Page 2058 - Week 07 - Thursday, 16 June 1994
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By 1988 the core public sector underwent significant financial management reform which has had as its aims the improvement of performance by enhancing the accountability relationship between Ministers and departmental chief executives. These reforms are based on a mix of elements, including performance goals and, importantly, reporting of actual performance against specification.
The committee took steps to ensure that it obtained a fully representative range of views about the efficacy of the financial management reforms and what they have meant in terms of accountability to the parliament, improvement in fiscal information and the effect on management and public attitudes. From our observations it is clear that with accrual accounting the New Zealand Parliament now has a comprehensive set of financial statements which gives a more complete picture of government activity than is possible with cash based accounting. The range of information for assessing the government's fiscal position has been extended and, further, of significant importance, the objectives of public accountability and usefulness of decision making have been dramatically improved by the compilation and maintenance of a more complete listing of the public assets. This has helped to ensure that public sector managers remain conscious of the need to fully document and completely manage assets under their control.
The New Zealand Controller and Auditor-General advised the committee that the adoption of accrual accounting has given a more accurate picture of agency operations and the overall financial position of the government. In particular, the controller noted a number of facets about it. It provides better information on financial viability, fiscal compliance, management performance and cost of services. It provides more accurate information on the cost of providing services, as all transactions are recorded regardless of whether cash actually changes hands. It provides better information for the management of assets and liabilities, helping to ensure that resources are allocated in a more effective and efficient manner between various competing alternatives. It reflects better the ongoing nature of government operations. It reports certain unrealised changes in the value of assets and liabilities - for example, those resulting from exchange rate fluctuations. It provides higher quality information about the financial consequences and long-term implications of government policies, and it better enables trends in the financial statements to be identified and, therefore, allows solutions to be identified and implemented more quickly. The controller further noted that there is produced a statement of cash flows which provides information needed to interpret the cash flows of the government, so that the adoption of accrual accounting has not resulted in any information loss; rather, it has provided more information upon which to assess the operations and the position of the government.
The committee notes that ministries, departments and the Reserve Bank of New Zealand are combined on a line-by-line basis and that transactions and balances between them are eliminated from the combined financial statements. State owned enterprises and other government agencies are also combined, using an equity method which records the government share of the net assets of these entities, including their surpluses and deficits. Unrealised surpluses and deficits on inter-entity transactions and balances are not, however, eliminated.
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