Delegates from the World Bank, International Monetary Fund (IMF), International Public Sector Accounting Standards Board (IPSASB), and International Federation of Accountants (IFAC) convened today in Washington, DC, for an international seminar, Transparency and Beyond: Harnessing the Power of Accrual in Managing Public Finances.
IPSASB Chair Ian Carruthers remarked, “Coinciding with the 20th year of IPSASB’s standard-setting program, the seminar brings together global organizations committed to strong public financial management (PFM). IPSAS—-high-quality global accrual-based accounting standards—enable governments to produce high-quality financial information that leads to better decision making and builds accountability and trust with citizens. The event is a crucial first step in deciding IPSASB’s strategic direction for the next five years, the projects it will undertake, and how it will work with other global organizations to strengthen PFM globally.”
Delegates began by taking stock of the current PFM landscape, with a look at the new Organisation for Economic Co-operation and Development (OECD)-IFAC report featuring OECD countries’ recent status and PFM reforms. Delegates emphasized the need to increase the availability and use of high-quality accrual information for transparency and decision making by public sector organizations themselves, as well as key stakeholders including parliamentarians, journalists, civil society, and capital market participants. The World Bank delegates highlighted the importance of implementing the standards, and the real challenges countries face in accounting and reporting, specifically, and broader public sector reforms required to actually achieve better decision making. Importantly, delegates concluded with commitments to continue to work toward influencing governments to pursue the needed reforms, building on recent successes and growing evidence that supports the use of accrual reporting based on IPSAS.
IFAC Chief Executive Officer Fayez Choudhury said, “Government spending accounts for a significant portion of a country’s GDP, and many governments are incurring deficits that will have to be settled by future generations. We must address both the supply of, and demand for, better public sector financial information. Public sector leaders must embrace accrual-based IPSAS as the basis of transparent, accountable financial reporting, which is an essential component of strong PFM. And citizens must be encouraged to demand stronger PFM and hold their government officials to account.” (See more about IFAC’s Accountability. Now. initiative.)
Mr. Christopher Towe, Deputy Director of the IMF Fiscal Affairs Department, said, “Comprehensive and high-quality fiscal reports, including financial statements that summarize the government’s financial position and performance, are necessary for governments, legislators, citizens, and markets to have a complete, up-to-date, and accurate understanding of a country’s fiscal position. Establishing a full balance sheet requires capacity to adopt accrual accounting standards, including valuation of assets and liabilities. This one-day seminar provided a valuable platform to bring together all key stakeholders, including standard setters, producers, and users of government financial statements. It facilitated a debate on various perspectives, opportunities, and challenges in adoption of accrual accounting by governments and provided a platform to discuss the way forward.”
Mr. Gabriel Quiros, Deputy Director of the IMF Statistics Department, said, “We are encouraged that several IMF members are pursuing a phased migration toward accrual accounting. However, we are also cognizant of the challenges faced by some of the Fund’s members with regard to these reforms. For many years, Government Finance Statistics compiled on a cash accounting basis have supported measuring the liquidity constraint of governments. As the nature of fiscal activity has evolved in our members, the evolution of—and complementarities between—accrual-based statistical methodology and accounting standards for the public sector also will help countries ensure the sustainability of fiscal operations.”
“We actively support and promote the use of accrual-based accounting standards in countries to enable sustainable, long-term change,” said Jennifer Thomson, Director in Operations Policy and Country Services at the World Bank. “Reliable data on government assets and liabilities, as well as revenue and expenditure, provides a strong foundation for public financial management, and serves as a key tool for facilitating implementation of broader reforms in the countries we support.”
World Bank Director, Governance Global Practice, Mr. Jim Brumby, said, “The IPSASB has done outstanding work in developing the accrual accounting standards. There are many implementation issues that countries encounter in adopting these standards and the World Bank Group remains ready to assist this process. As well as the technical and systems work this requires, a particular focus should remain on the best uses of this information—how accruals can assist governments in doing a better job with the resources they mobilize and how citizens can better hold their governments to account.”
About the IPSASB
The IPSASB develops accounting standards and guidance for use by public sector entities. It receives support (both direct financial and in-kind) from the Government Accounting Standards Board, the Asian Development Bank, the Chartered Professional Accountants of Canada, the South African Accounting Standards Board, the New Zealand External Reporting Board, and the governments of Canada, New Zealand, and Switzerland.
About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.
About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.
About the IMF
The International Monetary Fund (IMF) is an international organization working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership. For more information, visit www.imf.org.
About the World Bank Group
The World Bank Group is one of the world’s largest sources of funding and development expertise for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in pursuing the World Bank Group’s mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.
Accrual Accounting Standards Key to High-Quality Government Financial Transparency and Decision Making
The IPSASB discussed scope, key definitions, and the obligating events to be included in the future Exposure Draft (ED). The IPSASB decided not to include the “key participatory events” and “accumulating liabilities” options and to refine the options related to fulfillment of eligibility criteria. Following an education session on the forthcoming International Accounting Standards Board insurance standard, the IPSASB agreed that the insurance accounting approach should be optional for programs with some of the characteristics of insurance contracts that are intended to be fully funded.
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