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FEE believes IPSASB governance reform proposals could be more "innovative"

  • FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image
  • IPSASB (International Public Sector Accounting Standards Board) (mid gray) Image

30 Apr 2014

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the IPSASB Governance Review Group consultation paper on the future governance of the International Public Sector Accounting Standards Board (IPSASB). FEE assesses advantages and challenges of each option presented in the consultation paper and concludes that a more innovative approach might be required.

FEE welcomes the consultation as the Eurostat report on the suitability of IPSASs for EU Member States had shown that the lack of oversight is an area of significant concern and a reform of the IPSASB governance could promote a more widespread adoption of the IPSASB standards.

The consultation paper contained a number of possible options for strengthening the IPSASB's governance arrangements:

  • Monitoring and oversight of the IPSASB by the IFRS Foundation’s Monitoring Board and Trustees
    FEE believes that this option could add to the credibility of acting in the public interest and could ensure the independence of the IPSASB. However, it would need to be developed in co-operation with the IFRS Foundation and would need a review of the IFRSF constitution, so it does not seem to be available as a near term solution.
  • Separate monitoring and oversight boards for the IPSASB, while it remains under the auspices of the IFAC
    This option is regarded as a practical and straightforward solution that would require limited investments of resources and time. However, FEE believes that it would not address concerns over accountability, independence and conflicts of interests.
  • Re-establishing the IPSASB outside of IFAC with its own monitoring and oversight bodies
    This is seen as the optimal solution by FEE as it would create a truly independent standard-setter, however, questions of financing, staffing and the need to reform the IPSASB governance within a reasonable time frame would make this solution impracticable.

Given the challenges associated with all of the options, FEE believes that other approaches should be investigated. According to FEE, one possible solution might be a hybrid model that would combine expanding the responsibilities of the IFRS Foundation's Monitoring Board and establishing a new IPSASB oversight body within the remit of IFAC. FEE argues that a monitoring body and an oversight body do not have the same objectives and could therefore well be located in different structures where the expertise on the matters is already available:

The IFRS Foundation's monitoring board has well established competence, resources, procedures and credibility for insuring the public interest of accounting and financial reporting standard setting activities for the private sector, most of which would be readily applicable to the setting of public sector accounting standards.

[...]

Establishing a new oversight body for the IPSASB, while it remains under the auspices of IFAC (a public sector version of the PIOB), would have the following advantages:

  • The members of such a body could be selected fully on the basis of their background and expertise in public sector accounting issues;
  • Such a body could be established reasonably quickly without requiring significant constitutional and organisational changes to the IFRS Foundation and to IFAC's constitution and organisation.

Please click for the full consultation response on the FEE website.

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