EU nations should halt EPSAS project, demand German auditors

17 Nov 17

The EU’s member states should suspend the rollout of harmonised public sector accounting standards across the bloc and plough the money saved back into budgets, German auditors have said.

In a hard-hitting report published today, the Bundesrechnungshof – Germany’s supreme audit institution (SAI) – called on the new German federal government to use its influence in the EU to prevent the compulsory implementation of European Public Sector Accounting Standards (EPSAS).

The EPSAS project aims to roll out a single, harmonised set of accruals-based accounting standards, based on the International Public Sector Accounting Standards (IPSAS), and make these binding. It is led by the EU’s official statistics office, Eurostat.

But, in today’s report, the Bundesrechnungshof said the European Commission’s commitment to EPSAS was the wrong approach and could waste funds.

According to the commission, the cost of rolling out EPSAS in Germany alone will be €3.1bn, although Germany’s SAI said this estimate was unreliable and the real cost was likely to be much more.

Instead of enforcing EPSAS adoption, the commission should ensure rigorous fiscal discipline, which it said was the best way to ensure a stable economic and monetary union.

“The key to avoiding sovereign debt crises in the European Union is a sound fiscal policy,” said Bundesrechnungshof president Kay Scheller.

“Such as policy cannot be imposed by enforcing a specific public sector accounting system.”

He added: “When it comes to fiscal surveillance, the EU does not lack information but enforcement of fiscal rules. In many cases, member states do not practise the necessary fiscal discipline and are reluctant to make tough policy decisions, with the associated consequences. To seek better comparability of budget data will not serve the purpose.”

Rather than delivering more reliable and comparable public budget data, EPSAS would “open up additional accounting choices, options and leeway for member states in recognising individual budgetary items”, the Bundesrechnungshof said.

The auditors also suggested that private sector audit firms had a conflict of interest as they were both key architects of EPSAS, influencing the wording and requirements for the standards, and providers of consultancy and support for governments adopting them.

“This conflict of interest is not tolerable,” Scheller said.

“The scope for government action is strongly affected if profit-driven private-sector firms are closely involved in developing the potential legal framework in the European Union.”

It called on Germany’s federal government to persuade the European Commission to bring in alternative options to EPSAS, which would enhance transparency but also respect the structures in place in member states.

Germany has resisted the move to accrual accounting and continues to account on a cash basis, partly because of its long tradition of cameralism, built around the idea of prudence and the importance of balanced books.

Eurostat said it did not comment on reports from national audit bodies.

Read more on Germany and accruals adoption in our Nein Danke feature

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