IPSAS have a potentially significant role to play in enhancing the transparency and comparability of government financial information. However, despite the increasing recognition of IPSASs as a reference by governments and international organizations, their take-up has been limited over the last years. Consultation exercises, such as the recent one undertaken by Eurostat, indicated that reservations about the governance and oversight of IPSASB were among the reasons cited by governments for not adopting IPSAS. In particular, concerns were expressed over the independence of the standard-setting process and the extent to which public-sector specific needs were effectively addressed.
To resolve these issues, the IPSASB Governance Review Group (“the Review Group”) was formed to propose improved governance arrangements for the international standard setter. The Review Group was chaired by representatives from the World Bank, International Monetary Fund (IMF), and Organization for Economic Cooperation and Development (OECD), and included representatives from the Financial Stability Board (FSB), the International Organization of Securities Commissions (IOSCO) and the International Organization of Supreme Audit Institutions (INTOSAI). Observers included Eurostat, the International Federation of Accountants (IFAC) and the IPASB.
The Review Group explored the range of governance arrangements for other international standards, and sought stakeholders view on different models for strengthening the public interest oversight of IPSASB in a public consultation undertaken in the first half of 2014. The results of this public consultation have been presented in this blog. In the near term, the bulk of responses advised to keep the IPSASB under the auspices of the IFAC and to set-up relatively “light” governance arrangements – meaning a single body in charge of the monitoring and oversight of the IPSASB, and a Consultative Advisory Group. The mission of the former would be to strengthen, where necessary, the IPSASB governance arrangements, and to ensure appropriate consultation and transparency in the development of its work program and standards, while the latter would be in charge of advising the IPSASB on technical matters. Respondents also underlined that international organizations should play a key role in these arrangements. Last, many respondents thought that more ambitious reforms could be considered over the long term, even if views differed on the optimal accounting standards setting arrangements for the public sector.
In light of the responses to the public consultation and subsequent discussions, the Review Group has issued today its Recommendations on the Future Governance of the International Public Sector Accounting Standards Board (IPSASB). They include:
A new Public Interest Committee overseeing the IPSASB’s work
A new Public Interest Committee (PIC) will ensure that the public interest is served in the standard-setting activities of the IPSASB. This Committee will be comprised of individuals from the IMF, OECD, World Bank and INTOSAI. Its role will be to review and advise the IPSASB on the (i) terms of reference of the IPSASB; (ii) arrangements for nomination and appointment of IPSAB members; and (iii) procedures and processes for formulation of the IPSASB’s strategy and work plan and development of individual standards to ensure that all are consistent with the public interest.
A new Consultative Advisory Group to provide feedback from compilers and users
A Consultative Advisory Group (CAG) will enable the IPSASB to receive direct feedback from interested public and private sector institutions, especially those engaged in the preparation, audit, or evaluation of public sector financial statements. The Review Group underlines in its recommendations that this should also provide an opportunity for IFAC and IPSASB to hear from government representatives about the technical issues that may have impeded their adoption of IPSAS, and an opportunity to improve the framework, and answer some of the main users’ needs.
A milestone in a longer-term reform to the architecture of international standards
The Review Group acknowledges the creation of the PIC and CAG as steps towards a potentially more ambitious and wider set of reforms to international accounting standards for both the public and private sectors, and proposes that a further public consultation on the improvements to the IPSASB’s governance arrangements shall be undertaken no later than 2020.
Next steps
The members of the Public Interest Committee, IFAC and IPSASB are now working on implementing these governance arrangements, and an inaugural meeting of the Committee is expected to be organized in March. Advice provided by the Committee, and progress made against these over time, should be made public, as recommended by the Review Group, and will be hopefully be discussed on this blog over the next months.
Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.
