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Milestone reached in shift to accrual-based budget.
Minister for Finance and Administration
THE HON JOHN FAHEY, MP
Milestone reached in shift to Accrual-based Budget
I am pleased to release consolidated accrual-based financial statements for the Commonwealth Government for the 1996-97 financial year. These are the first fully audited accrual statements for the Commonwealth and follow two earlier trials.
The shift to an integrated accrual financial management framework will result in a significant improvement in the way the Commonwealth budgets and manages its finances. Its adoption will move the Commonwealth into line with the States and the wider business community.
The existing financial management framework of the Commonwealth records only cash transactions. Accrual accounting records when an actual economic transaction occurs and integrates information on debtors, creditors and other assets and liabilities.
The audited financial statements are in a form broadly equivalent to those produced by larger companies with a number of subsidiaries, with the operating result broadly similar to a company's profit or loss.
The 1996-97 audited accrual based consolidated financial statements therefore focus on:
· revenues and expenses to show financial performance
· assets and liabilities to show financial position
· cash flows to show how government activities are financed
These statements confirm the positive direction of the Government's fiscal policy.
From a high of $10.6 billion recorded in the first accrual-based trial of consolidated financial statement for 1994-95, the accrual-based operating deficit at the whole-of-government level for 1996-97 was $2.5 billion.
The Government's concerted efforts to restore financial responsibility are expected to result in an operating surplus in future years. This will enable a reduction in the Commonwealth's overall net liabilities of some $75 billion, which have been built up over many years of Labor Governments' deficit cash budgets.
As previously announced, the accrual framework will be introduced according to the following timetable:
· audited consolidated financial statements of the Commonwealth from 1996/97 (completed)
· trial of accrual budgeting arrangements for selected agencies in 1998/99
· full accrual framework, including an accrual-based Budget and quarterly accrual reports from 1999/2000.
This measure complements the Coalition's Charter of Budget Honesty and will enable improved public sector management and greater accountability to the community.
Canberra 11 March 1998
Media contact: Davi d McLachlan 02 6277 7400
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