - Macroeconomic assumptions are presented clearly and comprehensively, especially in the April Stability Program Update (SPU) and November Medium-term Fiscal Statement, with recent outturn and three year-ahead forecasts for real GDP, expenditure components of GDP, inflation, unemployment rate, and GNP. - Detailed discussions cover drivers of GDP(E) components and differences between GDP and GNP. - Forecasts are updated in the Economic and Fiscal Outlook published alongside the Budget Estimates in December, with major revisions explained. - Forecast accuracy and bias - Abstracting from the crisis impact, Ireland’s macroeconomic forecast errors are relatively large in absolute terms but relatively unbiased. - Ireland had one of the largest absolute forecast errors for GDP among EU countries due to high volatility and large scale revisions to GDP estimates. - In 1998–2007 the Department of Finance’s (DoF’s) macroeconomic forecasts were slightly pessimistic on average and more cautious than most other European economies; errors averaged out over the medium term. - Since the crisis, the DoF’s forecasts adjusted quickly, with relatively realistic assumptions for GDP growth since mid-2011. - Medium-term budget framework (Good) - Fiscal forecasting record: relatively cautious in the near term, mixed over the medium term. - Pre-crisis (1998–2007): forecasts for general government revenue were relatively conservative; revenues tended to come out better than forecast on average, producing larger-than-expected surpluses versus annual budget forecasts. - Consistent positive revenue surprises led to an upward drift in expenditure levels from one medium-term forecast to the next pre-crisis. - Immediate crisis aftermath: actual general government balance fell well short of pre-crisis forecasts due to reduced activity, revenue losses, and large financial sector intervention expenditures. - Since 2011, fiscal forecasts have been relatively prudent, aided by more credible medium-term expenditure forecasts. - Medium-term expenditure framework improvements - Since 2002, SPU provides three-year forecasts of aggregate general government expenditure and revenue by economic category. - After the Comprehensive Review of Expenditure (CRE) in 2011, net expenditure ceilings for each department (“Vote”) were set on a three-year fixed basis covering 2012, 2013, and 2014. - The 2013 Expenditure Report provided a detailed reconciliation of changes to expenditure ceilings since the CRE, identifying impacts of macroeconomic changes, policy changes, and technical adjustments. - Ceilings set in 2011 currently extend to 2014; a second expenditure review is planned for mid-2013 to set ceilings for 2015–16. ### Timeliness of budget submission and approval - Fiscal strategy report (Advanced) - The mid-year fiscal report is the April Stability Program Update (SPU), setting medium-term economic and fiscal parameters for the upcoming budget. - Previously, the Medium-Term Fiscal Strategy (MTFS) published in October/November duplicated the SPU; from 2013 the government will publish only the SPU in April. - The White Paper on Receipts and Expenditure, released in the week prior to the budget, provides an updated fiscal forecast for the upcoming budget year on a no-policy-change basis as a benchmark. - Budget submission (Basic) - Expenditure estimates are submitted to Parliament in early/mid-December, less than a month before the financial year begins. - The Finance Bill, legislating tax changes, is not submitted until February. - The late timing gives legislators limited opportunity to consider the budget before the start of the financial year. - The government plans to bring forward submission of the 2014 Budget to mid-October to align with good practice under the Fiscal Transparency Code and new EU economic governance regulations. - Budget approval (Not met) - Due in part to late submission, annual Expenditure Estimates and the Finance Bill are not approved by Parliament until well into the financial year. - Departments have standing authority under the Central Fund (Permanent Provisions) Act, 1965, to spend up to four-fifths of the level authorized for the previous year; urgent taxation changes can be introduced by resolution with statutory effect for up to four months. - The budget approval process has three main stages: - Mid-December: departmental Expenditure Estimates are submitted to Parliament; approval is not necessary due to standing spending authority. Parliament typically approves Financial Resolutions on budget day for temporary effect of indirect tax changes, subject to confirmation in the Finance Bill. - February onwards: Revised Estimates Volume and Finance Bill are presented; Parliament must vote on the Finance Bill within four months of the Budget; Revised Estimates usually voted on by July. Combined with the Finance Bill and Social Welfare Act, these provide legal authority for central government expenditure and tax changes in the current year. - End of budget year: Appropriation Bill is submitted and enacted, formalizing expenditures and adjusting in-year amendments. - The traditional Westminster approach does not meet the basic practice of the Code. - Planned improvements from 2013: - Budget Estimates to be submitted in October and Revised Estimates produced and submitted before the beginning of the year to which they refer. - This should enable Parliament to approve estimates either before or shortly after the beginning of the financial year. - The Appropriation Act approval is intended to remain at the end of the year as a regularization of in-year adjustments. ### Policy orientation of the budget - Fiscal policy objectives (Good) - Pre-crisis objectives: - (i) meet obligations under the EU Stability and Growth Pact by aiming for budget balance; - (ii) keep the general government fiscal deficit below 3 percent of GDP; - (iii) keep debt below 60 percent of GDP. - Post-crisis near-term objectives set as part of the EU-IMF program: - Target reduction in the general government deficit from 30.9 percent of GDP in 2010, to 8.6 percent in 2012, to 3 percent of GDP by 2015. - 2012 Fiscal Responsibility Law introduced a suite of new fiscal rules: - a budget balance rule requiring general government budget balance or surplus; or, in exceptional circumstances, a convergence of the structural budget deficit towards the medium-term target of 0.5 percent of GDP; - a debt rule: when general government debt exceeds 60 percent of GDP, the annual pace of debt reduction must be no less than 1/20th of the distance between the actual debt ratio and the 60 percent of GDP limit; - a medium-term objective of structural budget balance target of no-less than -0.5 percent of GDP; - a medium-term expenditure rule, limiting annual growth in general government expenditure to potential GDP growth, as assessed over the past five years, the estimate for the current year, and projections for the next four years. *Source: IMF staff chapter assessing Ireland’s fiscal forecasting and budgeting practices.* ### 43. While these rules are precise and time-bound, their number and complexity will ### _cr13209 - 43. While these rules are precise and time-bound, their number and complexity will ### Reporting of fiscal rules and general government aggregates - Budget documentation should include a section that clearly states each rule and demonstrates how the budget, as presented on an Exchequer basis, is performing against each of these general government rules, both historically and into the future. - Practice: - A walk-through from the Exchequer balance to general government balance is provided for the fiscal balance rule. - For the expenditure growth rule, general government aggregates are given but a walk-through from Exchequer payments to general government expenditure is not provided in the budget documentation; Appendix 1A and 1D provide examples of such a walk-through. ### Separation of existing and new policies (Advanced) - The budget distinguishes the cost of existing policies and identifies the impact of new policies included in the budget. - 2013 Budget quantitative impacts: - increased revenues by 0.9 percent of GDP - reduced expenditures by 1.1 percent of GDP - New policy impacts are compared against no-policy-change estimates from the White Paper on Receipts and Expenditure published the week before the budget. - The budget documentation factors in second-round effects of consolidation measures on economic activity and tax revenues over the forecast period. - Presentation of individual measures: - Tax policy measures: Summary of Budget Measures provides yield/cost for both the budget year and a “full year” cost. - Since 2012, expenditure measures: shown in the Estimates as changes to each department’s Vote ceiling relative to the previous year’s estimate for both the budget year and a full year. ### Performance information (Good) - Each department’s expenditure Estimate includes: - targets for outputs to be delivered - retrospective indicators for outcomes achieved under their Vote - Revised Estimates appendices include: - high level policy goals for each department - outturn and indicative targets for outputs in numerical terms - data on outcome indicators for the last three years - Limitations: - No explicit link between these performance targets and budget allocations within departments. - Policy objectives and nonfinancial performance indicators are not directly linked to expenditure programs within departmental Votes. - No targets for expected improvements in outcomes to compare subsequent department performance. ### Distributional analysis (Advanced) - The Irish budget provides detailed distributional analysis of the financial impact of government policies. - The budget includes an annex describing the impact of major tax policy changes on household incomes by: - gross income levels - income sources - family types - pre and post policy change basis - Illustrative taxpayer profiles are provided (e.g., single person paying full rate PRSI; married couple with single income and two children). - Information on distribution of taxpayers across groupings (exempt from PRSI, standard rate, higher rate) is included. - External research drawn on in 2013 Budget: - Distributional Impacts of Recent Budgets and Progressivity Issues annex uses research by the OECD, ESRI and the European Commission (EC). - Demonstrates high income earners bore the greatest share of the fiscal adjustment. - Compares progressivity of Irish consolidation to six other crisis-hit countries, measured by changes in disposable income by decile (2008–11). ### Fiscal sustainability analysis (Not met) - Published fiscal forecasts cover a relatively short horizon; 2013 budget documentation provided forecasts of main fiscal aggregates only to 2015. - Long-term work cited: - 2012 SPU summarizes the EC’s 2009 Aging Report projections for Ireland out to 2060. - No comprehensive long-term projections published since the 2007 National Pensions Framework. - 2013 Expenditure Report includes analysis of alternative demographic scenarios on education expenditure between 2013 and 2030, but limited to expenditure side. - Department of Finance (DoF) has a longer-term forecasting model used for EC inputs but does not publish comprehensive long-term fiscal projections. - Concerns and quantitative context: - Government debt at current level of 118 percent of GDP; long-term objective of 60 percent of GDP. - Demonstrating compatibility with the 60 percent objective requires a time horizon of 10 years or more. - EC estimates age-related pressures will require an additional 7.4 percent of GDP of expenditure based on existing policies by 2050. - Recommendation implicit: undertake scenario-based debt sustainability analysis and publish comprehensive long-term fiscal projections covering revenues, balance, and debt. ### Credibility of forecasts and budgets - Independent evaluation (Advanced): - Macroeconomic and fiscal forecasts are evaluated by the Irish Fiscal Advisory Council (IFAC). - IFAC: five economists appointed part-time and a full-time secretariat of three. - IFAC assesses credibility of government projections and appropriateness of fiscal stance; submits assessments twice a year to the Minister for Finance and releases them publicly within ten days. - If government does not accept IFAC’s assessment on certain issues, the Minister for Finance must lay a statement before Parliament outlining reasons. - Supplementary budget (Advanced): - Any increase in total expenditure or movements between Votes requires Parliamentary approval via a Supplementary Estimate when certain conditions apply (additional money for existing service; shortfall in appropriations in aid; use of surplus appropriations in aid; transfers between Votes; transfers between services within a Vote not doable by administrative virements). - In practice: - Ireland has underspent against Exchequer budget totals in every year since 2004, with an average underspend of 2.3 percent of expenditure. - Overall movement of resources between Votes during the budget year averages 0.5 percent of total expenditure, after accounting for the overall underspend. ### Forecast reconciliation (Not met) - Medium-term fiscal forecasts are subject to large variations that are not comprehensively reconciled and explained in a single publication. - Example revisions between April 2012 SPU and 2013 Budget: - tax revenue forecast for 2013 revised down by €835 million (0.5 percent of GDP) - expenditure forecasts revised up by €2.2 billion (1.4 percent of GDP) - such variations required 2 percent of GDP in policy adjustments to remain within deficit targets - Reconciliation practice: - Reconciliations provided for changes in multi-year expenditure allocations between budgets, but not for changes in medium-term projections of revenue or other fiscal aggregates. - 2013 Expenditure Report provided a comparison of changes to three-year departmental Vote ceilings since 2011 with breakdown by macroeconomic factors, policy changes, and technical adjustments; same reconciliation not provided for broader general government expenditure. - Revenue forecasts are only compared to forecasts in the White Paper on Receipts and Expenditure (released a week prior to the budget). - Implication: - New fiscal rules will require clearer differentiation of policy impacts on general government fiscal aggregates from parameter variations. - More transparent reconciliation will enable IFAC to assess appropriateness of policy responses and demonstrate compliance with the expenditure benchmark. ### Conclusions and key areas for improvement - Overall assessment: Irish fiscal forecasting and budgeting meet good or advanced practices in most areas; reforms underway where practice falls below standard. - Key areas for improvement highlighted: - Unity and coverage of budget documentation and legislation: Exchequer-only coverage excludes €6.8 billion (4.3 percent of GDP) of extra-budgetary activity within central government. - Timing of budget submission and approval: Parliament receives the budget only a few weeks before the beginning of the budget year and approves it halfway into the budget year. - Relatively short fiscal forecasting horizon and lack of comprehensive fiscal sustainability analysis. - Lack of transparent reconciliation of changes to the main fiscal aggregates between successive fiscal forecasts, hindering assessment of impacts from macro shocks, policy changes, and technical changes. - Chapter IV of the source provides recommendations addressing these gaps (coverage of fiscal reporting, bringing forward the budget timetable, improvements in fiscal forecasts and documentation). ### Fiscal risk analysis and management (Introduction) - Fiscal risks arise from macroeconomic uncertainty (growth, inflation, interest rates, unemployment) and from specific sources (government guarantees, tax disputes, litigation, changes in asset/liability values). - Ireland’s risk profile: - Revenue volatility was high even before the crisis. - Rapid rise in general government debt from 25 percent of GDP in 2007 to 118 percent in 2012 reduces room to accommodate fiscal shocks. - High indebtedness of households, firms, and financial institutions increases risk of further government support demands. - Reporting on fiscal risks is extensive but fragmented across many documents and agencies; much information is reported by entities other than the ministries responsible for fiscal management (DoF and DPER), including the Comptroller and Auditor-General, IFAC, and the Central Bank. - Table of selected reports related to fiscal risk (authors and aspects) is provided in the source, showing risks are discussed across many publications (DoF, IFAC, DPER, CSO, CBI, NTMA, NPRF, C&AG, DECLG, various public corporations). *Source: _cr13209 - 43. While these rules are precise and time-bound, their number and complexity will (PDF chapter/section).* ### 61. This chapter assesses the adequacy of Ireland’s fiscal risk analysis and ### This chapter assesses the adequacy of Ireland’s fiscal risk analysis and management practices relative to the IMF Fiscal Transparency Code ### Fiscal Risk Analysis — Macroeconomic Risks (3.1.1) - Ireland’s GDP was more volatile than other Euro Area countries before the crisis, increasing forecasting difficulty (Figures 3.1.a–d). - GDP volatility fed directly into volatility of government revenue, making fiscal forecasting difficult. - Even controlling for growth rates, Ireland’s GDP and government revenue were among the most volatile in the Euro Area. - Three recent reports, taken jointly, meet the standard of advanced practice for macroeconomic risk analysis: - DoF’s November 2012 Medium-Term Fiscal Statement: estimates sensitivity of forecasts of the deficit of general government to changes in world GDP growth and the domestic savings rate. - DoF’s April 2012 Stability Program Update: projects the deficit of general government under four alternative scenarios (relating to interest rates, world GDP growth, oil prices, and the domestic savings rate) in which growth differs from forecast by 1 percent. - Irish Fiscal Advisory Council’s September 2012 Fiscal Assessment Report: by assuming that forecast errors of nominal GDP will be as large in the future as in the past, presented 80 percent confidence bands for forecasts of debt and deficit of general government until 2015, holding current policy constant (Figure 3.2). - The IFAC fan chart displays 80 percent of the probability distribution of outcomes, each band representing 10 percent of the distribution. ### Fiscal Risk Analysis — Specific Fiscal Risks (3.1.2) - Specific (discrete) fiscal risks documented include: - Factors beyond macroeconomic analysis affecting revenue (example: pharmaceutical “patent cliff” affecting tax revenue from pharmaceutical firms). - Contingent liabilities: guarantees, deposit insurance, callable capital in international organizations, and law suits (Table 3.3). Some are quantifiable (e.g., guarantees in Finance Accounts); others are open-ended and hard to quantify (e.g., Insurance Compensation Scheme). Implicit contingent liabilities (e.g., pressure to support systemically important banks or compensate natural disaster victims) also exist. - Risks related to assets and liabilities not reported on a balance sheet: refinancing risks, interest rate and exchange rate effects, and other valuation sensitivities. - Technical changes in debt/deficit measurement (example: reclassification of Irish Rail and RTE into general government and risk of further reclassification). - Selected quantified contingent liabilities (Table 3.3): - Eligible Liabilities Guarantees: 45.0 percent of GDP; 72.8 billion euros; 2012; NTMA website. - Exceptional Liquidity Assistance: 7.1 percent of GDP; 11.5 billion euros; 2011; Finance Accounts 2011. - National Asset Management Agency: 18.0 percent of GDP; 29.1 billion euros; 2011; Finance Accounts 2011. - Deposit Guarantee Scheme: 50.7 percent of GDP; 82.0 billion euros; 2011; Comptroller and Auditor General's report 2011. - Callable capital in European Financial Stability Facility: 4.6 percent of GDP; 7.5 billion euros; 2011; Finance Accounts, 2011. - Callable capital European Stability Mechanism: 6.1 percent of GDP; 9.9 billion euros; 2012; Speech by Minister for Finance, June 7, 2012. - Callable capital in European Investment Bank: 1.9 percent of GDP; 3.0 billion euros; 2012; Estimate based on UK's reporting. - Contingent obligations to other international organizations: 2.4 percent of GDP; 4.0 billion euros; 2012; Estimate based on Australian and New Zealand reporting. - Other guarantees: 0.0 percent of GDP; 0.1 billion euros; 2011; Finance Accounts, 2011. - Credit Guarantee Scheme: 0.0 percent of GDP; 0.02 billion euros; 2012; Website of Department of Jobs, Enterprise & Innovation. - Total (quantified): 136.0 percent of GDP; 219.8 billion euros. - Unquantified contingent liabilities (Table 3.3, panel b) include: - Insurance Compensation Scheme; Title insurance; Court cases; Revenue guarantees for toll roads; Indemnities, warranties, etc. - Observations on disclosure: - No single government report compiles specific fiscal risks. Information is fragmented across reports (Finance Accounts, Comptroller and Auditor-General report, Appropriation Accounts, other sources). - Appropriation Accounts disclose contingent liabilities by Vote and are not consolidated in a single summary table; examples of page locations given (pages 233, 318, 345, 401, 424, 452, 468, 548, and 569 in the Accounts of 2011). ### Fiscal Risk Analysis — Comparability of Fiscal Reports (3.1.3) - Budgets and Exchequer statements are prepared on the same basis; differences between the Exchequer balance and national debt, and the deficit and debt of general government, are explained. - ESA95 fiscal statistics (used for EU fiscal rules compliance) are prepared on a basis very different from Ireland’s budgetary accounting. - Differences between the two main sets of indicators of deficit and debt are reconciled; however, differences in the two measures of spending and revenue are not reconciled in the same manner. - Table 3.4 reconciles revenue and expenditure between Exchequer and General Government, 2011 (Million Euros): - Central Government: Revenue 52,410; Expenditure 76,174; Balance -23,764. - Exchequer (nonfinancial transactions): Revenue 37,576; Expenditure 56,223; Balance -18,647. - Memo: Exchequer (receipts and issues): 39,305; 64,222; -24,917. - Appropriations in aid: 4,026; 4,026; 0. - Social insurance: 9,720; 9,646; 74. - Other extrabudgetary funds: 4,094; 7,986; -3,892. - Nonmarket semi states: 7,641; 7,665; -24. - Eliminations within central government: -11,208; -9,050; -2,158. - Cash-to-accrual adjustments: 562; -322; 884. - Local Government: Revenue 8,294; Expenditure 8,284; Balance 10. - Eliminations between LG and CG: -5,020; -5,020; 0. - General Government: Revenue 55,684; Expenditure 77,279; Balance -21,595. - Percent of GDP: Revenue 35.0; Expenditure 48.6; Balance -13.6. (2011) ### Management of Fiscal Risk — Contingency Reserves (3.2.1) - Budgets include small contingency amounts; the budget has been underspent in aggregate each year since 2004. - Expenditure Report 2013 includes contingency expenditure lines: - Current spending contingency: €50 million in 2013 and €70 million in 2014 (about 0.1 percent of total spending). - Unallocated reserve under capital spending: €67 billion and €134 billion in 2015 and 2016 respectively (nothing for 2013 and 2014). - Extra-budgetary contingency fund: contained €1.2 million at end-2011 and was not used in 2011. - DPER’s Public Financial Procedures manual sets criteria for use and reporting of the contingency fund (section C1); no published criteria for use and reporting of the contingency lines in the budget. ### Management of Fiscal Risk — Assets and Liabilities (3.2.2) - Rapid growth in government financial assets and liabilities over the last decade: - End-2007 (eve of crisis): liabilities €60 billion (32 percent of GDP); financial assets €58 billion (31 percent of GDP). - End-Q3 2012: general government financial liabilities €212 billion (131 percent of GDP); assets €78.4 billion (48 percent of GDP). - Note: This estimate of liabilities differs from the Maastricht measure (includes accounts payable and derivatives in loss; valued at market value; not fully consolidated). New CSO data published April 22, 2013 (after analysis) show total liabilities end-2012 of €207.7 billion (128 percent of GDP). - Riskier asset holdings include equities of some €23 billion (14 percent of GDP). - Large differences can occur between the deficit and total change in financial net worth due to market valuation changes: - 2010: deficit was 31 percent of GDP; decline in financial net worth was 22 percent. - 2011: deficit was 13 percent of GDP; decline in financial net worth was 18 percent. - Figure 3.3 shows composition of financial assets and liabilities (2002–12) including accounts payable, equity, loans, derivatives, securities other than shares. - Table 3.5 — Selected other assets and liabilities, 2011: - Assets: Nonfinancial assets 73.6 percent of GDP; 117 billion euros. PPPs 1.0 percent. - Liabilities: Public pensions 73.0 percent of GDP; 116 billion euros. PPPs 1.0 percent. State Claims 0.6 percent; Litigation 0.10 percent. - Government borrowing control and approvals: - As a rule only the Minister for Finance may borrow (Public Financial Procedures §B3); primary borrowing delegated to NTMA. - Government agencies need approval to borrow (PFP §C3); lease-purchase arrangements included (PFP §D2). - Local governments require ministerial approval following Department of Environment, Community and Local Government review. - Public bodies must get approval to enter into PPPs. - NTMA reporting and gaps: - NTMA Annual Report 2011 provides information on most central government conventional debt; covers 79 percent of liabilities of general government. - Government’s €28 billion in promissory notes is mentioned but excluded from NTMA financial statements. - NTMA report shows currency composition and maturity profile of national debt and discusses refinancing risk. - NPRF portfolio summary shown; NPRF worth €13.4 billion at end-2011 (20 percent of financial assets of general government). Separate NPRF annual report discusses risk management. - NAMA’s assets and liabilities are reported. - No report consolidates assets and liabilities under NTMA management, analyzes risks to this consolidated portfolio, and describes a consolidated management strategy. ### Management of Fiscal Risk — Guarantees (3.2.3) - Guarantees are an important fiscal risk source though exposure has fallen sharply since 2009: - As defined in Finance Accounts, guarantees fell from roughly 200 percent of GDP to 73 percent at end-2011 (Figure 3.4). - About half the liabilities the government had guaranteed at end-2011 were liabilities of public corporations and thus not additive to public sector liabilities in Chapter 1. - Guarantees remain large in absolute terms and relative to other EU countries (Figure 3.5). - Basic disclosure exists but issuance generally at discretion of Minister for Finance. - Finance Accounts 2011 reported guarantees amounting to €147 billion (92 percent of GDP) given to private corporations, public corporations, and general government entities. - Figures disclosed do not include commitments economically similar to guarantees (callable capital in international financial institutions, deposit-insurance scheme covering deposits up to €100,000, insurance-compensation scheme). - While guarantees have statutory basis, in some cases there are no prescribed limits on total amounts guaranteed. - Table 3.6 presents government guarantees, end-2011 (percent of GDP; billion euros; included in liabilities of general government; included in liabilities of public sector): - Eligible Liabilities Guarantees: 63.9 percent of GDP; 101.5 billion euros; No; Partly. - Exceptional Liquidity Assistance: 7.2 percent of GDP; 11.5 billion euros; No; Partly. - National Asset Management Agency: 18.3 percent of GDP; 29.1 billion euros; No; Yes. - Housing Financing Agency: 2.7 percent of GDP; 4.4 billion euros; Yes; Yes. - Other: 0.0 percent of GDP; 0.1 billion euros; No; Partly. - Total: 92.2 percent of GDP; 146.6 billion euros; Partly; Partly. - Memorandum items: - Guarantees, excluding those of liabilities of general government: 89.4 percent of GDP; 142.2 billion euros. - Guarantees, excluding those of liabilities of public sector: 44.9 percent of GDP; 71.4 billion euros. ### Management of Fiscal Risk — Financial Sector Exposure (3.2.4) - Fiscal risks from the financial sector exceed explicit guarantees; a broader measure is the sector’s total liabilities (guaranteed and unguaranteed). - Ireland’s financial-sector total liabilities are extremely high compared with other high-income countries (Table 3.1), though much of these liabilities are associated with foreign banks that the government is unlikely to be pressured to support. - Additional indicators: - Irish banks are relatively dependent on the Irish government’s creditworthiness, but equity as a percentage of assets (book values) is relatively high. - Table 3.7 (Indicators of Banking Financial Stability in Europe, 2012) shows a mixed picture: Tier 1 capital ratio relatively good; ratio of nonperforming loans (NPL) to total loans is high. - CBI’s Macro-Financial Review, 2012:II described the Irish banking sector situation as remaining “fragile.” *Italic: Source — Chapter text provided in content unit _cr13209 - 61. This chapter assesses the adequacy of Ireland’s fiscal risk analysis and* ### 75. Public reports provide basic information on financial-sector risks and the ### _cr13209 - 75. Public reports provide basic information on financial-sector risks and the ### Financial-sector risks and government exposure - Public reports provide basic information on financial-sector risks and the government’s explicit exposure to them. - The 2011 report of the C&AG provides a clear and detailed discussion of the government’s interventions in the financial sector and describes the government’s guarantees and other factors relevant to an assessment of the risk, but it “does not attempt to assess the risks faced by the government.” - The Central Bank’s Macro-Financial Review analyzes the risks of financial instability, including those emanating from the financial sector, but “does not discuss fiscal questions.” - The government does not provide its own assessment of potential fiscal risks created by the financial sector. ### Long-term contracts (PPPs) — findings (Basic) - The estimated present value of the central government’s recorded financial commitments under PPPs given available data was about 2 percent of GDP in 2011. - CSO published an estimate of off-balance sheet liabilities related to PPPs in 2011 (and 2012) of €5.049 billion (3 percent of 2011 GDP); the report notes this CSO estimate is higher than the estimate presented in this report and higher even than the undiscounted commitments reported by the C&AG and cautions the CSO estimate “may be too high” because it does not take account of amortization of obligations when availability payments are made. - The 2 percent of GDP estimate excludes projected payments in PPPs undertaken by local governments and projected payments by the central government to two toll-road companies that benefit from traffic guarantees. - PPP commitments in Ireland are noted as “not trivial” but smaller than in Portugal and the United Kingdom. - The C&AG’s 2011 report disclosed total government spending on PPPs in 2011 of €400 million, or a ¼ of a percent of GDP, and provided the nominal (undiscounted) value of the government’s outstanding commitments (about €4 billion), but omitted an estimate of how the commitments of €4 billion are distributed over the remaining years of the contracts. - PPP assets and liabilities are not recorded on the government’s accounting balance sheets. - There is no legal limit on the government’s ability to enter into PPP contracts; central government departments cannot enter into PPPs without prior authorization from the DPER. ### Derivatives — findings and reporting (Good) - The government’s holdings of derivatives are identified as a potential source of fiscal risks. - The net value of the derivatives of general government has been volatile but “in the third quarter of 2012 was close to zero.” - Notional (nominal) values provide an indicator of possible risks: the notional value of derivatives managed by NTMA increased markedly from less than €1 billion in 2010 to €18 billion in 2011. - Table 3.8 (market and notional values, Billion euros): - General government: Market value — 2010: 0.6; 2011: 0.3; September 30, 2012: 0.0. - General government: Notional value — 2010: n.a.; 2011: n.a.; September 30, 2012: n.a. - NTMA: Market value — 2010: 0.0; 2011: −0.4; September 30, 2012: n.a. - NTMA: Notional value — 2010: 0.8; 2011: 18.0; September 30, 2012: n.a. - The reporting of the government’s derivatives is characterized as “good”: CSO estimates the market value of the general government’s derivative assets and derivative liabilities, and NTMA’s annual report discloses the notional values of its derivatives. - The report notes reporting would be better with “a consolidated accounting balance sheet of at least financial assets and liabilities” to allow analysis of derivative risks in the context of the government’s portfolio. ### Subnational governments — findings (Good) - Local governments are not a significant source of fiscal risk owing to small size and lack of financial autonomy. - In 2011, gross expenditure of Ireland’s local governments accounted for 12 percent of total government spending. - Own-source revenues accounted for just 43 percent of local government annual expenditure. - At end-2011, the debt of local government was €5.5 billion; most of this was owed to central government and the contribution of local governments to the debt of general government was only €1.0 billion (less than 1 percent of GDP). - While five local governments have debt-to-revenue ratios of 150 percent or more, local governments’ borrowing costs are low and “no local government has a debt-service-to-revenue ratio of more than 7 percent.” - The CSO publishes annual data on local government spending, revenue, and debt; borrowing by local governments is controlled by central government and all borrowing must be approved by the appropriate minister after a review by the Department of Environment, Community, and Local Government. - Planned improvements include published quarterly accounts for local government and a need for consolidated information on 240 public corporations controlled by local authorities. ### Public corporations — findings (Basic) - Public corporations, especially public financial corporations, create large fiscal risks in Ireland. - The debt of public corporations makes the debt of the public sector about 200 percent of GDP larger than the debt of general government. - The largest part of this additional debt is the debt of financial corporations, including NAMA and Allied Irish Bank. - The government publishes basic information on budgetary transfers to public corporations and dividends received; individual corporations also publish their accounts. - There is “no information on quasifiscal operations of financial corporations.” - In 2011 the government established New Economy and Recovery Authority (NewERA) under NTMA auspices to provide a perspective on the performance of five large nonfinancial public corporations (ESB, Bord Gáis, EirGrid, Bord na Móna, and Coillte) with opportunities for improved oversight and reporting. - Table 3.9 summary items (selected numeric highlights preserved exactly as presented): - General government liabilities and financial assets of 131% and 48% of GDP, plus off-balance-sheet assets and liabilities of 75% of GDP each. - Explicit guarantees are large at 73% of GDP but have fallen from 197% in 2008. - General government PPP liabilities are only 1% of GDP. - Contingency reserves are small (0.1% of expenditure). - Incremental liabilities of public corporations are about 200% of GDP. ### Overall assessment and key shortcomings (Conclusions) - The government’s reporting and management of risk “meets at least basic practice for all principles and in some cases meets the standards of good or advanced practice.” - Several areas for improvement are highlighted: - Analysis of and reporting on macroeconomic and specific fiscal risks are scattered across multiple documents and agencies. - Disclosure and management of specific fiscal risks (government assets, liabilities, contingent liabilities, derivatives, financial sector exposures, long-term commitments) meet basic disclosure requirements but lack analytical depth for risk management and mitigation. - Comparability of fiscal forecast and outturn data is limited: most budget information and in-year fiscal reports are not presented on the same basis as the government’s ESA95-based fiscal rules. - Oversight of public corporations needs strengthening; new arrangements for transparency and oversight are only just being established. ### Recommendations (IV) — specific reforms and implementation goals - Recommendation to bring existing fiscal information together, including: - DoF’s monthly cash-based report on Exchequer revenues, expenditure, and financing covering 91 percent of general government revenue. - CSO’s consolidated general government operating statement and financial balance sheet submitted to Eurostat quarterly and annually. - Information on fixed and financial assets reported on balance sheets of central government departments and agencies, local governments, and public corporations. - Estimates of public service pension liabilities, PPP commitments, guarantees and derivatives, contingent liabilities, and tax expenditures from a range of sources. - Forecasts of long-term trends in health and pensions expenditure submitted to the EU for inclusion in their Fiscal Sustainability Report. - NTMA, NPRF, and NAMA’s analysis of the performance of and risk associated with their holdings of financial assets and liabilities. - Ten key reforms to align Ireland’s fiscal reporting with international standards and best practices: i. expand the institutional coverage of budgets, statistics, and accounts; ii. recognize a wider range of assets and liabilities in balance sheets; iii. incorporate the corresponding accrued flows into fiscal reports; iv. modernize the budget classification and chart of accounts; v. accelerate the timetable for the submission of the annual budget and accounts; vi. provide a more detailed reconciliation of changes to fiscal forecasts; vii. regularly publish long-term fiscal projections; viii. produce a comprehensive statement of fiscal risks; ix. publish a medium-term asset and liability management strategy; and x. harmonize financial reporting standards and practices across the public sector. - Implementation aims to be achieved by the end of 2017: - bring the financial activities of all publicly controlled entities into summary fiscal reports; - present their operations and balance sheets in a consolidated, integrated, and comprehensive set of financial statements for the public sector and its sub-sectors; - put Ireland in a position to fully comply with ESA95 and GFSM2001 for fiscal statistics, meet the additional reporting requirements the EU Six Pack and Two Pack and ESA 2010, and adopt IPSAS requirements (or their European variant) for government accounting; - enable the government to track its performance against its national and EU-wide general government fiscal rules on a monthly basis; - ensure that fiscal forecasts, budgets, statistics, and accounts are presented on a consistent and comparable basis; - enhance public recognition of and government accountability for medium and long-term fiscal developments and risks. *Source: IMF staff report content provided in the input.* ### 1. Expand the Institutional Coverage of Fiscal Reports ### 1. Expand the Institutional Coverage of Fiscal Reports ### Findings - 126 central government entities whose net expenditure accounts for €6.8 billion (4.3 percent of GDP) are currently excluded from the central government budget and accounts. - A further 297 entities whose net expenditures accounted for at least €16.8 billion (11.7 percent of GDP) are outside the scope of the general government fiscal statistics. ### Recommendations - Expand institutional coverage of budgets, fiscal statistics, and financial statements by: - Expanding the coverage of the annual budget documentation to present the gross revenues and expenditures of the consolidated central government to provide a comprehensive overview of all tax-funded activities of central government regardless of classification (vote, extra-budgetary fund, or non-market semi-state body). - Combining the Finance and Appropriation Accounts into a consolidated Central Government Financial Statement to provide a comprehensive and accessible summary of the central government’s annual financial performance relative to the approved budget. - Providing an overview of the gross revenues and expenditures of central, local, and general government in budget documentation and in-year fiscal statistics to enable forecasting and monitoring against the general government expenditure benchmark and other fiscal rules in Ireland’s new FRL and EU “Six Pack”. - Preparing fiscal statistics for the consolidated public sector and its subsectors to give policymakers, legislators, markets, and the public a regular and comprehensive overview of the financial position and performance of all publicly controlled entities. ### 2. Recognize a Wider Range of Assets and Liabilities ### Findings - Current balance sheet exclusions include: - €116.8 billion (73.5 percent of GDP) in fixed assets of central and local governments. - €116 billion (73.0 percent of GDP) in liabilities associated with public service pensions (2009 estimate of the present value of accrued pension benefits). - €4.0 billion (2.5 percent of GDP) in liabilities under PPPs. - €324.7 billion (204.3 percent of GDP) in assets and liabilities held by public corporations. ### Recommendations - Recognize a wider range of assets and liabilities by: - Revaluing and recognizing accrued pension liabilities of public servants and regularly updating the €116 billion estimate in central and local government balance sheets. - Recognizing government assets and liabilities associated with PPPs in central and local government balance sheets. - Revaluing and recognizing nonfinancial assets of central government departments (bringing fixed asset valuations up-to-date in line with international standards, subject to a de minimis for small or heritage assets) to enable a full balance sheet in the Central Government Financial Statements. - Preparing a financial and full balance sheet for the public sector and its subsectors by incorporating existing data on central government, local government, and public corporation financial assets and liabilities and, when updated valuations are available, showing overall public sector net worth. ### 3. Incorporate Associated Accrued Revenues and Expenses ### Findings - Recognition of the above assets and liabilities allows incorporation of related fiscal flows; currently unrecognized expenses could amount to 1 percent of GDP per year. - Changes in valuation of public sector pension liabilities amounted to approximately €1 billion (non-cash flow). ### Recommendations - Incorporate corresponding economic flows in fiscal documentation by: - Reflecting changes in accrued public sector pension liabilities in budget documentation, statistics, and accounts as non-cash flows once present value estimates are included in balance sheets. - Incorporating info on the annual flow of government investments and payments under PPPs into fiscal projections, budgets, and accounts to demonstrate long-term affordability. - Utilizing department-specific depreciation figures in summary statistics and accounts; current economic depreciation based on the perpetual inventory model is €1.8 billion higher than the sum of department and local government account depreciation figures, so updating fixed asset valuations would allow use of the more accurate departmental/local figures. - Recognizing valuation changes in public sector assets, liabilities, and contingent liabilities in fiscal documentation and as supplementary disclosures in budgets once a comprehensive balance sheet is prepared. - Providing a more comprehensive estimate of revenue foregone from all tax expenditures by extending annual estimates beyond income and corporation taxes to fully cover the estimated 6 percent of GDP in total revenue foregone from all direct and indirect tax allowances, reliefs, deductions, and rebates, without adding to taxpayer compliance burden. ### 4. Modernize the Budget and Accounting Classification ### Findings - Current charts of accounts for central government departments, extra-budgetary funds, non-market agencies, local governments, and public corporations cannot automatically generate summary fiscal data in line with international reporting standards (ESA 95, GFSM 2001), hindering comprehensive, comparable fiscal reports and real-time monitoring against national and EU fiscal rules. ### Recommendations - Bring classification into line with international standards by: - Reorganizing the monthly Exchequer Statement to present gross revenues and expenditures and distinguish nonfinancial and financial transactions, supplementing current statements and aligning with ESA 95 and GFSM 2001 presentations. - Developing an exhaustive program classification mappable to individual output/impact indicators and COFOG sectors to enhance departmental accountability and automate internationally comparable functional expenditure statistics. - Developing a harmonized chart of accounts for all general government and, eventually, public sector entities to facilitate automated collection and consolidation of detailed fiscal data while allowing internal management reporting flexibility; leverage the planned shared services project to roll out such a chart of accounts. ### 5. Bring Forward the Timetable for Budgeting, Accounting, and Audit ### Findings - Audited accounts are published too late to inform annual budget preparation. - Annual budget estimates are submitted too late for parliament to debate and approve before the start of the fiscal year. ### Recommendations - Accelerate production, presentation, and approval of annual budget and accounts by: - Requiring the government to submit the annual budget to parliament in October to align with the EU Two Pack Common Budgetary Timeline and the October 15 publication requirement. - Requiring parliament to approve the annual budget in December to give at least two months for scrutiny and to meet the EU Two Pack requirement that budgets be adopted by December 31. - Requiring the government to submit annual accounts to the C&AG by March or an earlier agreed date so outturn data can inform the Stability Program Update due to the EU by end-April. - Requiring the C&AG to submit audited accounts to parliament by June to ensure next year’s budget is prepared on the basis of audited outturn figures. ### 6. Prepare Long-term Fiscal Projections ### Findings - Ireland’s general government gross debt reduction target: from 121 percent of GDP to 60 percent of GDP will require a prolonged period of tight fiscal policy. - Harmonized European estimate suggests age-related expenditure will increase by 7.4 percent of GDP by 2050. - Current Irish fiscal projections extend only to 2015 and thus do not show how/when debt target will be met or long-term impacts of demographic trends. ### Recommendations - Regularly publish long-term fiscal projections as part of annual budget documentation by: - Publishing the government’s own debt-sustainability analysis extending out 10–20 years to show interaction of new fiscal rules and alternative macro scenarios on expenditures, revenues, and rules compliance. - Augmenting the internal long-term fiscal projection model and publishing projections at least every two-to-three years to demonstrate ageing and health expenditure pressures and to assess impacts of alternative expenditure policy changes using detailed entitlement data. ### 7. Reconcile Fiscal Forecast Changes ### Findings - Large revisions occur between successive medium-term forecasts. Example: between the SPU and 2013 Budget, on a no-policy-change basis: - Tax revenues revised down €800m. - Net expenditures revised up by €2.2 billion. - Difficult to distinguish impacts of macroeconomic changes, policy changes, and technical/accounting changes on forecasts. ### Recommendations - Provide comprehensive reconciliations of changes to key fiscal aggregates between successive forecasts by comparing successive vintages of revenue and expenditure forecasts and breaking down variations into macroeconomic, policy, and technical components to increase transparency and reinforce credibility of multi-year expenditure ceilings in the MTEF. ### 8 and 9. Enhance Fiscal Risk Analysis ### Findings - Information on fiscal risks is published across many documents by many agencies, reducing utility. - Much information is reported by entities other than the ministries responsible for fiscal management (Department of Finance and Department of Public Expenditure and Reform), e.g., C&AG, IFAC, Central Bank. - Improvements in fiscal reporting (consolidated statistics and financial statements) will help but will take time and be insufficient to gather all fiscal risk information in one place. ### Recommendations - Recommendation 8: The Department of Finance should publish as part of budget documentation a comprehensive annual statement of fiscal risks including sections on: - Macroeconomic analysis of risk (drawing on Medium-Term Fiscal Statement, SPU, IFAC Fiscal Assessment Report). - Specific revenue risks not reflected in macroeconomic analysis (Medium-Term Fiscal Statement). - Contingent liabilities, including guarantees, insurance, callable capital, indemnities, litigation, etc. (Finance Accounts, C&AG report, Appropriation Accounts). - Risks related to the financial sector beyond explicit guarantees (CBI Macro-Financial Review). - Risks related to values of assets and liabilities and associated cash flows, including debt, derivatives, financial assets, pensions, provisions, and PPPs (annual reports of NTMA, NPRF, State Claims, C&AG report). - Recommendation 9: The Department of Finance or NTMA should publish an annual report on the government’s strategy for management of its portfolio of assets and liabilities, including debt, the NPRF fund, and shares in financial and nonfinancial corporations. ### 10. Harmonize Financial Reporting Standards and Practices ### Findings - No permanent official/unit is responsible for setting and enforcing financial reporting standards across the public sector, resulting in no uniform accounting rules for government departments, extra-budgetary funds, semi-state bodies, local governments, and public corporations. - This lack of uniformity makes consolidating government-wide financial information and system-wide improvements costly and time-consuming. - The Government Accounting Section in the DPER prescribes accounting procedures for preparing Voted accounts subject to the Exchequer and Audit Departments Act, 1866. ### Recommendations - Establish a permanent government financial reporting unit in the DoF or DPER headed by a Chief Financial Officer (CFO) or Director of Government Accounting (DGA), possibly requiring legislative changes to grant authority. The CFO/DGA should be appropriately qualified and supported by a small group of finance professionals to: - Set financial reporting standards for all public sector entities based on international and European accounting and statistical standards. - Enforce those standards in preparation of in-year and year-end financial reports by public sector bodies. - Prepare and transmit proposed consolidated Central Government Financial Statements to the C&AG for audit. - Cooperate with the CSO, DECLG, CBI, and other public entities on preparation of fiscal statistics for general government and public sector. - Establish and maintain professional standards for the government accounting profession. *Source: _cr13209 - 1. Expand the Institutional Coverage of Fiscal Reports* ### 2. Recognize a Wider Range of Assets and Liabilities in Balance Sheets ### 2. Recognize a Wider Range of Assets and Liabilities in Balance Sheets ### a. Revalue and recognize accrued pension liabilities of public servants - Actions: - Update the estimate of the present value of pension liabilities. - Report pension liabilities in a note to Central Government Financial Statement. - Recognize pension liabilities in balance sheet of Central Government Financial Statement. - Update the valuation of the present value of pension liabilities. - Responsible agencies: DPER, CSO, DoF ### b. Recognize government assets and liabilities associated with PPPs - Staged reporting and recognition: - Report major PPP assets and liabilities in a note to the central government balance sheet. - Recognize major PPP assets and liabilities in the central government balance sheet. - Recognize and report all PPP assets and liabilities in the central government balance sheet. - Recognize and report all PPP assets and liabilities in central, local, and general government balance sheet. - Responsible agencies: DPER, CSO, DoF ### c. Revalue and recognize non-financial assets of central government - Actions: - Complete the non-financial asset registers of Non-Commercial Semi-State Bodies and EBFs. - Revalue the major non-financial assets of central government departments and of Local Authorities. - Revalue the major non-financial assets of Non-Commercial Semi-State Bodies and EBFs. - Include all revalued non-financial assets in the Central and local government Financial Statements in line with international standards. - Responsible agencies: DPER, Depts, SSBs, EBFs, CSO, DoF, LAs ### d. Prepare and publish a financial and full balance sheet for the public sector and its subsectors - Staged outputs by year: - Publish a financial balance sheet for the general government sector (2013-14: CSO). - Publish a financial balance sheet for the central and general government sectors (2015: DoF). - Publish a full balance sheet for budgetary central government (2016: DoF). - Publish a full balance sheet for consolidated central government (2017: DoF). - Prepare a full balance sheet for the public sector and its subsectors. - Responsible agencies: CSO, DoF, DPER, DECLG, LAs ### 3. Incorporate Accrued Economic Flows in Fiscal Documentation - a. Reflect changes in accrued public sector pension liabilities in budget documentation, statistics, and accounts - Incorporate estimated valuation changes in pension liabilities as a non-cash flow in Central and local Govt. revenues and expenditures. - Report valuation changes in pension liabilities in Central and local government Financial Statements in line with international standards. - Responsible agencies: DoF, DPER, CSO, LAs - b. Incorporate information on annual flow of govt. investments and payments under PPPs into fiscal projections, budgets, and accounts - Include in budget documentation estimated annual investments and payments under major PPPs of central government. - Include in budget documentation estimated annual investments and payments under major PPPs of central and local governments. - Incorporate estimated annual investments and payments under major PPPs of Central and local governments in the accounts. - Incorporate annual investments and payments under PPPs of General Government in the financial statements. - Responsible agencies and timing: DPER (2014-15), DoF (2016-17), CSO - c. Use department-specific depreciation figures in summary statistics and accounts - Recognize central government department specific depreciation in statistics. - Recognize CG department and local government specific depreciation in statistics. - Recognize CG department and local government specific depreciation in accounts. - Responsible agencies: DoF, DPER, Depts, LAs - d. Recognize valuation changes in public sector assets, liabilities, and contingent liabilities in fiscal documentation - Disclose estimated valuation changes of Central Government assets and liabilities in the budget. - Disclose valuation changes of Central and local government assets and liabilities in budget and accounts. - Disclose valuation changes of Central and local govt. assets, liabilities and contingent liabilities in budget and accounts. - Responsible agencies: DPER (budget), DoF (accounts), DECLG, CSO - e. Provide a more comprehensive estimate of revenue foregone from all tax expenditures - Stage of reporting: - Estimate and report revenue foregone from VAT. - Estimate and report revenue foregone from VAT, capital gains tax, and property tax. - Estimate and report revenue foregone from all tax expenditures. - Responsible agencies: DoF, Revenue Commission, CSO ### 4. Bring the Classification of Fiscal Documentation into Line with International Standards - a. Revise exchequer statement to present gross revenues and expenditures and distinguish financial and nonfinancial transactions - Produce a complementary Exchequer Statement using a bridging table on a monthly basis. - Develop a new coding system to distinguish non-financial and financial transactions. - Incorporate the new coding system into chart of accounts. - Generate both the standard and alternative exchequer statements using the revised chart of accounts. - Responsible agencies: DoF, CSO - b. Develop an exhaustive program classification that can be mapped to output/impact indicators and COFOG sectors - Review program classification for harmonizing its structure across Votes and bring it into line with COFOG. - Develop a harmonized two level program classification, with second level mapped to COFOG. - Roll out the new program classification to Departments. - Incorporate the new program classification into chart of accounts. - Generate Estimates, COFOG, and management reports using the new program classification. - Responsible agencies: DPER, DoF, Depts, CSO - c. Develop a harmonized chart of accounts for all public sector entities - Complete the baseline assessment under the shared services project. - Identify common information requirements for GFS and financial reporting. - Develop a parent chart of accounts that meets the common requirements. - Rollout the new chart of accounts to all general government entities, then to all public sector entities. - Responsible agencies: DPER, DoF, DECLG, LA, CSO ### 5. Accelerate the Production, Presentation, and Approval of the Annual Budget and Accounts - a. Submit the annual budget to parliament in October - Submit Economic & Fiscal Outlook by October and Expenditure Report by December. - Submit Economic & Fiscal Outlook and Expenditure Report by October and REV in December. - Submit Economic & Fiscal Outlook, Expenditure Report, and REV in late October/early November. - Submit Economic & Fiscal Outlook, Expenditure Report, REV, and Finance Bill in late October/early November. - Responsible agencies: DoF, DPER - b. Approve the annual budget in December - Approve the Estimates by March of the budget year. - Approve the Estimates before the budget year. - Approve the Estimates and Finance Bill before the budget year. - Responsible agencies: DoF, DPER - c. Submit the annual accounts for audit by March - Submit partial Central Govt. Financial Statement for “dry run” audit by Sept. - Submit partial Central Govt. Financial Statement for “dry run” audit by June. - Submit for “dry run” audit consolidated provisional Central Govt. Financial Statement by April. - Submit by March consolidated Central Govt. Financial Statement for audit. - Responsible agencies: DoF, DPER, Depts - d. Submit the audited accounts to Parliament by June - “Dry run” audit of partial Central Govt. Financial Statement by December. - “Dry run” audit of partial Central Govt. Financial Statement and informal audit opinion on IPSAS based entity accounts by September. - “Dry run” audit of consolidated provisional Central Govt. Financial Statement by June and informal audit opinion by September. - Full published audit of and formal audit opinion on consolidated Central Govt. Financial Statement by June. - Responsible agencies: DoF, C&AG ### 6. Prepare and Publish Long-term Fiscal Projections - a. Publish a debt-sustainability analysis, showing the interaction of the new fiscal rules, for next 10–20 years - Project main fiscal aggregates for next 5 years, including impact of fiscal rules. - Project main fiscal aggregates for next 10 years, including impact of fiscal rules. - Project main fiscal aggregates under alternative scenarios for 20 years, incl. impact of fiscal rules. - Responsible agencies: DoF, NTMA - b. Develop an internal long-term (50 years) fiscal projection model and publish its projections every two-to-three years - Develop model for long-term demographic, economic, revenue and expenditure to calculate the fiscal gap. - Publish first long-term fiscal sustainability projections based on a single scenario. - Expand model to run alternative demographic, macroeconomic, and policy scenarios. - Use long-term fiscal sustainability model to inform policy decisions. - Publish long-term fiscal sustainability reports based on a range of demographic, macroeconomic, and policy scenarios. - Responsible agencies: DoF, DPER, IFAC ### 7. Reconcile Fiscal Forecast Changes - Action: - Compare 2013 Budget, 2014 SPU and 2014 Budget and show the impact of macroeconomic, policy, and technical changes on forecasts of revenue, expenditure, and balance. - Explain changes to fiscal aggregates between successive fiscal forecasts showing the effects of macroeconomic, policy, and technical changes. - Responsible agencies: DoF, DPER ### 8. Publish a Statement of Fiscal Risks - Phased publication: - Prepare fiscal risk statement for internal management purposes. - Publish fiscal risk statement discussing macroeconomic risks, specific revenue risks, and contingent liabilities. - Publish fiscal risk statement on risks related to macroeconomic factors, contingent liabilities, and financial sector exposure. - Publish fiscal risk statement on risks related to macroeconomic factors, contingent liabilities, financial sector exposure, and values of assets & liabilities. - Publish fiscal risk statement on risks related to macroeconomic factors, contingent liabilities, financial sector exposure, assets & liabilities, and their likelihood. - Responsible agencies: DoF, DPER ### 9. Publish an Asset and Liability Management Strategy - Staged strategy publications: - Publish a debt management strategy. - Publish a strategy for management of debt and NPRF. - Publish a strategy for management of debt, NPRF and shares in non-financial corporations. - Publish a strategy for management of debt, NPRF and shares in financial and non-financial corporations. - Responsible agencies: DoF, DPER, NTMA, New ERA ### 10. Harmonize Public Sector Financial Reporting Standards and Practices - Institutional and procedural actions: - Establish a permanent financial reporting unit in the DoF headed by a Chief Financial Officer (CFO) or Director of Government Accounting (DGA). - Establish a permanent government financial reporting unit, and recruit the CFO/DGA. - Start developing accounting rules/policies and standards for public sector, produce FRS based accounts, & build accounting capacity. - Conduct a trial (dry run) of IPSAS based individual govt. entity accounts and full IFRS accounts for all public corporations to help identify gaps. - Continue the trial and legislate to give authority to the CFO/DGA for preparation of consolidated Central Government Financial Statement. - Produce fully consolidated Central Government Financial Statement for audit by C&AG. - Responsible agencies: DoF, DPER, Cabinet, CSO, C&AG, Parliament ### Key statistics from appendices (selected, preserved exactly as presented) - Appendix 1A / Appendix 1D (Consolidated figures) - Central Government Revenue 2010: 51,847 - Central Government Expenditure 2010: 102,101 - Central Government Balance 2010: -50,254 - Central Government Revenue 2011: 52,410 - Central Government Expenditure 2011: 76,174 - Central Government Balance 2011: -23,764 - General Government Revenue 2010: 55,187 - General Government Expenditure 2010: 105,345 - General Government Balance 2010: -50,158 - General Government Revenue 2011: 55,684 - General Government Expenditure 2011: 77,279 - General Government Balance 2011: -21,595 - Percent of GDP (2010 row): 35.3, 67.3, -32.0 - GDP values: 156500 (2010), 159000 (2011) - Memo General Government Expenditure Benchmark: 101,338 (2010), 71,535 (2011) - Appendix 1C (Central Government Financial Statement summary) - Financial assets 2010: 62,970; 2011: 60,378 - Currency and deposits 2010: 17,414; 2011: 16,961 - Securities other than shares 2010: 10,720; 2011: 7,910 - Loans 2010: 5,174; 2011: 6,165 - Shares and other equity 2010: 23,750; 2011: 22,565 - Other financial assets 2010: 5,912; 2011: 6,777 - Liabilities 2010: 256,353; 2011: 285,277 - Currency and deposits 2010: 13,711; 2011: 15,218 - Securities other than shares 2010: 84,403; 2011: 80,691 - Loans 2010: 33,610; 2011: 64,966 - Pension Liabilities 2010: 116,000; 2011: 116,000 - Other liabilities 2010: 8,629; 2011: 8,402 - Financial assets net of liabilities 2010: -193,383; 2011: -224,899 - Appendix 1E (Public Sector Balance Sheet by Segment, 2011; Percent of GDP) - Total Assets: General Government 112.7, Non-Financial Public Sector 124.5, Non-Monetary Public Sector 264.1, Public Sector 317.0 - Financial assets: General Government 39.2, Non-Financial Public Sector 36.9, Non-Monetary Public Sector 176.0, Public Sector 228.8 - Non-Financial Assets: General Government 73.5, Non-Financial Public Sector 87.6, Non-Monetary Public Sector 88.1, Public Sector 88.1 - Liabilities: General Government 181.4, Non-Financial Public Sector 193.3, Non-Monetary Public Sector 332.8, Public Sector 385.7 - Financial assets net of liabilities: General Government -142.2, Non-Financial Public Sector -156.4, Non-Monetary Public Sector -156.8, Public Sector -156.8 - Net worth: -68.7 (all segments listed) * _Source: _cr13209 - 2. Recognize a Wider Range of Assets and Liabilities in Balance Sheets_ ### Appendix 1G: Mapping of Exchequer Statement to ESA 95 Classification ### Appendix 1G: Mapping of Exchequer Statement to ESA 95 Classification ### Mapping of Exchequer items to ESA 95 aggregates - Total Revenue (A): 6,167,384 - Tax Revenue: 5,815,226 - Customs: 29,187 - Excise Duty: 649,779 - Capital Gains Tax: 63,740 - Capital Acquisitions Tax: 13,957 - Stamps: 273,281 - Income Tax: 2,614,150 - Corporation Tax: 157,063 - Value Added Tax: 1,978,065 - Training and Employment Levy: 92 - Unallocated Tax Receipts: 35,912 - Non-tax Revenue: 311,305 - Surplus Incomes / Royalties — National Lottery Surplus: 35,000 - Income from Credit Inst (Eligible Institutions Guarantee): 210,458 - Interest on Loans — Local Loans Fund: 842 - Other Advances: 2,847 - Other Receipts — Property Registration Authority Fees: 5,600 - Motoring Fines: 827 - Other Receipts collected by Departments etc.: 5,848 - Miscellaneous: 606 - Pension Levy: 2,680 - Public Service Pension Payments: 22 - Interest on Contingent Capital Notes: 46,575 - Appropriations in aid (Receipts) / Receipts under statute: items listed (no aggregate total separately reported in source excerpt) - Capital Receipts: - Capital Grants: 40,853 - EU Receipts: - Cohesion Fund Receipts: 0 - European Regional Development Fund: 33,093 - Trans European Network: 0 - Other EU Receipts: 0 - Loan Repayments: Local Loans 2,329 (presented under Loans) - FEOGA Intervention: 730,000 - Miscellaneous Capital Receipts: 7,760 - Sale of Contingent Capital Notes in Bank of Ireland: 1,010,000 ### Expenditure and selected aggregates - Total Expenditure (B): 8,692,095 - Voted Departmental Expenditure (Current and Capital): 7,288,168 - Vote Group — Agriculture, Fisheries and Food: 161,928 - Arts, Heritage and the Gaeltacht: 44,194 - Communications, Energy and Natural Resources: 25,847 - Defence: 121,868 - Education and Skills: 1,377,242 - Jobs, Enterprise and Innovation: 86,935 - Environment, Community and Local Government: 109,339 - Finance Group: 64,413 - Foreign Affairs and Trade: 75,041 - Health: 2,336,458 - Justice Group: 325,752 - Social Protection: 2,177,221 - Taoiseach's Group (incl Legal Votes): 22,401 - Transport, Tourism and Sport: 160,391 - Public Expenditure and Reform: 126,010 - Children and Youth Affairs: 73,128 - Non-Voted Current Expenditure: 1,403,927 - Service of National Debt — Interest: 866,019 - Other Debt Management Expenses: 16,987 - Other Non-Voted Expenditure — Contribution to EU Budget: 466,007 - Election Expenses: 142 - Payments to Political Parties under the Electoral Acts: 2,754 - Salaries, Pensions and Allowances: 6,439 - Oireachtas Commission: 15,279 - IDA & ADF - Payments under Development Banks Acts, 2005: 29,070 - NDFA Act: 454 - Miscellaneous: 17 - Post & Telecommunications Services Act 1983, Section 46: 0 - Pensions Insolvency Payment (Amendment) Scheme 2011: 759 - Non-Voted Capital Expenditure (Net Acquisition of Non-Financial Assets): 154,000 - Loans to Insurance Compensation Fund: 154,000 - Other Capital Payments / Other Payments under Statute: 0 - Exchequer Non Financial Balance (A - B): -2,524,711 ### Source and Application of Funds / Financing and changes in financial assets/liabilities - Source and Application of Funds - Borrowing/Repayments (presented as Exchequer Financing (D-E-F)): -2,524,713 - Net Acquisition of Financial Assets (D): -1,588,329 - Loan Repayments — Local Loans: -2,329 - FEOGA Intervention: -730,000 - Sale of Contingent Capital Notes in Bank of Ireland: -1,010,000 - Loans — Loans to Insurance Compensation Fund: 154,000 - Net Incurrence of Liabilities (E): 6,195,266 - Borrow/Repay Min funds: 647,226 - Commercial Paper: 2,243,695 - IMF Extended Fund Facility: 111,313 - Irish Government Bonds on Irish Exchange: 27,790,363 - Nat Saving Schemes: 436,669 - Miscellaneous Debt: 0 - UK Bilateral Loan: 0 - Source and Application of Funds - Increase / (Decrease) in Exchequer Deposits and Other Balances: 5,258,882 - Inc/(Dec) in Exch Balances: 2,745,036 - Inc/(Dec) in Deposits, Notes & Treasury Bills: 2,513,673 - Inc/(Dec) in Other Balances: 173 - Nat Saving Schemes: 436,669 - Repayment of promissory notes: -25,034,000 - Change in Exchequer Deposits (F): -5,258,882 - Dec/(Inc) in Exch Balances: -2,745,036 - Dec/(Inc) in Deposits, Notes & Treasury Bills: -2,513,673 - Dec/(Inc) in Other Balances: -173 - Receipts into Sinking Fund: 0 ### Compliance with new EU (Six Pack / Two Pack) and ESA/Eurostat reporting requirements - Methodological reconciliation table between public accounts and ESA95: - Purpose: show how monthly and quarterly fiscal reports relate to main ESA95 Government aggregates. - Presentation: likely separate reconciliation table for each sub-sector of General Government; within sub-sectors, group units using the same accounting/reporting basis. - Variables required: Unclear, but will have to be presented for Revenue and Expenditure. - Update frequency: only if methodology changes. - Reference deadline: Dec 2013; Publish nationally. - Monthly fiscal data: - Table shows main fiscal aggregates from public accounts. - Separate tables recommended for (1) Central Govt, (2) State Govt and (3) Social Security Funds. - Variables: Total Revenue, Total Expenditure & Balance (additional breakdowns recommended but voluntary). - Reference period: Monthly Jan 2014; Publish nationally. - Quarterly fiscal data: - Separate tables for (1) Central Govt, (2) State Govt, (3) Social Security Funds & (4) Local Govt. - Variables: Total Revenue, Total Expenditure & Balance (additional breakdowns recommended but voluntary). - Reference period: Quarterly June 2014; Publish nationally. - Tables of contingent Government liabilities: - Guarantees: shown for each sub-sector; variables: One-off & Standardized guarantees; Annual Oct 2014; Publish nationally. - PPPs: shown for each sub-sector; variable: Adjusted capital value of off-balance sheet PPPs; Annual Oct 2014; Publish nationally. - NPLs: shown for each sub-sector; variable: Outstanding stock of non-performing loans; Annual Oct 2014; Publish nationally. - Liabilities and participation in public corporations: - Liabilities of Public Corporations: liabilities of individual companies (not consolidated groups); Annual Dec 2014; Publish nationally. - Participation in Public Corporations: Government equity in Public Corporations (market or book values); Annual Dec 2014; Publish nationally. - ESA 2010 reporting notes: - Table 801 (timing only): Quarterly non-financial accounts by institutional sector — General Government; Quarterly Sept 2014; Q2 & earlier submitted to Eurostat. - Table 26: Nonfinancial assets by institutional sector — General Government; 7 asset categories compulsory; Annual Dec 2014; Q2 & earlier submitted to Eurostat. - Table 29: Accrued-to-date pension entitlements in social insurance — three yearly; General Government; Annual Dec 2017; Year 2015 submitted to Eurostat; earlier years' data requested on voluntary basis. ### IPSAS compliance, gaps and recommended actions - Areas of existing or near compliance with IPSAS in Ireland (high level): - IPSAS 1: Appropriation Account notes present reconciliation of outturn to expenditure on accruals basis; (incomplete) balance sheet; cash flow statement. Other accounts follow FRS or IFRS as appropriate. - IPSAS 2: Cash flow statements presented, but exclude cash equivalents. - IPSAS 3: Statements of Accounting Policies provided. - IPSAS 12: Inventories included in balance sheets. - IPSAS 13: Lease information given in accounts following IFRS. - IPSAS 17: Notes to the balance sheet disclose information about property, plant and equipment and depreciation. - IPSAS 18: Segmental analysis given in notes to the accounts of Public Corporations. - IPSAS 19: Contingent liability information disclosed. Provisions only in accounts of Public Corporations. - IPSAS 20: Related party disclosures given only in accounts of Public Corporations. - IPSAS 24: Comparison of Estimate and outturn given in Appropriation Accounts. - IPSAS 25: Pension liabilities or relevant disclosures given only in accounts of Public Corporations. - IPSAS 28, 29, 30: Financial instruments presented, recognized and measured and appropriate disclosures given in accounts of Public Corporations following IFRS. - Linkage between report recommendations and IPSAS adoption (selected entries): - Recommendation 1b: Combining the Finance and Appropriation Accounts into a consolidated Central Government Financial Statement — relevant IPSAS 6 (in part). - Recommendation 2a: Revaluing and recognizing accrued pension liabilities of public servants — IPSAS 25. - Recommendation 2b: Recognizing government assets and liabilities associated with PPPs — IPSAS 32. - Recommendation 2c: Revaluing and recognizing non-financial assets of central government departments — IPSAS 16, 17, 31. - Recommendation 2d: Preparing a financial and full balance sheet for the public sector and its subsectors — IPSAS 6, 7, 8. - Recommendation 3e: Providing a more comprehensive estimate of revenue foregone from all tax expenditures — IPSAS 23. - Recommendation 4a: Reorganizing the monthly Exchequer statement to present gross revenues and expenditures and distinguish non-financial and financial transactions — N/A. - Recommendation 4b: Develop an exhaustive program classification which can be mapped to both individual output/impact indicators and COFOG sectors — IPSAS 18 (in part). - Recommendation 8 and 9 relate in part to IPSAS 30 (reporting on financial instruments, fiscal risks, and management of assets and liabilities). - Steps to comply with remaining IPSASs for individual entities (selected actions): - IPSAS 1: Expand notes to accounts to include better analysis of receivables and payables. - IPSAS 9: Review types of Appropriations in Aid and other receipts to identify appropriate income recognition points so receivables can be accounted for; state income net of any provision for bad or doubtful debts. - IPSAS 13: Determine whether material leases are operating or finance leases; capitalise finance leases and include in fixed assets note. - IPSAS 16: Determine whether properties held for rental income or capital appreciation should be accounted for as investment properties. - IPSAS 17: Revalue land and buildings and any other significant assets to current values; requires additional resources from the Valuation Office. - IPSAS 19: Identify events giving rise to provisions or contingent liabilities and report them in the accounts of the ultimate settler. - IPSAS 21 & 26: Conduct annual impairment reviews following revaluation of land and buildings; resource implications for Valuation Office. - IPSAS 25: Provide appropriate disclosures about pension arrangements; centralized pension schemes should produce their own pension fund account following FRS 102. - IPSAS 28, 29, 30: Review whether entities hold financial instruments and ensure appropriate recognition and disclosures; link to recommendations 8 and 9 (fiscal risk reporting and asset/liability management). ### Possible outline of a Statement of Fiscal Risks (sections and content) - I. Macroeconomic Analysis - Discussion of macroeconomic outlook - Description of historical differences between forecasts and outcomes - Analysis of sensitivity of forecasts to key parameters - Scenario analysis and stochastic analysis - Government’s strategy for mitigating risks - Reference documents: Medium-Term Fiscal Statement; Economic and Fiscal Outlook; Stability Programme Update; IFAC’s Reports - II. Exposure to the Financial Sector - Potential fiscal risks associated with fragility of the financial sector - Explicit contingent liabilities related to financial sector - Government’s strategy for mitigating the risk - Reference documents: DoF presentations; CBI Macro-Financial Review; Finance Accounts; C&G Report - III. Other Contingent Liabilities - Guarantees other than for financial sector; Litigation; Callable capital; Minimum-revenue guarantees for toll roads - Government’s mitigation strategy - Reference documents: Finance Accounts; Appropriation Accounts - IV. Specific Revenue Risks - Any risks to revenue other than those in macroeconomic analysis (example: pharmaceutical “patent cliff”) - Government’s mitigation strategy - Reference documents: Medium-Term Fiscal Statement; Economic and Fiscal Outlook - V. Assets and Liabilities - Risks related to values of and cash flows associated with government’s asset/liability portfolio: - NTMA debt - NPRF assets - Derivatives - Shares in banks (if not discussed above) - Shares in nonfinancial enterprises - Public-service pension liabilities - PPP assets and liabilities - Government’s strategy for managing portfolio and mitigating risks - Reference documents: NTMA Annual Report; NPRF Annual Report; NewERA reports if any; C&AG’s report *Exchequer statement and supporting appendices as presented in the source PDF.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13209.pdf_