Momentum is growing for better public sector accounting, says PwC survey
Governments around the world are increasingly taking steps to improve their accounting and achieve greater transparency and better public finance management - amidst growing recognition that the accounting framework traditionally used by the public sector isn’t fit for the 21st century, according to a PwC survey conducted in 120 countries.
“It is important that governments - which regulate accounting in the private sector – lead by example and have a high standard in their accounting system. This is not the situation today, but we see great interest in seeking i mprovement,” said Jean-Louis Rouvet, PwC Global Public Finance and Accounting leader.
Accrual accounting principles reflect the long-term economic impact of political decisions in the financial statements. This results in a comprehensive view of a government’s assets and liabilities, and of its financial performance and cash flows. Some seven in ten governments intend to use accrual accounting in five years’ time, with IPSAS (International Public Sector Accounting Standards) being often taken as a reference point, the survey found.
“There is now growing recognition of the importance of appropriate accounting and financial management in the public sector as a key means of achieving sustainable public finances. Governments need to step up and adopt sound and transparent accounting and reporting rules, as part of the democratic accountability process and the wider public finance management,” added Patrice Schumesch, PwC Global Public Finance and Accounting Partner.
While in Europe, the European Commission is progressing with its plan to adopt harmonised accrual accounting standards for all EU member states, the research shows that the biggest shift to accrual accounting is expected in Africa and Latin America, followed by Asia. Among the non-OECD countries surveyed, 50% plan to transition to accrual accounting in the next five years.
“Transitioning to accrual accounting is not an end in itself, it is an enabler. Adoption of high-quality accrual accounting also lays the basis for developing better management information systems, which should also contribute to better decision making and a better use of public money,” Jean-Louis Rouvet added.
“Performance management should help governments to measure the achievement of their service delivery objectives and in so doing add value for citizens. The end goal is to deliver a better public service and to achieve sustainable public finances, therefore creating a positive legacy for the next generation.”
The governments surveyed also indicated their priorities for the next five years include one or several of the following projects, depending on their position along the government finance maturity spectrum: accrual accounting (based on IPSAS or similar standards) implementation, modernisation and greater integration of IT systems, capacity building and improvement of management information systems.
The report ‘Towards a new era in government accounting and reporting’ (2nd edition) is available to download at www.pwc.com/gx/en/industries/governmen t-public-services/public-sector-researchcentre/publications/second-edition-globalsurvey-government.html