Good governance and PFM key to stability and growth, says IFAC ahead of G20

19 Jun 17

The International Federation of Accountants has reiterated its call for better governance and public financial management to make it on to the G20’s agenda.

 

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Inequality protests

People protest against inequality following the financial crisis.

 

Ahead of a meeting of the world’s most powerful economies in Hamburg in July, the federation published a list of 10 actions that will not only ensure a more stable and growing economic environment, but restore public trust in business and government.

It had first issued such a call last year following the UK’s Brexit vote and growing prevalence of populism around the world, which are seen as reflecting simmering anti-establishment sentiment.

However, such calls were not heeded. Since then, we have seen further shock election results, with outsider politicians coming to power in both the US and France.

Fayez Choudhury, chief executive of IFAC, said in uncertain times it is essential for businesses and government to inspire public confidence and build thriving economies.

Germany, which holds the G20 presidency this year, has already voiced its support for one of these.

Outlining the priorities for the G20 under its stewardship, it called for: actions to ensure national economies are stable and resilient; that they are ‘fit for the future’, with viable energy strategies and quality jobs; and for countries to accept responsibility, namely for delivering progress in Africa, but also for refugees, the fight against terrorism and money laundering and corruption.

IFAC too called for collaboration on corruption, but also for stronger governance in the public and private sectors and better public financial management, in particular through accruals-based accounting.

This, it continued, allows citizens to hold governments to account, rebuilding their trust while also resulting in better decision making and more sustainable services.

“Accounting is the language in which governments communicate their financial performance and position,” the report said. “Converting from a cash-based to an accrual-based form... will result in a more accurate overall picture of national income, costs, assets and obligations.”

The federation also called for integrated reporting to be embraced, efforts to cooperative on a more coherent international tax system that prevents avoidance and evasion and a consistent and transparent regulatory environment.

Adding that high quality, internationally accepted standards are “crucial to enhance confidence, growth and stability”, it urged the adoption of global frameworks like IPSAS and the International Standards on Auditing.

“Rebuilding trust in the global economy and financial systems is critical to inspiring the confidence the world needs for sustained economic growth,” said Choudhury. “Especially in these uncertain times, stakeholders with a passion for transparent, accountable governance must work together.”

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