OBSERVER REPORT
KARACHI A report issued jointly by ACCA (the Association of Chartered Certified Accountants) and IFAC (the International Federation of Accountants), Is cash still king? Maximising the benefits of accrual information in the public sector not only confirms that a complete public sector transition to accrual accounting will serve the public interest, but also contains 30 specific recommendations to improve accrual implementation. Good decision-making requires the right information. Given that most government decisions have financial implications, understanding the economic reality of a government’s activities improves the quality of decisions made. The report predicts that by 2023, the number of countries reporting their financial position on an accruals basis is expected to increase from 37 to 98, jumping from 25% to 65% among 150 countries surveyed. These are human consequences that can result – and do result – when governments don’t have the financial information necessary to make the best long-term decisions for their citizens. Cash accounting, which 75 per cent of governments around the world use in some form, does not present the most accurate picture of a government’s financial health, nor does it enable adequately planning for the development, delivery, and maintenance of the services, programmes, and infrastructure on which people rely. And that, in turn, leads to a breakdown of trust in governments. The report’s author, ACCA’s Head of Public Sector Policy, Alex Metcalfe, said: ‘Moving to accruals needs to be more than a compliance exercise, it should be about making the best use of financial information. The range of benefits highlight in this report demonstrates the clear upside to implementing accruals in the public sector. We need to ask whether cash is still king, when it comes to financial reporting and budgeting.’ ‘The accounting profession’s public interest mandate is nowhere more apparent than in the public sector, where high-quality reporting and budgeting is a prerequisite for government transparency and effective delivery of public services,’ said Kevin Dancey, CEO of the International Federation of Accountants (IFAC). ‘To the finance professionals and public sector decision makers who are leading the transition from cash to accrual accounting, we commend you and support you.’ The benefits and complexity arising from accruals varies by types of adoption. The report notes that: Cash accounting and budgeting is the simplest basis but provides the least decisionuseful information. Accrual accounting combined with cash budgeting is the most complex basis, but it generates information that helps achieve value for money, facilitates public scrutiny, and supports sustainable decision-making. Accrual accounting and accrual budgeting creates a ‘medium level of complexity’ and creates consistency
