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December 23, 2011

Fixing the Foundations: A Global Call to Action on PFM!

Posted by Steve Freer[1]

CIPFA – the UK-based Chartered Institute of Public Finance and Accountancy – is inviting organisations which share its passion for Public Financial Management (PFM) to come together and deliver a quantum leap in the quality of governments’ accounting, auditing and financial management practices. Steve Freer, Chief Executive of CIPFA explains why the present may be the best time for action……

Readers of this blog will know – better than anyone - the value of sound, effective PFM. You’ll also be aware of the potentially dire consequences of getting it wrong. Sadly, shortcomings in governments’ financial management practices are all too common in many jurisdictions around the world.

Many of our weaknesses have been exposed by the current sovereign debt crisis. Markets depend upon certainty and confidence. But what could be more uncertain than government accounts prepared on a cash basis without full balance sheet disclosure of assets and liabilities? How can that inspire confidence when governments are at the same time entering into complex guarantees to shore up ailing financial institutions?

More vividly than ever before, citizens have seen how government’s financial management or mismanagement can impact on public services, living standards, and economic opportunities and performance. Amidst the current drama, those of us in the PFM community should recognise that this is a golden opportunity to make the case for a quantum leap in financial management standards and practice in governments across the world.

Many organisations and individuals are already hard at work to drive improvements. The development of international public sector accounting and auditing standards, the establishment of the PEFA framework, and the work of the OECD aid effectiveness forum are just a few examples of important achievements to date.

Notwithstanding these successes, progress to make real improvements is slow. Too many efforts and resources are uncoordinated with the result that the problem of weak public financial management is being tackled in an inefficient, fragmented and wholly underpowered way.

As Jack Diamond’s recent, thought-provoking post on this site (The Soft Side of PFM Reform is Often the Hardest) acknowledged, many country reform programmes ultimately deliver disappointing results. Against this background, CIPFA has launched an initiative that aims to scale-up, renew, and bring co-ordination to the drive for improving PFM.

We cannot deliver the required level of change by acting alone, however. The state of PFM is a global issue which requires concerted, coordinated action across the world from the full range of organisations involved, including governments, international agencies, developments banks, accountancy firms and institutes, and more.

That’s why we launched a partnership prospectus - Fixing the Foundations - at the Annual Council meeting of the International Federation of Accountants in Berlin last month.

We are keen to collaborate and, where appropriate, enter into formal agreements and partnerships with organisations which share our determination for change.

We are open-minded about the nature of the agreements which will be best suited to assure success and we expect that different partners will bring different contributions to the table. Funding, skills, knowledge, intellectual property, networks and other support will all be vital.

Our initial priority is to make contact with like-minded organisations. May I therefore invite IMF PFM blog readers to review our prospectus and get in touch.

If your organisation shares CIPFA’s passion and would welcome a conversation about how we can work together, we want to hear from you.

[1] Steve Freer has been chief executive of the Chartered Institute of Public Finance and Accountancy (CIPFA) since 2000. Previously he worked in senior public finance roles in several UK local authorities, and in management consultancy. Steve is a board member of the Centre for Public Scrutiny and the Local Government Leadership Centre. He is also an adviser to the International Federation of Accountants.

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.


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