Ball calls for improved financial reporting to measure government “net worth”

7 Jul 15

CIPFA International chair Ian Ball has urged governments across the world to use balance sheets and accrual accounting to improve the transparency of their public finances.

Speaking at CIPFA’s international seminar today, Ball said the challenge was to get all governments to use these methods as the basis for financial management and budgetary decisions.

The publication of public sector balance sheets was “going back into favour” as a measure and could be used as a measure of a government’s “net worth”, he told delegates.

“However I would say they are not back in favour in that senior policymakers and politicians are not using them as the basis for their decision-making. I think that is the next step.”

This should be implemented by all governments, Ball added, as the public finances could not be managed properly unless governments thought about how the decisions it makes impact on its net worth.

“The net worth is the much better measure of the government’s fiscal position – but people don’t talk about it in those terms because most governments don’t have that information.

“And if you want to do an international comparison like the Organisation for Economic Co-operation and Development and the International Monetary Fund would do, you can’t do that because it isn’t shown. The IMF said in its latest report that 14 governments had provided it with a balance sheet, but you need more than 50% compliance.”

He did acknowledge, however, that governments in some parts of the world – particularly Latin America and Africa – were promoting good governance and accrual accounting, such as Brazil and Tanzania.

The use of balance sheets also allowed policy plans to be matched against outcomes, he said.

“For example, when we see the UK budget this week I would like to see a forecast set of financial statements.

“[This way] we can look at the end-of-year Whole of Government Accounts and say how do they compare with the budget we saw at the beginning of the year.”

In addition, Ball highlighted the importance of having qualified chief financial officers to make the system run smoothly both in departments of government and at the centre.

“There needs to be a very strong financial management function in the Treasury,” he concluded.

“In a way the test is when that is integrated in into the budgetary decision-making process. The people who look at the budget have got to be a team with accounting and economics skills.”

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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