Article published on IFAC Gateway | Supporting the Public Sector: How PAOs Are Making a Difference
The coronavirus crisis has created exceptional challenges for the public sector, and the crisis is far from over. Many governments the world over, from local all the way to federal levels, are already facing gaps in budgets as the pandemic rages on despite earlier silver linings from vaccination progress. For many, government efforts such as injecting fiscal stimulus is still needed in one form or other, to sustain public services and the economy, and directly support citizens.
Adding to the complexity are other issues, such as disruptions caused by climate change and other catastrophes, which demand ongoing public investments. Furthermore, the need to react swiftly to such emergencies has exposed inefficiencies, not just in developing nations but even in countries with supposedly robust institutions and regulatory frameworks.
As spotlighted in the CAPA article1 published on the IFAC Knowledge Gateway in July 2021, “…the necessity for speed and the sheer magnitude of government interventions to address the health, social and economic consequences … have challenged government’s capacity to manage resources in a transparent and accountable manner.” And we are not alone in our concern.
The International Monetary Fund called for the ‘keeping of receipts’ of public spending and some civil society groups have demanded the information be made public. Transparency International called for auditing bodies and regulators to be involved in real time2.
The call for stronger public financial management (PFM) and governance by stakeholders is not new. There is however renewed urgency amidst such a time as this, where any weaknesses in the system, if not addressed, will have far reaching and likely long lasting societal impacts.
Public Sector Leadership
The Confederation of Asian and Pacific Accountants (CAPA) has been a long-standing advocate on the importance of high-quality PFM. To underline this critical element which stands as part of CAPA’s mission statement, one of our key initiatives through the last decade has been the focus on developing public sector focused thought leadership for use by professional accountancy organisations (PAOs).
The drive behind this is the recognition that as a profession, we can make an impact by driving necessary changes to support stronger optimisation of PFM. Taking a back-seat stance is not an option.
Released in 2019, CAPA’s ‘Professional Accountancy Organisations – Engaging with the Public Sector’ identified the current extent and nature of PAO engagement with the public sector, and encouraged them to consider increasing their level of engagement. Understanding the issues and challenges is important, however achieving improvement and success requires solutions and actions.
Accordingly, in June 2021 CAPA released ‘Professional Accountancy Organisations – Extending Activities into the Public Sector’, a ground breaking publication providing a framework and catalogue of activities that PAOs may implement to assist in ‘Creating Supply’, ‘Building Demand’, ‘Providing Opportunities’ and ‘Enhancing Skills’.
Case Studies
Implementing activities that allow PAOs to get involved in the public sector, including attracting and supporting members that aspire to or already operate in the public sector, requires effort and investment. Some activities require more effort than others and CAPA explores this dynamic in the June 2021 publication.
However, PAOs can learn from each other. The June 2021 publication contains nearly ninety examples, from some twenty-two PAOs representing sixteen countries, regarding activities they undertake.
Furthermore, CAPA is producing a series of case studies that delve deeper into a number of highly strategic initiatives, not only providing ideas for PAOs to pursue, but also the factors that contributed towards to their success, ‘top tips’ for other PAOs should they wish to emulate, and the extensive benefits to the PAOs and countries concerned.
Case Study 3: Canada is the latest and has just been released. Working in collaboration with its member, CPA Canada, the resultant case study illustrates how the national PAO in Canada developed two public sector certification programs: the Public Sector Certificate and the Senior Executive Advanced Finance and Accounting Program. These programs contribute towards ‘enhancing the skills’ and ‘creating a supply’ of well trained, highly competent finance personnel to enable various levels of governments in Canada to better deliver on their PFM agenda.
A government’s existing talent pool is one of its greatest assets. Of equal importance is the need to attract and retain new talent to forge the right level and type of skills needed in a modern government. CPA Canada’s public sector education programs address both of these cohorts – skilling, reskilling and upskilling as required.
Case Study 2: Malaysia showcases how the Malaysian Institute of Accountants engaged with the government by assisting in the introduction of accrual accounting into the public sector and strengthening the accounting cohort working in that sector.
The decision to introduce accrual accounting in any country is not taken lightly. We know from the IFAC – CIPFA International Public Sector Financial Accountability Index, 2021 Status Report that 30% of jurisdictions reported on accrual accounting in 2020. This is forecast to increase to 50% by 2025, and looking ahead to 2030, the current projection is 73%.
Although the Index shows a positive trend with a significant shift from cash to accrual reporting by governments over next 10 years , there is still much work to do. PAOs can assist to advocate and influence for such reform, but also must be prepared to support when the ‘demand’ arrives for highly skilled finance personnel to implement and maintain such systems.
Case Study 1: India describes the involvement of two CAPA members, the Institute of Chartered Accountants of India and the Institute of Cost Accountants of India, in a major project with the Indian Railways focusing on both:
- the migration to an accrual-basis of accounting, and
- improving their costing systems to provide better information for decision-making.
Indian Railways is an enormous transport network and organization, and other entities are following suit as part of broader public sector reforms in India. This initial project allowed the PAOs to facilitate short-term opportunities for their members to provide consulting and other services. The reputation of the PAOs was significantly enhanced in the eyes of government.
In the longer term, entities such as the Indian Railways will require highly trained and skilled finance personnel, as will their auditors, and opportunities may well arise for other advisory and governance roles in an increasingly sophisticated environment with a focus on efficiency and performance. An all-round win-win situation for the economy, government and accountancy profession.
PAOs Can Make a Difference
If there is anything the pandemic and other disruptions have taught us in the past two years, is that crises will likely recur or emerge in other forms. The public sector will continue to come under pressure to deliver more value, whether in direct response to these crises, or to address underlying issues. It has become obvious that where there are fundamental weaknesses in public sector structures and/or systems, these must be addressed with urgency or they will resurface.
It has been widely acknowledged and recognized that ‘partnerships’ with many stakeholders will be essential to drive better outcomes, and one of the most obvious ‘partnership’ roles that the profession is well placed to take on is to continue to support and advocate for the development of stronger PFM.
PAOs whether in developing or developed jurisdictions cannot ignore their role in this regard. They should therefore take a page from the practical experience and knowledge shared by the PAOs in the CAPA case studies and publications, and seriously consider what are the next steps they should take to be part of a sustainable solution to support the public sector in their jurisdictions.
[1] An Opportunity to Make a Difference in the Public Sector for PAOs
[2] Why fighting corruption matters in times of COVID-19 >> Transparency.org
This article was first published on the IFAC Knowledge Gateway on 18 October 2021.
To access the article on Gateway, please refer here.
