• Register
Return to: Home > Comments > Poor quality government accounting – an issue for all

Poor quality government accounting – an issue for all

Alex Malley

The recent International Monetary Fund (IMF) report Fiscal Transparency, Accountability, and Risk notes only 12 of 184 national governments publish accrual-based balance sheets - the UK and Australia are members of a select group! The rest are leading and managing their countries without the benefit of information about their own financial position and are not open about their true level of debt.

This is an unsurprising result given the prevalence of cash accounting, which ignores government liabilities. How can governments fix an economy when they can't even see the problems? And the loss of trust the public has in a government's ability to manage their country's financial position is a consequence of that opaqueness.

Notwithstanding these observations, the Group of Twenty (G20) has persistently ignored the issue of poor quality government accounting in its examination of the financial crisis. The leaders of the UK and Australian governments must change that.

2011 saw the UK publish its first audited whole of government financial statements. Successive Australian Governments over the last sixteen years have been held to at least the same level of integrity and transparency by its citizens as that demanded of companies.

I believe that a willingness by governments to commit to the adoption of accrual accounting standards-based financial and budget reporting is critical for the effective management of government and its entities - a necessary precondition for good economic decision making. A more transparent government reporting regime is evidence of government commitment to being accountable, itself a necessary step to regaining the trust of the public.

The poor quality of accounting practised by most governments of the world is a huge issue confronting the world's economies. The governments of the UK and Australia need to work together to have the G20 examine this issue. To not take action is likely to result in many governments repeating the actions that caused the current crises and fail to understand fully the financial consequences of those actions. The last five years shows this cannot be a good outcome for anyone.

Top Content

    Choosing the right location can have cast-iron benefits

    As Game of Thrones, one of the biggest television shows of all time, comes to an end, Joe Pickard looks at how tax incentives offered to television and film production companies help the wider economy.

    read more

    Primary financial statements: a game changer in reporting?

    International Accounting Standards Board chair Hans Hoogervorst delivered a speech at the Seminario International sobre NIIF y NIF, organised by the Consejo Mexicano de Normas de Información Financiera in Mexico. The Accountant presents the highlights.

    read more

    FASB readies standards for the netflix generation

    The US Financial Accounting Standards Board (FASB) has updated its accounting standard for entertainment, with a specific eye on keeping up to date with how episodic content, such as television programmes, is consumed in the modern world. Jonathan Minter reports.

    read more

    Brexit: why it takes two to tango

    Former TA editor Vincent Huck, now editor of Insurance Asset Risk, looks at why Brexit might unleash geopolitical intrigue in Europe’s accounting standard-setting scene – and why IFRS 17 will be an incredible source of opportunity for firms in the coming years.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.