Speaking at the MIA International Accountants Conference, John Matheson said moves to accrual accounting across the globe represent a major step towards delivering world-class financial management.
Poor PFM leads to waste, encourages corruption and reduces the ability to collect taxes and fund public services, he told delegates.
“In contrast, a major part of good PFM is the need to take a whole systems approach – a holistic plan to improve capability and accountability systems, which emphasises medium- and short-term financial planning,” Matheson said. “High and exacting accountancy standards – through accrual based accounting – are at the heart of this.”
CIPFA is a strong proponent of accrual accounting and has urged countries to adopt this system because it represents a much better way to measure a government’s fiscal position than cash-based accounting, Matheson said.
“Accrual accounting gives a complete financial overview of an organisation – assets, liabilities incurred and actual financial performance, while at a whole of government level it makes clear the taxation due and the overall surplus or deficit.
“In short, accrual accounting helps underpin and support economic growth, which in turn improves sustainability and transparency – providing a reliable basis for decision making.”
He highlighted that both the federal and state governments in Malaysia are working to implement accrual accounting through a two-year “dry run” period.
“We recognise that moving to accrual based accounting is not a simple or easy task. Like most things in life worth doing, it will take time, thought, leadership and effort to deliver results. But we believe it is a critical step towards strengthening a country’s fiscal position – and ultimately improving the lives of its citizens – as part of a wider journey towards securing the very best accounting standards.”
CIPFA is also committed to ensuring the accountancy profession’s voice is heard globally, and has worked with a host of governments to improve PFM, Matheson noted.
However, the current “volatile and unpredictable times” require new collaborative partnerships and alliances to strengthen this influence, he added.
Earlier this year, CIPFA signed a memorandum of understanding with the Malaysian Institute of Accountants and the Malaysian Institute of Certified Public Accountants to strengthen PFM in the country.
“I am confident that the MoU, and the opportunity that I have been given to speak to you today, will help pave the way for even closer ties between our respective organisations as we work together to support the accounting profession right across Malaysia,” he concluded.
