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For most countries, the last year has seen the biggest injection of financial support from public coffers in a generation to help citizens, businesses and economies ride out the impact of the Covid-19 pandemic. Much of this was handed out at pace to meet urgent need. However, as everyone working in public finance will know, eventually the bill will come due, and public sector bodies will need to account for how this money was spent. Corruption and cronyism has been hitting headlines around the world off the back of dubious procurement practices and a loosening of scrutiny brought about by the emergency situation. In this context, transparent accounts that support good decision making, accountability, and public trust are more important than ever before.
This is why CIPFA is proud to partner with the International Federation of Accountants (IFAC) on the International Public Sector Financial Accountability Index, the latest edition of which was published this month. The Index analyzes data from across 165 jurisdictions to understand the accounting bases and frameworks used in public sector financial reporting, specifically with a view to track the adoption of accrual reporting. By providing a comprehensive view of government finances, accrual reporting helps ensure that liabilities are recognized officially and planned for.
The latest edition of the index forecasts that 50% of jurisdictions around the world will report on an accrual basis by 2025, with 30% already doing so in 2020. This represents an increase of 6% since 2018. The projected increase in adoption over the next five years will be led largely by Africa, Asia, Latin America, and the Caribbean, with significant progress too in the European region.
Many organizations will be using International Public Sector Accounting Standards (IPSAS) to drive this change. More than half (57%) of governments that reported on an accrual basis in 2020 used IPSAS directly, indirectly, or as a reference point. By the end of 2025, this will rise to nearly three-quarters (73%) of governments worldwide. Looking further ahead, these trends are projected to continue. By 2030, we anticipate that 73% of jurisdictions will be reporting on an accrual basis, and that IPSAS usage and influence will have further increased.
However, these gains are by no means a given. Implementation will be reliant on ongoing organizational and political support, funding and general appetite for reform. Continuing efforts to develop professional capacity will also be vital in upskilling accountants to work with more comprehensive data and maintain momentum towards global adoption and implementation.
At a time when public trust in government seems to be at an all-time low, steady progress towards the adoption and implementation of accrual reporting is to be welcomed. Improving transparency and accountability are key elements of better public financial management around the world. These changes will allow public finance professionals to play a central role in the fight against corruption and the delivery of services that citizens need and expect.
