The news that accrual accounting is, at long last, now on its way towards being implemented as the methodology for recording the government’s revenue and expenditure joins the several recent historical developments in the history of our country’s financial administration.

Accrual accounting – assuming that all within the public service take a genuine interest in learning as much as possible its implications and implementation – is certain to, at least in the first few years of its coming into force, bring up some surprises, not least statistical, and I sincerely hope that our political structures will not use these inevitable discoveries to score political points over each other. It will be all so childish if politicians so indulge with what, after all, is essentially only (even if fundamental) a newly available technical tool.

Perhaps the main essence of accrual accounting will in fact be the possibility that at a given point in time everyone will – when financial statistics are published regularly and punctually – be able to see and assess the real situation of our public finances. Consider a simple example.

Today (without accrual  accounting), if, say on the eve of a general election, a government minister agrees to a big public service provision contract with a private provider, and both sides agree to leave that document hidden in some bottom drawer, that agreement, though binding on both parts, will not at that point in time be recorded anywhere on the government’s books for what it really is – a constitution of a factual financial liability for the State and a similar supply liability for the contractor cum creditor position as and when supply starts.

Accrual accounting will help to tell all and sundry not only what the government is receiving and paying by way of the present cash-based accounting system, but it should also bring out constantly into the open what government will, at any point in time, really owe and really be owed.

Let us, for example, take a sector which I follow closely, taxation. Over long recent years our Income Tax Department has ended up in a situation where large am-ounts of factually due amounts simply end up remaining long unpaid. (Technically tax dues remain due for ever and ever!)

The present cash-based public finances accounting system has allowed finance ministers to suppress the public deficit for one or more years

Under accrual accounting the government starts being shown as the creditor for such sums, and the taxpayers the debtors. And sooner than they know those debtors, like all private debtors, will quickly find themselves in court for their failing to pay what is due.

The IMF has had quite a few words to say to Malta about the way that taxation dues remain long unpaid in respect of tax basis years that go back quite a lot.  Such dues can really be a cancer seriously handicapping the ability of any government to finance necessary projects for society.

For far too long, the present cash-based public finances accounting system has allowed finance ministers to suppress the public deficit for one or more years by postponing payments due.

The cancerous element in today’s system lies in that at some point in time, suppressed dues from government, or due to government, will (probably even years later) inevitably emerge into the open.

But, under the cash-based system, by that time, some other mix-in-the-wash figures will have been concocted to cover up one situation with another. In short government, plus its debtors and creditors, will be allowed to indulge in creative accounting galore.

Those who follow public finances closely are now therefore eagerly looking forward to seeing the fruits of the new system. It will not be an easy task for the contracted consultants, Grant Thornton, to not only set up the new financial rule book, but hopefully also help provide the required training for all public finance officials.

Much expectancy too lies for the way that the standardised reporting, and public presentation thereof, will be made.

This is indeed, as Finance Minister Edward Scicluna described it, “a red letter day” for public finances.

But my hope is also that the process of its introduction will bring with it other necessary changes elsewhere in systems and structures for, hopefully, quicker settlement of other financial issues.

We are, for example, still in a situation where someone who owes, say, €50,000 to the VAT Department but is owed a refund from the Income Tax Department of €10,000 cannot engage in an offset deal to settle his real liability. And vice versa too.

And the pitiful reason that is often brought up for this is “Cannot be done because of computer issues.” This is simply ridiculous in a 21st-century country.

Will accrual accounting help to also alleviate such situations? Many are looking forward to seeing whether it is possible.

John Consiglio lectures economics at the University of Malta and is chairman of the Revenue Remissions Supervisory Board.

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