The International Federation of Accountants (IFAC) called this week on the Group of Twenty’s (G20) finance ministers and central bank governors to resume efforts to strengthen the adoption of International Public Sector Accounting Standards (IPSAS).
IFAC said it’s now one year since the G20 meeting held in Moscow set the goals of strengthening governments’ balance sheet and achieving greater comparability on public sector reporting.
Yet much remains to be done according to IFAC chief executive Fayezul Choudhury: "We believe that the G20 has a key role to play in ensuring that momentum is maintained and governments recognize the benefits of enhancing financial management and reporting -to ultimately improve transparency and accountability."
According to IFAC, transparency and comparability can only be achieved by adopting accrual-based financial reporting frameworks based on IPSAS, although many governments don’t follow the same practices and some have not yet transitioned from cash to accrual accounting systems.
IFAC said there are currently signs that the sovereign debt crisis is easing, with Greece and Portugal re-entering the bond markets and intensifying efforts to exit their bailout programs.
This marks a period of reflection where the lessons of poor government reporting should not be forgotten, IFAC said, and therefore it also recommended IPSAS to be added to the Financial Stability Board’s list of standards that deserve priority implementation.
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By GlobalDataAustralia’s G20 presidency response
A spokesperson for Australia’s G20 host presidency told The Accountant that public sector accounting was raised under the public debt management work stream under the Russian Presidency.
According to the spokesperson, this work stream culminated in updates to the International Monetary Fund and the World Bank’s Guidelines on Public Debt Management. These updates were welcomed by G20 finance ministers and central bank governors in the Annex of the Communique for their April 2014 meeting in Washington D.C.
The revised guidelines contain guidance on making information relating to debt management policies and debt composition publicly available, the spokesperson continued. And where available, debt managers should also have access to an accounting of official assets and liabilities on a cash or accrual basis.
"In 2014 the Australian presidency and the FSB are focusing the G20’s financial regulation agenda on substantially completing key aspects of the four core reform areas set out in response to the global financial crisis: building resilient institutions; ending too-big-to-fail; addressing shadow banking risks; and making derivative markets safer.
The spokesperson added that while other financial regulation issues are progressing within the FSB, those core areas are the focus of G20 finance ministers and central bank governors in 2014.
IPSASB governance review
Additionally, the International Public Sector Accounting Standards Board (IPSASB) recently issued a response to the consultation paper on the future of its own governance as international standard setter.
The review focuses on three possible ways of establishing oversight of IPSASB’s activity in order to address concerns over a perceived conflict of interest with IFAC, which is its largest funder.
First, establishing oversight by the IFRS Foundation’s Monitoring Board and Trustees. Second, setting up separate oversight bodies for the IPSASB while remaining under the auspices of the IFAC. Third, re-establishing the IPSASB outside of IFAC with its own oversight bodies.
IPSASB chair Andreas Bergmann told The Accountant that the board has to be independent from the influence of any organisation, government, private sector body or stakeholder.
"IFAC has never influenced our standard-setting process but obviously they could have done so. It’s more of a theoretical fear that IFAC could influence our work. And that’s the concern why there is a call for an independent mechanism which makes sure no entity exercise any undue influence on standard-setting," Bergmann said.
Bergmann said IPSASB has always called for such a review because not having an oversight structure could be seen as a weakness of its governance and credibility as an international standard-setter.
Of the three options available, Bergmann said the board is in favour of the second one: "In our view it should be a structure within IFAC; a mechanism set up by independent individuals, perhaps representing some international organisations but without giving any particular influence to anyone."
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