Ethics has been debated by philosophers for millennia, from Socrates to Kant, and can be a murky area at the best of times. However, it is important. Fundamentally, it is concerned with doing what is right. And in public finance, this is an essential subject, now more than ever.
Recently, United Nations secretary general António Guterres spoke on the impact of corruption worldwide, pointing to the significant drain it continues to pose to prosperity. Figures from the World Economic Forum estimate that corruption costs the global economy more than £2trn every year – or 5% of global GDP.
Transparency International’s Corruption Perceptions Index 2017 was also gloomy, showing that most countries are making little or no progress in ending corruption. On a scale of 0 to 100, where 0 is highly corrupt and 100 very clean, over two-thirds of countries scored below 50, with the average global score only 43.
Trust in governments and public bodies remains in decline, with the most recent Gallup World Poll indicating that it sits below pre-financial-crisis levels. On average in OECD countries, 42% of citizens had confidence in their government in 2016, compared with 45% before 2007.
Just a few months ago, the OECD cut its 2018 forecast for the global economic outlook by 0.1%, and its 2019 forecast by 0.3%. This lack of growth continues to put pressure on governments worldwide, which must do more with less.
Britain in the same report had its growth forecast shaved by a point to 1.3% in 2018, and 1.2% in 2019, with the OECD saying a squeeze on living standards was affecting consumer spending, while Brexit uncertainty was leading to soft investment.
‘Many people seem to now be turning away from traditional institutions or ways of thinking – unsurprising, given that income inequality in OECD countries is at its highest level for half a century.’
Many people seem to now be turning away from traditional institutions or ways of thinking – unsurprising, given that income inequality in OECD countries is at its highest level for half a century. The average income of the richest 10% of the population is now about nine times that of the poorest 10% across the OECD.
The political reaction has been unsettling, with a rise of populist politicians. Many have advocated protectionism, economically and socially, and rejected multilateralism in favour of nationalism. The OECD and Transparency International have expressed concern.
For accountants in the public sector, these global trends have local effects. When we talked to CIPFA members from around the world at our annual conference in July, a number spoke of the pressure they had felt to use ‘creative’ accounting techniques, or to turn a blind eye to fraudulent behaviour.
With our recent survey finding that almost 60% of public sector finance professionals have come under pressure to act unethically at least once in their career, we are not talking hypothetically.
As the only body specifically for public finance professionals worldwide, CIPFA is focused on countering fraud and corruption, whether through training by our Counter Fraud Centre, or via our global advocacy for accrual accounting and IPSAS principles. But all of us who work with or for CIPFA, as members, associates or students, have a role to play on an individual level, by behaving ethically and standing up for what is right.
On 1 November 2018, we formally adopted a new statement of professional practice to align with the International Ethics Standards Board for Accountants code of ethics. This is based on integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour. While the fundamentals of the code have not changed, there are several major revisions, including stronger independence provisions and new guidance on professional judgment and scepticism.
I hope all our members take the time to read the new SOPP, the case studies, and Ethics and You, our introduction to these new standards. The local actions each and every one of us must take will be vital in restoring, preserving and upholding trust in our public institutions, and combating fraud and corruption.
