RPG 1
Active
Reporting on the Long-Term Sustainability of an Entity's Finances
Guides reporting on the long-term sustainability of public sector finances over specified time horizons across service, revenue, and debt dimensions, incorporating demographic, economic, and sustainability program assumptions.
Active Standard
RPG 1 Reporting on the Long-Term Sustainability of an Entity's Finances is non-authoritative good-practice guidance issued by the IPSASB. It assists public sector entities in providing forward-looking financial projections and narrative analysis across service, revenue, and debt dimensions.
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Objective, Status & Scope (paras. 1–8)
Objective
Guides reporting on the LONG-TERM SUSTAINABILITY of a public sector entity's finances – the impact of current policies/decisions on future inflows/outflows, SUPPLEMENTING (not replacing) the financial statements. Aim: indicate projected long-term sustainability over a specified time horizon, per stated assumptions.
Not limited to social-benefit programs, though those are often highly significant. Doesn't directly address ENVIRONMENTAL sustainability – but financial impacts of environmental factors should still feed into projections (paras. 3–4).
Status – good practice, not a requirement
Following this RPG is ENCOURAGED, not required – an entity's IPSAS compliance statement is UNAFFECTED by whether it follows RPG 1
Like the accrual IPSAS themselves, information can't be described as complying with THIS RPG unless it meets ALL its requirements (para. 7) – a binary "if you claim it, claim it fully" rule, even though the RPG itself is non-mandatory. Doesn't apply directly to COMMERCIAL public sector entities – but a commercial entity's flows, if CONTROLLED by the reporting entity, ARE in scope (para. 6).
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Definitions (para. 9)
The core vocabulary
Long-term fiscal sustainability
The ability of an entity to meet service delivery and financial commitments BOTH now and in the future.
Current policy assumptions
Assumptions based on legislation/regulation in force at the reporting date, with appropriate departures for defined circumstances.
Projection
Forward-looking financial information prepared on the basis of current policy assumptions, and assumptions about future economic and other conditions.
Inflows and outflows – broader than the accrual statements
Inflows
Cash and cash equivalents projected to be received or accrued over the projection time horizon.
Outflows
Cash and cash equivalents projected to be paid or accrued over the projection time horizon.
"Fiscal" is used BROADLY here – covering both inflows and outflows, not just taxation, despite a narrower meaning in some jurisdictions (footnote 1).
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Determining Whether to Report & the Reporting Boundary (paras. 10–15)
Who has users for this – three telltale characteristics (para. 13)
Significant TAX and/or other REVENUE-RAISING powers Powers to incur significant DEBT The power/ability to determine the NATURE, LEVEL, and METHOD of service delivery, including introducing new services
This information is BROADER than the financial statements themselves – it captures decisions already made that will trigger future outflows NOT yet meeting the liability definition/recognition criteria, and future inflows not yet meeting the asset definition (para. 11).
Reporting boundary – same as the statements, or GGS
Using the SAME boundary as the financial statements enhances understandability (para. 14). Alternatively, an entity MAY use the General Government Sector (GGS) boundary instead – for cross-jurisdiction comparability, or where other GGS-based indicators are the norm. Entities doing so are encouraged to ALSO present IPSAS 22 GGS disclosures (para. 15).
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The Three-Component Reporting Structure (paras. 16–20)
No single presentation format will do
Form and content vary by entity nature and regulatory environment – a SINGLE approach is unlikely to satisfy financial reporting's objectives. Long-term fiscal sustainability information USUALLY includes three components (para. 17):
PROJECTIONS of future inflows/outflows – tabular or graphical, with narrative discussion (§5) A narrative discussion of the DIMENSIONS of long-term fiscal sustainability, with any indicators used (§7) A narrative discussion of the PRINCIPLES, ASSUMPTIONS, and METHODOLOGY underlying the projections (§8)
May be published as a SEPARATE report, or as part of another one; at the same time as the GPFS, or a different time. A controlled entity's reported information must stay CONSISTENT with its controlling entity's (paras. 19–20).
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Presenting Projections of Future Inflows and Outflows (paras. 21–24)
Building on current policy, reusing existing work where possible
Projections (including capital expenditure) are based on CURRENT policy assumptions plus future economic/other condition assumptions (para. 21). An entity should assess whether it can draw on ASSUMPTIONS/PROJECTIONS/INDICATORS already prepared by others (e.g. a Ministry of Finance) – reducing reporting cost, provided that information meets the qualitative characteristics. An existing BUDGET or FORECAST meeting the projection definition can be reused for the relevant period(s) (para. 22).
Format choices, and the neutrality safeguard
Tabular or graphical – balance UNDERSTANDABILITY against RELEVANCE; more periods = more complete, but risks information overload (para. 23) Choice/presentation must NOT be skewed toward a misleadingly favorable OR unfavorable picture – formats/terms stay CONSISTENT between periods (para. 24)
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Time Horizon (paras. 25–26)
A genuine tension – longer captures more, but weakens robustness
Balance VERIFIABILITY, FAITHFUL REPRESENTATION, and RELEVANCE – longer horizons capture more future events but rely on progressively LESS ROBUST assumptions; TOO SHORT a horizon risks ignoring consequences that fall just outside it
What drives the right length
Longevity of KEY PROGRAMS Level of DEPENDENCE on other entities for funding Estimated lives of major PP&E – especially infrastructure networks Time horizons adopted by COMPARABLE entities providing similar prospective information
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Addressing the Dimensions of Long-Term Fiscal Sustainability (paras. 27–40)
Three inter-related dimensions, each with two aspects
Changing ONE dimension affects the others – a single dimension is analyzed by holding the other two CONSTANT (e.g. fixing service/revenue levels to isolate the effect on debt) (para. 28). Every dimension has TWO aspects: CAPACITY (the entity's ability to change/influence it) and VULNERABILITY (its dependence on factors outside its control) (para. 29).
Service Dimension
Volume/quality of services and beneficiary entitlements over the projection period, given current revenue policy, within debt constraints. Focuses on capacity to MAINTAIN or VARY service levels – and vulnerability to beneficiaries' willingness to accept reductions, or to another government level setting service levels externally (paras. 31–34).
Revenue Dimension
Taxation and other revenue sources over the projection period, given current service policy, within debt constraints. Focuses on capacity to VARY tax levels or introduce new sources – and vulnerability to taxpayer resistance, or dependence on revenue sources outside the entity's control (e.g. intergovernmental grants) (paras. 35–37).
Debt Dimension
Debt levels over the projection period, given current service and revenue policy. Focuses on capacity to meet commitments as due, or refinance/increase debt – and vulnerability to market/lender confidence and interest rate risk. NET DEBT is a key indicator: it represents past service provision that must still be financed in the future (paras. 38–39). At national level, the PRIMARY balance (spending excluding interest, minus tax revenue) may be distinguished from the OVERALL balance (including interest); at sub-national level, net debt as a % of total revenues is often the focus (para. 40).
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Principles & Methodologies – Assumptions, Inflation & Sensitivity Analysis (paras. 41–53)
Updating, age-related programs, and demographic/economic assumptions
Annual updating is DESIRABLE but not always realistic – an inverse relationship exists between assumption robustness and time elapsed; entities should update MORE frequently during financial volatility or after major unexpected events (para. 41). AGE-RELATED programs (eligibility tied to age/demographics) may be individually modeled; NON-age-related programs may track GDP or stay constant in real terms, offering some built-in flexibility (para. 49). Demographic assumptions: fertility, mortality, migration, workforce participation. Economic assumptions: growth rates, inflation, and increasingly, environmental factors like resource depletion (para. 50).
Inflation/discount rate consistency, and sensitivity analysis
If projections INCLUDE inflation → the discount rate must ALSO include inflation. If projections are at CURRENT prices → the discount rate EXCLUDES inflation
A genuine consistency requirement – mismatching these two would double-count or omit inflation's effect (para. 52). SENSITIVITY ANALYSIS helps users understand how significant changes in demographic/economic assumptions affect the projections, since small variable changes can have outsized impacts (para. 53).
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Disclosure Requirements (paras. 54–58)
Entity-identification disclosures (para. 55)
The entity's NAME, and which financial statements the information relates to Where DIFFERENT, the names of entities within the long-term sustainability reporting BOUNDARY vs. the financial statement boundary If a controlled entity: the identity of its CONTROLLING entity The DATE the full projection set was made, and the basis/timing of subsequent updates Where projections/indicators from OTHER entities/sources were used: their names, and what was used
Narrative-discussion disclosures (para. 56)
Sources of SIGNIFICANT revenue inflows, and current policy assumptions behind them (thresholds, allowances) Sources of SIGNIFICANT outflows (incl. capital expenditure), and the assumptions behind them Whether projections are modeled INDIVIDUALLY or in AGGREGATE An EXPLANATION that projections are NOT FORECASTS – actual outcomes are unlikely to match, and the gap depends on many factors including the entity's own future actions Changes in projections and formats between periods, and WHY; the time horizon used, and why – including any horizon CHANGE from the prior period
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Sustainability Programs – Implementation Guidance (paras. IG1–IG3)
A genuinely current extension – does RPG 1 cover climate/sustainability program impacts?
YES – RPG 1's principles apply to an entity's OVERALL long-term fiscal sustainability, INCLUDING sustainability-program impacts, provided the relevant inflows/outflows are built into the projections (IG1)
Sustainability programs (green bonds, carbon taxes, climate-adaptation infrastructure, sustainability tax expenditures – see the Handbook's own illustrative examples) can affect ALL THREE dimensions – service, revenue, and debt Their impacts should be MODELED and INCLUDED in overall projections, using the same current-policy/demographic/economic assumption framework – presented EITHER separately, or folded into overall totals, depending on the report's purpose and their significance (IG2) ALL of RPG 1's ordinary guidance applies – policy/demographic/economic assumptions, and sensitivity analysis to help users understand assumption-change impacts (IG3)
This guidance doesn't create a SEPARATE sustainability-reporting model – it confirms RPG 1's existing framework is BROAD enough to absorb these newer program types without modification.
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Statement / Process Mapping
Reporting decision map
- Does the entity have significant tax/revenue-raising power, debt-incurring power, or service-delivery-determining power? → likely has genuine USERS for this information (§3)
- Choose a REPORTING BOUNDARY – same as the financial statements, or the GGS (§3)
- Build the THREE reporting components: projections, dimension discussion, and assumptions/methodology discussion (§4)
- Select a TIME HORIZON balancing relevance against assumption robustness (§6)
- Address ALL THREE dimensions – Service, Revenue, Debt – each with capacity AND vulnerability framing (§7)
- Set demographic/economic assumptions, keep inflation treatment CONSISTENT between projections and discount rate, and run sensitivity analysis (§8)
- Disclose entity identification, projection dates/updates, and the required narrative items (§9)
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Related Standards – Cross-Reference Map
How RPG 1 connects across the IPSASB body of literature
DocumentNature of the connection
Conceptual FrameworkSource of the objectives, qualitative characteristics, and constraints this RPG applies throughout (Chapters 2–3, cited directly)
IPSAS 22Governs GGS disclosure, encouraged as a companion where the GGS reporting boundary is used (§3)
IPSAS 24Conceptual parallel – budget/forecast information reused as projection input where it qualifies (§5)
IPSAS 35Governs the controlling/controlled entity relationship underlying the consistency requirement between related entities' reports (§4)
IPSAS 42Cross-references THIS RPG directly as encouraged (not required) long-term sustainability reporting – see that Standard's own poster §6
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Quick-Reference Glossary
Long-term fiscal sustainability
The ability of an entity to meet service delivery and financial commitments both now and in the future.
Projection
Forward-looking financial information based on current policy assumptions and future economic/other condition assumptions.
Capacity
The entity's ability to change or influence a dimension of long-term fiscal sustainability.
Vulnerability
The extent of an entity's dependence on factors outside its control or influence.
Service dimension
The volume and quality of services and entitlements over the projection period.
Debt dimension
Debt levels over the projection period, given current service and revenue policy.
Reporting document key
GPFR General Purpose Financial Report
GPFS General Purpose Financial Statements