Post by Delphine Moretti[1]
In March 2017, the Organisation for Economic Cooperation and Development (OECD) organised the 17th Annual Meeting of the OECD network of Senior Financial Management Officials. The meeting was attended by around 120 delegates from OECD member countries, the European Commission, the International Monetary Fund (IMF), the World Bank Group (WBG) and international standards setters, such as the International Public Sector Accounting Standards Board (IPSASB).
The meeting discussed progress with accounting reforms in OECD member countries and the related modernisation of financial management. The participants discussed how “modern” financial management entails not only producing more complete and reliable financial data, but also making these data publicly available in fiscal reports that are transparent, clear, and useful.
The discussion, and recent OECD Surveys, highlight that, in the wake of the financial crisis, there has been a greater emphasis on budget discipline and transparency. This has led to significant changes in fiscal reporting practices in OECD countries, including:
- The use of new accounting and budget classifications for reporting the government’s operations (cash and accrual basis, classification by function, program, etc.); For more on accrual practices and reform experiences in OECD countries click here.
- An expansion in the types of financial documentation (e.g., reports on long-term sustainability of public finances, fiscal risks, etc.) that are published, in addition to “traditional” reports (e.g., budget execution reports and fiscal statistics); and
- The emergence of non-financial performance information (e.g., on the outcomes and outputs of spending programs, and evaluation reports).
Consequently, a wider range of forward-looking and backward-looking financial information is now available to users. Some of these documents are submitted for external audit. Governments appear confident that the transparency of their fiscal reporting has improved.
Concerns, however, are still expressed by users, particularly by parliaments. Mainly, they consider it difficult, if not impossible, to find information relevant to their needs in numerous, voluminous, and complex fiscal documents. They have also raised concerns about the comparability of fiscal reports, the level of detail necessary for accountability purpose, the clarity and usefulness of the notes and commentaries included in these documents, and the linkage of financial data to non-financial performance information. Against this background, questions have also been raised about the costs associated with the production of potentially overlapping fiscal reports, some of which have only limited practice use.
These issues reveal a fundamental “paradox” with government fiscal reporting: that the desire for greater transparency and sophistication may come at the expense of clarity. To consolidate recent progress in improving transparency, some finance ministries in OECD countries have endeavoured to resolve this paradox.
One option entails putting in place mechanisms that allow users of financial reports to provide feedback. For example, France conducts annually a formal survey which assesses parliamentarians’ level of satisfaction with fiscal documents and requests suggestions for improving their content and presentation.
A related idea involves triggering initiatives and innovations based on users’ feedback. For example, in the United Kingdom, a new format for Departments’ Annual Reports and Accounts, which combines in single document, financial, performance and accountability information, was recently adopted to better address users’ needs. In Australia, the Department of Finance led an ambitious and extensive simplification of the Australian Government Consolidated Financial Statements, which aimed at providing simpler, more meaningful financial information to users. This exercise involved inputs from parliamentarians and other stakeholders, such as the auditors and the Australian Accounting Standards Board.
Last, IT increasingly changes the way fiscal information is provided to users. In Canada, for example, a government database combines detailed contextual information and data on government spending and people management. It allows users to build customized reports that meet their specific needs.
All four countries mentioned above show that, with greater awareness of users’ needs, important improvements and innovations in government fiscal reporting can be expected in the future.
Against this background, the OECD intends to study how government fiscal reporting has evolved in recent years, and could evolve further, to keep pace with users’ expectations. To do so, the study will seek inputs from key stakeholders – that is finance ministries, parliaments, independent fiscal institutions and auditors – and build on the discussions held at the network meeting. Parties with an interest in the topic are welcome to provide their views and participate in the debate.
[1] Senior Policy Analyst, Budgeting & Public Expenditures, OECD.
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.
