Trust in international public finances needs to be rebuilt following the pandemic
9 February 2021: Recent research has highlighted a worrying decline in trust around public finances and chartered accountants are at the heart of restoring that trust, writes Alison Ring, ICAEW’s public sector director.
A recent ICAEW and Pan African Federation of Accountants (PAFA) event examined lessons learned from the pandemic on the theme of “Leading in uncertain times – what has COVID-19 taught us?”
I was privileged to be part of a panel of high-profile international accountants and auditors speaking at the event, and my message was very simple – the pandemic has underlined the importance of public sector finances and the underlying principles for good financial management are unchanged. What we need is trust in public finances, and OECD research has shown this trust has declined.
The role of chartered accountants is fundamentally about creating that trust. Trust that the numbers are correctly stated, trust that a true and fair account has been produced, and trust in showing what money has been raised and how that money has been spent.
Where that trust breaks down the contract between government and citizens becomes weak and citizens start not to comply in many ways, be it not wearing a mask or fraudulently claiming COVID benefits.
When considering public sector finances, the same principles apply to good financial management in the public sector as they do in business. Just as shareholders in private companies need to understand how revenue has been calculated and what expenses have been incurred, citizens need to understand what monies governments have raised and how they have spent it – ensuring there has been good governance over their money.
We accountants create trust in government just as we create trust in business, by ensuring there is:
Transparency – accurate and accessible financial reports and records so citizens can see where money is raised and spent.
Assurance – assurance over how public funds have been spent with numbers and processes checked by independent experts. This is vital if citizens are to be able to trust governments in the same way that shareholders trust the companies in which they have invested. Citizens paying tax and investors providing funds are the governmental equivalent of shareholders, debt investors and depositors, requiring just as much assurance about the numbers as they would expect in a private sector context.
Accountability – decision-makers must be clearly identified and subject to strict rules and oversight. You need to know which person or department is accountable for decisions that impact you.
Objectivity – policies must be based on accurate, up-to-date information and rigorous analysis, so you need good and relevant data to be able to make evidence-based policy and decisions that citizens can trust.
The event was successful in provoking a much-needed discussion about how public financial management can be improved internationally.
In his closing remarks, Michael Armstrong, ICAEW’s Regional Director for the Middle East, Africa and South Asia, commented on the importance of the event at this time and the strong collaboration between PAFA and ICAEW. He mentioned that the ongoing pandemic has exposed gaps in the public sector infrastructure across the globe and stressed the critical need for professional accountants to play their part by acting at all times with integrity and in accordance with their strict code of ethics. Michael concluded that this will go a long way in improving public sector resilience and ensuring the long-term health and wealth of citizens.
For further information about building trust in public finances, read our publication Public Money for the Public Good.
To learn more about the Pan African Federation of Accountants, visit their website at pafa.org.za.