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Setting out post-pandemic suggestions for the public sector

5 June 2020: New papers published by Accountancy Europe provide a number of ideas on how the public sector can act in the short and long term to counter some of the main impacts of the coronavirus crisis.

Across Europe, the last few months have seen an almost unprecedented deployment of government support to deal with the impact of the pandemic. Taking European and national measures in aggregate, around €3.4tn has been mobilised. Fiscal deficits in the EU are expected to surge from 0.6% of GDP in 2019 to 8.5% in 2020. Against this backdrop, Accountancy Europe has shared several takeaways on what the public sector can do to address some of the key impacts of the pandemic.

Requiring immediate attention

Of immediate concern are questions of transparency and control on public sector expenditure, not least given the understandable relaxation of normal control processes in many countries during recent months. Measures such as retrospective checks on funds issued could play an important part in preventing and uncovering fraud and misuse. With financial and performance reporting disrupted, Accountancy Europe also emphasises the importance of disclosing material information as promptly and accurately as possible.

As ICAEW has also noted, there are specific issues around reporting and auditing in the public sector. Guidance on the level of government support provided to other public sector bodies will be of relevance also for assessments of going concern, which nonetheless will be somewhat different in the public sector compared to the private sector. The loans or loan guarantees provided by governments across Europe will need to be closely monitored given the potential for significant defaults. The impact on the whole of government accounts, including the consequences for determining overall fiscal sustainability, could also be challenging, with some countries potentially facing a negative balance sheet.

Central government guidance for public sector entities on reporting of post balance sheet events and contingencies as well as on disclosures in management commentary is urgently needed, where not already provided. 

On the long-term agenda

Looking further ahead, Accountancy Europe stresses the importance of continuing with existing fiscal reform, financial and non-financial reporting programmes – particularly when it comes to accruals accounting. The contribution of accruals accounting to better active management of governments’ balance sheets and in managing loans and guarantees is particularly highlighted. Adoption of IPSAS in the mid- to long-term is also encouraged.

Given the dramatic increase in public sector assets and liabilities – and already existing issues around the reporting by European countries of contingent liabilities (captured separately from national statistics figures by Eurostat) – demands for better transparency and ‘value for money’ assessments are only likely to grow. Some of these issues already seem to be on the agenda in the context of discussions around the future, multi-annual EU budget. Proposed EU recovery funds (whether eventually disbursed as grants or loans) are due to fall under normal EU financial control mechanisms. Improved financial reporting and management at national level, particularly for the Eurozone countries, could well be part of the conditions attached to overall agreement on the package, most likely after the summer.

The recommendations made by Accountancy Europe also cover the importance of improving crisis management procedures in many public sector bodies and of improving IT systems in the public sector for workers and end-users.