Finance ministries ‘tend to keep public finance data to themselves’

25 Nov 11
Financial and political decision-makers worldwide could be missing out on the fiscal information they need about governments, according to Ernst & Young.

By Nick Mann | 25 November 2011

Financial and political decision-makers worldwide could be missing out on the fiscal information they need about governments, according to Ernst & Young.

A survey by the accountants found that only 39% of government finance departments identified international financial institutions as ‘key users’ of government financial statements. Similarly, only 33% listed ratings agencies and just 51% the public. This compared with 84% that listed governments and parliaments.

The survey, Towards transparency, covered 33 advanced and developing economies, including the UK, Kenya, Croatia, Australia, Nepal and Lithuania.

Philippe Peuch-Lestrade, global government and public sector leader at Ernst & Young, said: ‘These findings suggest that many governments are not disclosing their financial status effectively to external audiences.

‘This has potential ramifications for the global economy if those audiences making critical investment, regulatory and political decisions do not have the most relevant and reliable information.

‘Governments should be motivated following the financial crisis to put in place the conditions for modern management and to reform their accounting methodologies – but more progress is still needed to address concerns about transparency, accountability and sustainability.’

In light of growing support for standardisation of financial regulation globally, the study found a ‘clear trend’ towards use of the non-statutory International Public Sector Accounting Standards.

But 22 out of 36 were still using their own unique accounting and financial reporting systems. This, Ernst & Young said, made true financial comparisons between governments ‘very difficult’ – creating barriers for cross-border investors.

A trend was also identified towards the use of accrual rather than cash accounting systems, with 52% of those surveyed having made the switch. But Ernst & Young said it was concerned that over half of those surveyed worldwide that said they had no plans to change were based in Europe, ‘where there is continued sovereign fiscal instability’.

Peuch-Lestrade said: ‘The sovereign debt crisis has focused the need for transparency on government finances within Europe in particular, but it is important for governments around the world to ensure their financial statements are as accurate as possible by using modern accounting methods that give a more complete picture of government’.

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