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News from Members Study: The application of IPSAS in the Romanian public sector will increase the trustworthiness and transparency of reporting by such entities, and improve their cost and financial performance accountability

Study: The application of IPSAS in the Romanian public sector will increase the trustworthiness and transparency of reporting by such entities, and improve their cost and financial performance accountability

by KPMG Romania June 26, 2014

Website www.kpmg.ro

KPMG in Romania teamed up with the Bucharest University of Economic Studies (ASE) to conduct a survey of the transparency of the decision making and reporting processes of Romanian city and town halls, the International Public Sector Accounting Standards (IPSAS) literacy of their staff, as well as the perceived benefits, challenges and implications of a possible application of IPSAS by such institutions. To this end, we have surveyed 318 Romanian city and town halls at the end of 2013.

The study revealed several expected benefits and challenges related to the application of IPSAS in the Romanian public sector. For example, our respondents consider that a possible application of IPSAS would increase the trustworthiness and transparency of their entity’s reporting, would improve their cost and accountability of their cost and financial performance, and would increase the comparability of their entity’s reporting. Respondents perceive however the understanding of certain IPSAS concepts, the choice of the appropriate IPSAS treatment for certain transactions and events, the existing gaps between IPSAS and the national regulations, and the training costs, as possible challenges of IPSAS application. In the context of discussions on the creation of European Public Sector Accounting Standards, the study investigates matters of the utmost importance for Romania.

Overall, we find a strong support for increasing the transparency of reporting by Romanian city and town halls. Almost half of responding entities – 49% - have designated a person to identify the Open Data information required to be posted to their website under the Open Data Partnership signed by the Romanian government, but only 45% of them have identified the available appropriate sets of documents to be disclosed in Open format. Additionally, 62% of our respondents consider that publishing non-financial indicators would contribute to a better understanding of the performance reporting by their institutions. Finally, 95% of the entities in our sample consider it important or very important to consult with citizens about their actions.

Our respondents seem eager to train staff in IPSAS, while only one in two of our respondents believes that the staff of their entities are well or very well trained in IPSAS. Most of them (66%) are willing to take part in training sessions, and envisage advisory support and materials issued by regulators as enablers of their IPSAS training. 74% of our respondents consider that IPSAS application would increase the reporting relevance and transparency of their institutions at least to a high extent. None of our respondents considers that IPSAS would not improve the current reporting system of the institution where they work.

Șerban Toader, Senior Partner, KPMG in Romania and Moldova, says: “The results of the study carried out by KPMG in Romania and ASE Bucharest reveal the direction financial reporting and accounting of entities in the Romanian public sector should take. Lack of transparency and efficiency in local public administration can present a significant risk for the economy. However, the implementation of rigorous models for public sector governance and performance, and increased transparency could help prevent future cases of insolvency in the public sector.”

Prof.dr. Pavel Nastase, ASE’s Rector, says: “Better accountability and governance are essential for the survival of for-profit organizations and, therefore, extremely fashionable topics for practice and academic research worldwide. Governments, governmental and non-governmental agencies, and researchers alike became interested in these processes, as they are supposed to lead to an improvement of services offered to the public and to a better management of their entities. Concepts such as New Public Management, New Public Governance or IPSAS have enriched the public and academic discourses for quite some time. ASE notes the increased importance of IPSAS for accounting professionals in Romania, and will assume a more proactive role in training current and future professionals in these standards.”

The typically sized entity where our respondents work has between 50 and 249 employees (63%), the rest being equally distributed between the 10-49 employees, and 250+ employees categories. None of our respondents works in institutions with fewer than 10 employees, which is consistent with the target type of our institutions (city and town halls). Our respondents work in entities that typically incur annual expenditure levels of 5 to 50 million EUR (63%), and 90% of respondents work in entities that incur more than 5 million EUR of annual expenditure. Finally, our answers are well distributed geographically across the country.
Our respondents are very experienced in accounting, which makes the study extremely relevant. The majority of our respondents are 50+ years of age (38%), and more than one third of them are 40+. Most of our respondents (59%) have between 10 and 25 years accounting experience, while 30% of them have less than 10 years experience (thus ensuring a good complement to experienced personnel). 41% of them occupy a chief accountant officer position (ro. contabil şef), while the rest occupy positions such as financial director, counselor, administrator or specialist inspector.

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

KPMG in Romania and Moldova operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chisinau.

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