European Commission Achieves Greater Financial Transparency

Feature Article | April 25, 2005 by admin

The accounting transformation project team developed the European Commission’s accounting system to deliver the budgetary and accounting transparency required for meeting modern accounting standards such as IPSAS, using accrual accounting and funds management functionality from the SAP for Public Sector solution. With its adoption of modern economic accounting standards, the European Commission is setting the path for governmental organizations in EU member states to follow. The project will provide the European Commission with greater transparency into its financial data, increased budgetary management control, easier comparison of accounting data and more efficient use of its accounting system. By providing transparency into its budget management processes, the European Commission will also increase taxpayer confidence in the sound financial management of its organization.
“This project identifies the European Commission as a pioneer among the majority of the world’s administrations,” said Brian Gray, the European Commission’s chief accountant and deputy director general of the Budget Directorate General. “We have succeeded in implementing a ‘dual system’ based on accrual accounting principles for general accounting and on cash accounting for running the budget. Furthermore, in addition to assisting the European Commission with compliance of IPSAS, the new management system will guide our users intuitively through the various stages of coding and payment.”

Accounting transformation to meet higher standards

The European Commission’s annual budget amounts to around EUR 100 billion. As a result of a European Commission decision of July 24, 2002, it became mandatory to manage this sum using accrual accounting(1) in accordance with international standards. International Public Sector Accounting Standards are requirements for financial reporting by governments and other organizations in the public sector that seek to improve public sector financial management and
accountability.
The European Commission chose the SAP for Public Sector solution for the integration of its general, budgetary and analytical accounting, all of which are crucial issues for the transformation of public institutions. The new system is connected via a Java front-end to each of the Commission’s 36 directorate generals, who can now encode invoices, manage budgets and authorize payments without major changes to their normal workflow. This solution also puts an end to cash-accounting system problems concerning the difficult budgetary management of multiyear projects in which only receipts and disbursements are recorded. For example, budgetary monitoring of fisheries agreements as well as structural and research funds will be made much easier.
“Government organizations at all levels are under the same strict scrutiny for effectiveness and efficiency as the private sector,” said Tom Shirk, president, SAP Global Public Services. “The European Commission’s successful transformation of its accounting system with SAP will enable compliance to new regulations such as IPSAS, while simplifying processes, improving productivity and lowering operational costs. In helping the European Commission on its accounting transformation project, we were pleased to work with the strong public sector experience of IBM Business Consulting Services, which conducted the implementation effort.”

Source: SAP AG

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