By Vivienne Russell | 16 November 2011
Accountants across the world should step out from the sidelines and put pressure on governments to improve the quality of financial reporting, CIPFA chief executive Steve Freer has said.
In his address to the International Federation of Accountants’ council in Berlin today, Freer highlighted the ‘uncertainty, turmoil and chaos’ caused by the sovereign debt crisis currently afflicting the eurozone.
He said there was no way of assessing what effect the proffered bail-out funds would have on the financial health of sponsoring governments because, in all but a handful of cases, governments continue to account on a cash basis.
‘They do not maintain balance sheets. They do not systematically record and value assets and liabilities including multi-billion dollar obligations to bail-out funds,’ Freer told the IFAC council.
‘It seems to me that a solution built on such fragile foundations is bound to collapse. It is built on sand. It is an accident waiting to happen. The question is not whether it will fail but when it will fail.’
Noting that governments are ‘susceptible to pressure and change’, Freer urged the accountancy profession to press for ‘a step change in public financial management, reporting and auditing’.
Freer concluded: ‘I want us to be able to say that we showed real leadership, that we stepped up to the plate, that we set our competitive instincts to one side and put the public interest first.’
CIPFA has today launched a prospectus, Fixing the foundations, inviting organisations involved in public financial management across the world to partner with the institute and push for improved public financial reporting.
The prospectus sets out some of the steps CIPFA and other similarly motivated bodies are taking to boost the quality of public financial reporting. These include support and guidance for governments moving from cash to full accruals accounting and the delivery of public sector specific accounting qualifications.
But the institute maintains that it cannot act alone and is inviting a ‘diverse partnership’ of organisations to work together in the public interest towards a shared goal.
The prospectus states: ‘Only by working together will we be able to achieve real impact at a scale and pace that will deliver outcomes which really matter – high-quality public services, economic growth and prosperity and improvement in life chances.’
Read Steve Freer's blog on how accountants can respond to the global crisis here
