By Nick Mann | 19 April 2012
The Group of 20 must encourage governments to seriously address the quality of public sector financial management, the International Federation of Accountants said yesterday.
In a letter sent to the deputies and finance ministers of the leading nations, IFAC said ‘enhanced public sector financial management, transparency, and accountability’ was needed to respond to the problems caused by the global financial crisis. The deputies and finance ministers are meeting in Washington DC today and tomorrow.
The letter added that the risks caused by poor public sector financial measurement and management, exposed by the sovereign debt crisis, are amplified by those caused by ageing populations.
The G20 should ensure the Financial Stability Board – which brings together central banks and finance ministries worldwide – carries out ‘urgent and fundamental’ work to consider what changes in public sector financial management are needed to protect the public and government bond holders.
It should also ‘make explicit’ that the FSB’s role should include the public sector. As part of this, a working group should be set up within the board to examine ‘enhanced public sector financial reporting, transparency and accountability’, IFAC said.
Leading nations should also ‘actively encourage and facilitate’ the adoption of accrual-based accounting by governments and public sector bodies. Doing so ‘promotes greater transparency and accountability in public sector finances, and allows for monitoring of government debt and liabilities for their true economic implications,’ it said in the letter.
At the same time, the FSB should be encouraged to include International Public Sector Accounting Standards as a set of standards that should be adopted as soon as possible to ensure ‘sound’ financial systems.
IFAC chief executive Ian Ball said that while the sovereign debt crisis had prompted a number of international-level policy developments, the need for better public sector financial management and reporting had yet to be adequately addressed.
‘The use of IPSASs by governments worldwide will improve the quality of financial information reported by public entities, which is critical for investors, taxpayers, and the general public,’ he said.
IFAC now plans to write to the leaders of the G20 nations before they meet in Mexico in June to raise its concerns over more general issues relating to economic growth and long-term sustainability.
