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December 2017

December 06, 2017

Fighting Illicit Fund Flows in Sub-Saharan Africa

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Posted by Howard Cooper, Paul Nash, and Oliver Stern[1]

In September 2017, Kroll delivered a seminar to a group of representatives from the Fiscal Network of the IMF’s African Department. The seminar, entitled ‘Fighting Illicit Fund Flows in Sub-Saharan Africa’, covered Kroll’s experience of performing forensic audits in various countries in Africa and other parts of the world, including the recent independent audit of three state-owned enterprises in Mozambique. The presentation also raised the global and growing issue of illicit fund flows, demonstrated how modern data analytics techniques can help to effectively detect and stop these flows, and highlighted the obstacles that currently prevent a coordinated data analytics strategy from working effectively.

Kroll is often asked to carry out discreet investigatory work to identify the origins of bottle-necks in decision making, or transparency issues associated with various transactions in emerging markets.  These markets are often characterized by a combination of weak institutional capacity and highly politicized government spending. Powerful commercial and political patronage networks, and weak public financial management frameworks increase the risk profile for Kroll’s clients. In addition to the macro-economic challenges associated with, for example, off-budget spending, a highly politicized environment can leave investors facing challenges over their security of tenure and a general lack of predictability.

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December 01, 2017

IPSAS on Social Benefits

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Posted by Guohua Huang[1]

Providing social benefits to the public is a critical responsibility of governments. However, concerns have been raised about the financial sustainability of social benefit policies in many countries. One recent IMF study[2] showed that, without further reforms, spending on age-related programs (pensions and health) would increase by 9 percentage points of GDP in advanced countries and 11 percentage points of GDP in less-developed countries, between 2015 and 2100. The fiscal consequences are potentially dire. Such spending increases could lead to unsustainable public debts, require sharp cuts in other spending by governments, or necessitate large tax increases that could stymie economic growth.

Even though the sustainability of social benefits is an important policy issue, there is no an international standard on how to appropriately account for the related liabilities and expenses. The International Public Sector Accounting Standards Board (IPSASB) has been criticized for not issuing any standards on this issue. For example, when assessing the suitability of IPSAS in the EU member states a few years ago, the European Commission stated that the coverage of IPSAS was incomplete, and expressed concerns about its applicability to some important types of government flows, such as taxes and social benefits. IPSASB’s oversight body, the Public Interest Committee, has been recommending IPSASB to focus its resources on social benefits and other key issues of public policy.

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