Central Government Accounting Standards – What You Need to Know

From January 1st, new Central Government Accounting Standards (CGAS) will see significant reform of financial reporting for all Government Departments and Offices of Government. These new standards, being based on the International Public Sector Accounting Standards (IPSAS) generally favoured by the European Commission, aim to modernise financial reporting in Ireland along lines proposed by successive IMF and OECD reports.

The CGAS will change how public sector Vote accounts are to be prepared, requiring that financial statements also include information prepared on an accruals basis in the Statement of Financial Position. This article will run through the key changes imposed by the CGAS and explain the principles behind these.

Requirements

The CGAS coming into effect from January 1st are envisioned as a stage in a wider process of reform of financial reporting in Ireland. For the moment, the CGAS and their requirements apply to the following bodies:

  • All Departments and Offices of Government
  • The Houses of the Oireachtas Commission
  • The National Training Fund
  • The Social Insurance Fund

For these bodies, the CGAS imposes requirements as to how their Statements of Financial Position are presented. Specifically, they are now required to account for all of the following in their Statements:

  • Property, Plant and Equipment
  • Intangible Assets
  • Impairment of Non-Cash Generating Assets
  • Impairment of Cash Generating Assets
  • Service Concession Arrangements
  • Inventory
  • Leases
  • Provisions, Contingent Liabilities, Contingent Assets
  • Short-Term Employee Benefits

For each of these areas, a relevant CGAS detailing the exact requirements has been prepared by the Department of Public Expenditure, NDP Delivery and Reform. In addition, each of the CGAS has been provided with a manual, or Central Government Accounting Manual (CGAM). These manuals provide guidance on how the CGAS should be implemented and are a support for Finance Officers working to bring their organisation into line with the CGAS.

Government documents relating to the CGAS have emphasised that all relevant bodies must ensure that the principle of materiality is observed in their financial reporting. As an accounting principle, materiality requires that financial statements include all information and items that relevant decision makers, such as investors, might consider to impact their activity. In other words, an organisation’s economic activity can be considered to be material if it might be of interest to any and all bodies which would view that organisation’s financial statements.

In principle, then, the CGAS are to replace a cash-based system of financial reporting with reporting carried out on an accruals basis. Under the CGAS, an organisation must record economic activity regardless of whether cash was exchanged or involved in that activity. For example, under the CGAS, contingent liabilities such as guarantees, where no cash exchange has yet occurred, have to be reported.

Transitions and Enforcement

As noted, the CGAS are being adopted as part of a modernisation of Irish financial reporting, with the aim of bringing Ireland into line with the majority of OECD and EU countries. Ultimately, this reform project will formalise accrual accounting financial reporting in Ireland. Given that this reform is to secure the international credibility of financial reporting in Ireland, Central Government guidance has emphasised the importance of compliance with the CGAS.

Where a relevant body is unable to comply fully with any of the CGAS, sanction for a temporary derogation should be secured from the Government Accounting Unit in the Department of Public Expenditure, NDP Delivery and Reform. This application should include a timeline for how the body will build its compliance with whatever elements of the CGAS it cannot currently meet. This sanction will have to be renewed on an annual basis; sanction received in 2024 will not apply in 2025, and so on. Where a Department or Office is non-compliant, this must be stated in their Statement of Accounting Policies and Principles in the Appropriation Accounts, as should whether any temporary derogation has been received.

It should be noted that as government reform of financial reporting is an ongoing project, future CGAS with new requirements are imminent. Continued monitoring of this area is recommended to ensure key reforms are not missed.

Contributors
                                                    

Vincent Teo | Partner & Head of Public Sector & Government Services

Vincent Teo
Partner & Head of Public Sector & Government Services

Dr. Conor Dowling | Research & Policy Executive | Risk Consulting

Dr. Conor Dowling
Research & Policy Executive
Risk Consulting

 

Public Sector Climate Action Mandate

In May of this year, the Government approved the updated 2023 Public Sector Climate Action Mandate (PSCAM). The Mandate, first introduced as part of the Climate Action Plan (CAP) 2021, sets out the goals Public Sector Bodies must achieve as part of the government’s overall strategy for reducing emissions. The newly updated Mandate is an expansion of the 2022 Mandate. New actions have been added and existing actions have been expanded. This article will talk through the updated Mandate, explain its purpose and describe the new requirements it presents.

What is the Mandate?

The CAP’s overall aim is to achieve a 51% reduction in greenhouse gas emissions in Ireland by 2030. While the CAP acknowledges that the public sector is not the major driver of emissions, the Mandate has been introduced to facilitate the public sector in taking a leading role in reducing emissions. The Mandate must be followed for those bodies it applies to, but it should be noted that it does not apply to every public sector body. Local Authorities, Commercial Semi-State Agencies and Schools are all exempt from the Mandate. Size is also a consideration when adhering to the Mandate. The Mandate places greater responsibilities on government departments and also on organisations that consume over 50 GWh of energy per annum than it does on smaller bodies, which can fulfil the Mandate’s minimum requirements.

Status of the 2022 Mandate

For those public bodies the Mandate does apply to, many of the requirements found in the updated Mandate are unchanged from previous years. For instance, the requirement to establish and support Green Teams has not been altered. Furthermore, nothing has been removed from the Mandate. This means that any work completed to fulfil the previous Mandate remains valid. Any organisation still working on fulfilling the previous Mandate can continue to use the guides made available by the Sustainable Energy Authority of Ireland. We anticipate that updated guidelines will be made available for the new Mandate, however, no timeline for this is available so far.

Changes from the 2022 Mandate

For those who are subject to the Mandate, the following are the major changes to be aware of:

  • A new requirement has been added stating that senior management complete a climate action leadership training course in 2023.
  • The requirement that sustainability and emissions be addressed in the annual report has been amended. The annual report must now also address: a) efforts to implement the Mandate; b) compliance with Circular 1/2020 related to air travel emissions.
  • The requirement to review use of paper has been amended to include the need to eliminate paper-based processes and, where this is not possible, to use recycled paper as the default.
  • The requirement to achieve formal environmental certification has been amended with distinct requirements for organisations spending more or less than €2m per annum on energy.
  • A requirement to implement Green Public Procurement (GPP) has been added. This should be performed in line with the EPA Green Public Procurement Guidance.
  • The requirement to create bicycle friendly buildings has been amended to indicate that the priority should be to facilitate moving away from individual car use.
  • A new requirement to phase out the use of parking in buildings, without compromising on supports for those with physical mobility issues, has been added.
  • New recommendations for retrofitting large building have been added.
  • The requirement to procure zero-emission vehicles only has been amended to include a requirement that any procurement contracts a public sector body enters into should use zero emissions vehicles whenever possible.

Contributors
                                                    

Vincent Teo | Partner & Head of Public Sector & Government Services

Vincent Teo
Partner & Head of Public Sector & Government Services

Dr. Conor Dowling | Research & Policy Executive | Risk Consulting

Dr. Conor Dowling
Research & Policy Executive
Risk Consulting

SICAP Audits

The Social Inclusion and Community Activation Programme (SICAP) 2018 –2022 provides funding to tackle poverty and promote social inclusion and equality through local engagement and partnerships with disadvantaged individuals, community organisations and public sector agencies.

The programme has two goals that focus on supporting communities and individuals:

Goal 1: Supporting Communities – To support communities and target groups to engage with relevant stakeholders in identifying and addressing social exclusion and equality issues, developing the capacity of local community groups and creating more sustainable communities.

Goal 2: Supporting Individuals – To support disadvantaged individuals to improve the quality of their lives through the provision of lifelong learning and labour market supports.

SICAP is managed and administered by the Local Community Development Committees (LCDCs) in each local authority area, which may be delivered at a local level by external party/(ies).

From 2018, the role of conducting audit / verification checks on the external parties receiving SICAP funding has been subsumed into the internal audit function of each Local Authority.

How can Crowleys DFK help?

Crowleys DFK has the expertise to conduct SICAP audits / verification checks for Local Authorities’ Internal Audit Units and LCDCs.

Our subject matter specialists have taken part in SICAP training programmes delivered by both POBAL and the Department of Housing, Planning and Local Government and our audit team are fully trained on the usage of SICAP’s data management system IRIS.

We understand that the audits must have a financial focus and can provide assurance that grant monies are spent for the purposes intended in accordance with programme rules and contractual conditions. The audits must also include a review of internal financial controls and corporate governance arrangements.

Contact Vincent Teo or Tony Cooney for more information on how Crowleys DFK can assist you with your SICAP audits.