• Register
Return to: Home > Comments > Status Report on the International Public Sector Financial Accountability Index

Status Report on the International Public Sector Financial Accountability Index

The Chartered Institute of Public Finance and Accountancy, CIPFA has issued a joint report with IFAC at the World Congress of Accountants (WCOA) 2018, providing a snapshot of developments in the International Public Sector Financial Accountability Index. This brings together information on financial reporting by national and federal governments, tracking progress in the adoption of accrual accounting. 

This is an important concern for citizens across the world, because unlike most private sector companies which report using accrual basis standards, the majority of governments worldwide use cash basis reporting. 

CIPFA is actively promoting the adoption of accrual-based accounting in countries across the globe through helping governments implement IPSAS. We are boosting the capacity of public financial managers in Zimbabwe to ensure the government has the capabilities in place to adopt IPSAS. We have also advised and assisted Ghana in the development of an IPSAS Implementation Strategy and Plan which will be useful in securing the necessary funding for IPSAS implementation across the Government of Ghana.

For governments which manage significant assets over long periods and enter into long term contracts to deliver public service infrastructure, cash basis reporting doesn’t help them manage their operations, assets or debt and the most important financial information can’t be found in any cash based report. The European sovereign debt crisis and other financial crises across the world have made all too clear the risks which arise where governments don’t have good information on their liabilities and commitments.

Against this background, the 2018 status report notes those areas where progress is already being made.  The Accountability Index brings together information from 150 countries across the globe, and 25% of these currently report on an accrual basis. Looking ahead, it predicts that the number of governments using accrual will more than double by the end of 2023.  It’s good to see that more than half of the accrual basis reporting was using International Public Sector Accounting Standards (IPSAS), and this proportion is again set to increase. The most important thing is that governments’ reporting is on the right basis (accrual) and of sufficient quality. The best way to achieve this is by using standards developed specifically for the public sector.

The report provides infographics and maps which show current reporting and what is planned, and it’s clear that the greatest prospects for accrual adoption are in Africa, Asia, Latin America and the Caribbean.  It also outlines key actions for successful accrual reforms. Implementation of accruals must be based on a firm foundation of strong financial and other controls. Perhaps more importantly, accounting reform needs to be managed as a major project with a formal change management program, and capacity building which reaches out beyond the accountancy function, with a strategy for frequent and clear communications to keep key stakeholders involved. 

One area where the Index shows less progress is in accrual budgeting. Only 15 jurisdictions reported that they currently prepare budgets on accrual, and the majority of governments do not currently plan to introduce accrual budgeting. Governments know that they need to carefully plan and control their capital expenditure and their borrowing, and almost all of them try to do this. But it’s very difficult when the information doesn’t flow from the financial reporting, and there are no standardised or well understood ways to do this. Accrual budgeting has the potential to be both cheaper and more effective, using information which is transparent and aligned with best accounting practice.

Overall, the plans for greater use of accrual reporting over the next five years are a promising sign for citizens across the globe.  Accruals-based accounting and auditable financial statements linked to comprehensive budgeting are a key part of improving public financial management worldwide, which is essential if governments are to promote trust and transparency, identify and fight corruption, and above all deliver the outcomes their citizens expect and deserve. 

 

IFAC and CIPFA will be seeking to expand the coverage of the Index as sufficiently reliable information becomes available, and it will be interesting to see how things have moved when the next status report is produced. As accrual reporting becomes more prevalent, it may be appropriate for CIPFA to more strongly promote the benefits of accrual budgeting. 

Top Content

    2018 Digital Accountancy forum and awards: Digital transformation

    The Accountant presents highlights from The Digital Accountancy Forum & Awards 2018 panel discussions

    read more

    2018 Digital Accountancy Forum and Awards: Tech deep dive

    The second panel session of the day saw experts discuss how new technologies should not just be seen as a threat, and could be used to improve accounting.

    read more

    Digital Accountancy Forum and Awards: The power of data

    The third panel discussion of the day saw panellists discuss some of the worries their clients have had, how to overcome them, and how data and technology are providing real business opportunities.

    read more

    Digital Accountancy Forum and Awards: The next generation

    With young people more mobile, and technology changing the industry rapidly, the final panel session of the Digital Accountancy Forum looked at how firms would need to adapt to the new reality

    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.