PwC surveys central governments in 120 countries
Worldwide, governments 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 is not fit for the 21st century, according to a survey conducted by PwC on central governments in 120 countries.
While in Europe, the European Commission is progressing with its plan to adopt harmonised accrual accounting standards for all EU Member States, the survey 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.
PwC ‘s report ‘Towards a new era in government accounting and reporting’ analyses key aspects of government accounting and reporting. 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. Seven in 10 governments intend to use accrual accounting in five years’ time, with IPSA (International Public Sector Accounting Standards) often taken as a reference point.
Shirley Machaba, Partner in Charge of the PwC Menlyn Office, and Public Sector Leader for PwC Southern Africa, says: “There is 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.”
Adds Machaba: “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. 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 by including 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.
“Moving along the maturity spectrum of the government finance function is a journey. There are obviously challenges linked to these developments, but there is no room for inaction, the cost of not reforming would be much higher than the cost of reform.”
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