Saglam, Government Finance Statistics in Turkey

International Journal on Governmental Financial Management – 2008 53

GOVERNMENT FINANCESTATISTICS IN TURKEY

Prof. Dr. Necdet SAGLAMFaculty of Economics and Administrative SciencesAnadolu University, Turkey

nsaglam@anadolu.edu.tr

Introduction

The foundation of modern public financial reporting lies in the communication of financialinformation about the government’s activities to its citizens and their representatives in parliament. This information should refer to the activities of public administrators for theentire state, covering pre-determined periods. This is a key aspect of the accountability of the Government and its administration to parliament and the electorate more widely. It isincreasingly a requirement of international obligations as required by, for example, theIMF and the European Union.In Turkey there will be challenges in providing financial information in the requiredformats. These will include technical, legal, financial data quality and consolidation of financial data, human resources etc. In this study some of these problems are investigatedand ideas are offered clear to help the authorities in harmonizing the two systems.The study provides a literature review of Government Finance Statistics and Disclosures ininternational and local level and interviews with key persons in Turkey. The next sectionintroduces the statistical approaches to financial reporting developed by the UN and IMF.The third section considers the differences between the international public sector accounting standards and this statistical approach. The fourth section considers theapproach adopted by Turkish Governments for accounting and financial reporting. The paper ends with a conclusion.

Financial Reporting in Government Sector

The Structure of the Public Sector

Government structures are generally more complex than the structures of private sector organisations. Figure 1 illustrates

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common government levels and sectors. Budgeting andaccounting methods have generally differed between levels and sectors—for instance,

1

http://www.adb.org/Documents/Reports/Accrual_Budgeting_Accounting/chap02.pdf

54 International Journal on Governmental Financial Management – 2008

central government agencies might use cash accounting while provincial and localgovernments, state enterprises, and statutory bodies prepare accrual-based reports.The Turkish Government like most other governments owns and controls a number of stateenterprises. Although these enterprises may appear to be run in a comparable manner to private sector companies their primary objective is to provide goods and services and notto produce a profit. However, in recent years it has been accepted that such entities shouldadopt the private sector approach to financial reporting. This has emphasised theimportance of their annual surplus (profit) or loss which has often consequently beenadopted as the main measure of their success. This is despite the fact that suchorganisations are usually part of the public sector because of the importance of the goodsor services which they provide and because these were not adequately provided by privatesector companies.Figure: 1 Common Government Accounting and Reporting Structures

International Standards for Public Sector Financial Reporting

Government accounting systems determine how financial and statistical information is prepared and presented. The three major international systems have slightly different

International Journal on Governmental Financial Management – 2008 55

purposes and applicability —Figure 2 illustrates

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differences in coverage. However, the prime aim to increase the level of comparability of national financial statistics to facilitatecomparisons between countries.• The European Union (EU), International Monetary Fund (IMF), OECD, United Nations(UN) and World Bank jointly publish the System of National Accounts (SNA). It compilesaggregate financial statistics for an entire economy. The public and private sector activities are combined together.• The IMF Government Finance Statistics (GFS) is a specialized system intended tosupport public sector analysis. The IMF designed GFS so that government financialinformation could be compared across economies.• The International Federation of Accountants (IFAC) began promulgating InternationalPublic Sector Accounting Standards (IPSAS) in 2000. They are designed for use in the preparation of general purpose financial reports by public sector entities (individualgovernment agencies or whole-of-government reports).Figure: 2 Coverage of Accounting/Statistical SystemsSNA, GFS and IPSAS have been developed, or radically overhauled, in the past 15years—all are now accrual based (although most governments still submit cash based GFSreturns and produce cash based financial statements). The European System of Accounts(ESA 95) also mandates accrual-based financial reporting.

2

http://www.adb.org/Documents/Reports/Accrual_Budgeting_Accounting/chap02.pdf

Public Sector

– Government Financial Statistics(GFS)/International Public Sector AccountingStandards (IPSAS)

State Enterprises

-International AccountingStandards (IAS)

National Economy

– System of NationalAccounts (SNA)