Trump, Brexit, the Italian referendum … 2016 was the year when major political upsets became almost normal. A year ago, at the start of my first year as chair of the International Public Sector Accounting Standards Board (IPSASB), I certainly never imagined having to open the final day of a board meeting in Toronto with, as a UK citizen, my mind still reeling about the EU referendum result, while fielding texts from a panicky daughter who, having just started as a camp counsellor, was in rural Connecticut with dodgy wifi. Definitely a personal low point.
But throughout the major political twists and turns in 2016, the IPSASB show carried on, releasing two new international public sector accounting standards (IPSASs) and two other final pronouncements, as well as a consultation paper on public sector financial instruments. The hard work, dedication and commitment of the volunteer board members and their technical advisers, together with the excellent support from IPSASB staff, were critical to this. For my part, in addition to chairing four four-day meetings, I gave over 40 presentations and travelled more than 200,000 miles, taking in 22 countries across six of the seven continents.
One of the main things that struck me was that, although it is only 20 years since the development of IPSASs began, the standards have either already been adopted or there are plans to adopt them in six of the seven continents I visited. Precise statistics on IPSASs adoption are difficult to obtain, because there are often local endorsement processes. But dig beneath the surface of, for example, Malaysian Public Sector Accounting Standards or New Zealand Standards for Public Benefit Entities, and they’re closely based on IPSASs.
In 2015, 31% of federal or central governments around the world were on accrual accounting, according to the most recent PwC survey. Wind forward five years and 71% expect to be on accrual. This means that the tipping point where the question flips from being “Why should a government adopt accrual accounting?” to “How can a government contemplate running its finances without knowing the true economic substance of its transactions?” is in sight.
IPSASB’s governance had a landmark year in 2016. Previously, the board had been criticised for its lack of an oversight mechanism. Following the Governance Review Group report in early 2015, the IPSASB Public Interest Committee (PIC) was formed, comprising representatives of the World Bank, the IMF, OECD and the International Organisation of Supreme Audit Institutions, and held its initial meetings later that year. Last year then saw the full implementation of the board’s governance reforms, with the formation and first two meetings of the Consultative Advisory Group (CAG), as well as the completion of the PIC review of IPSASB’s new and revised foundational documents, which are all now in force. The CAG comprises 22 members, who are very diverse in terms of both geography and backgrounds, ranging from preparers and standard setters to parliamentarians and civil society group representatives. This is already enabling the group to provide useful real-time input to IPSASB’s work through providing high-level public interest perspectives.
In addition to reforming our governance, we took a major step forward in strengthening our relationships with national standard setters around the world through holding the first ever Public Sector Standard Setters Forum in March in Norwalk in the US. The forum brought together over 70 participants from more than 30 countries, and from 22 organisations with standard-setting responsibilities. It gave attendees opportunities to discuss IPSASB projects with board members and staff, and for them to discuss the projects they were working on that were not covered by IPSASs, or were currently outside IPSASB’s work plan. The forum was highly interactive, and not only introduced the board to a number of new organisations but also strengthened many of its existing standard setting relationships too – an excellent platform for the future.
So much for 2016. What does 2017 hold? In terms of IPSASB outputs, it promises to be a critical year, with major consultations on revenue and non-exchange expenses and heritage, as well as exposure drafts of IPSASs on social benefits, financial instruments and leases, and a revised version of the cash-basis IPSAS. Throughout the year, we will also be developing our next strategy and work plan consultation document, in close discussion with the PIC and IPSASB CAG. This will be issued in early 2018 and will determine the board’s focus for the five years from 2019 onwards – an important period in terms of IPSASs adoption.
Our strategic objective sets IPSASB’s work in the context of helping to strengthen public financial management. Creating and building on our links with others in the PFM arena can only become more important as the number of governments using IPSASs increases significantly.
Indeed, this is the focus for two key events in this 20th anniversary year of the IPSASs programme – the second Public Sector Standard Setters Forum, which we are holding in Zurich in July, and the Transparency and Beyond – Harnessing the Power of Accrual in Managing Public Finances event we are running jointly with the World Bank and the IMF in Washington in March. At this high-level event, speakers from the World Bank, the IMF, the capital markets, civil society and others will debate with an invited audience how accrual can support strong public financial management and the role of various stakeholders in developing demand for the better information it provides. Coming on the day before IPSASB’s next meeting, and on top of previous discussions with the IPSASB CAG and PIC, this event will set the scene for the board’s first discussion on its Strategy and Work Plan, and will surely influence its thinking.
Regardless of uncertainties around the political weather ahead, the aim must be to provide the framework and tools not only to hold decision makers to account by providing accessible and transparent reports but also to provide the best possible information for them to take sound decisions in the first place.