ACCA outlines policy positions on public sector reporting

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14 Feb, 2013

The Association of Chartered Certified Accountants (ACCA) has released an updated paper outlining its policy positions on a range of themes for public services. In addition to a number of other themes, the paper supports the use of accrual accounting and sustainability reporting in the public sector, and puts forward policies and recommendations in these areas.

The paper, Setting high professional standards for public services around the world, sets out ACCA’s policies for members, employers and a wide range of external stakeholders with an interest in public services. It includes objectives such as setting out criteria for achieving strong public financial management, good governance and a strong ethical culture in the public sector.

Financial reporting

In relation to financial reporting, the paper notes that transparent financial reporting is imperative from a public accountability perspective. It takes that view that governments should aim "to provide financial information based on international accounting standards to improve both transparency and accountability and to get a tighter grip on fiscal management".

On the question of which standards should be applied by governments, the paper takes the view that the development of global accounting standards is the main responsibility of the IASB.  It however also supports the development of International Public Sector Accounting Standards (IPSAS) by the International Public Sector Accounting Standards Board (IPSASB), but does so in the context of the IPSASB interpreting IFRS accounting standards for the public sector.

The paper makes the following observation:

In our view there should not be any conflict between IFRS and IPSAS standards for use in the public sector. IPSAS standards have an important role to play in dealing with specific public sector issues for which there is no IFRS, such as service concessions: grantors, revenue and non-exchange transactions, presentation of budget information in financial statements and disclosure of financial information about the general government sector.

The paper outlines the approach taken by governments in various jurisdictions, and notes that there is a cash-based IPSAS that is followed by some countries, but that "in the long term the accruals basis of accounting is the right way forward for accounting for public funds as it increases transparency and accountability."

Furthermore, the paper expresses the view that the audit of financial statements is essentially the same in the private and public sectors, and accordingly supports the adoption and implementation of International Standards on Auditing (ISAs) for public bodies.

Sustainability reporting

On the topic of sustainability reporting and corporate social responsibility (CSR), the paper puts forward the view of a need to be aware of the differences between the private and public sectors for sustainability reporting.  The paper goes on to note the rationale for government sustainability reporting can be driven by many different factors, such a requirement imposed by donor organisations, or that the existing frameworks such as that produced by the Global Reporting Initiative (GRI) provide incentives to "embrace sustainability reporting ... to act as an example for the private sector" .

However, on the latter point, the paper sounds a note of caution:

Although lessons from private sector sustainability reporting and CSR are valuable, an understanding of the importance of sustainability action and reporting in public services should take account of the nature of the purpose, motivations and responsibilities of public services, rather than attempting to adopt wholesale an approach to reporting that may be more appropriate to the private sector.

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