IFAC/Ball: Government accounts - clear and present danger

05 December 2012

There is an emerging consensus that poor governmental reporting represents a threat to global financial stability and economic growth that must be addressed. A recent IMF paper is the latest to take this view.

The significance of the IMF's paper rests in the clear and strong position taken on the inadequacies in governments' fiscal reporting and accountability and the need for action to address these inadequacies. As the paper notes: “The last decade and a half has seen a concerted effort to develop a set of internationally accepted standards for fiscal transparency and to monitor and promote the implementation of those standards at the national level".

But while the paper reports that “the number of countries reporting data on financial assets and liabilities to the IMF has increased from 21 in 2004 to 41 in 2011, the vast majority of countries continues to provide no comprehensive data on their financial assets and liabilities”. And the situation is worse in respect of the number of countries reporting both financial and non-financial assets and liabilities. This gives a sense of the considerable distance still to be travelled.

IFAC supports key positions highlighted in the IMF paper, which include:

• updating fiscal transparency standards to address gaps in, and inconsistencies between, individual jurisdictions' standards;
• complying with international standards for public sector financial reporting, including reporting all assets and liabilities by, for example, using IPSAS;
• including in fiscal forecasting, budgeting, and financial reporting all entities that have fiscal implications for governments (including central banks, public entities, and corporations outside of the general governments);
• evaluating countries' compliance with fiscal transparency standards using, for instance, auditing and assurance as a means for assessing compliance with standards;
• strengthening incentives for improvements in fiscal transparency practices;
• strengthening the institutional relationships among international standard-setters;
• aligning the methodologies and standards for fiscal forecasting, budgeting and financial reporting to reinforce the links between fiscal transparency and long-term sustainability;
• building the capacity of professional accountancy organisations and promoting the role they play in improving government financial reporting practise; and
• strengthening fiscal transparency and public sector financial management in all nations and, in particular, in developing and emerging nations.

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IMF-paper

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