1、RETHINKING PUBLIC FINANCIAL MANAGEMENT 2021 Association of Chartered Certified Accountants December 2021 About ACCA ACCA (the Association of Chartered Certified Accountants) is the global professional body for professional accountants. Were a thriving global community of 233,000 members and 536,000

2、future members based in 178 countries and regions, who work across a wide range of sectors and industries. We uphold the highest professional and ethical values. We offer everyone everywhere the opportunity to experience a rewarding career in accountancy, finance and management. Our qualifications a

3、nd learning opportunities develop strategic business leaders, forward-thinking professionals with the financial, business and digital expertise essential for the creation of sustainable organisations and flourishing societies. Since 1904, being a force for public good has been embedded in our purpos

4、e. In December 2020, we made commitments to the UN Sustainable Development Goals which we are measuring and will report on in our annual integrated report. We believe that accountancy is a cornerstone profession of society and is vital helping economies, organisations and individuals to grow and pro

5、sper. It does this by creating robust trusted financial and business management, combating corruption, ensuring organisations are managed ethically, driving sustainability, and providing rewarding career opportunities. And through our cutting-edge research, we lead the profession by answering todays

6、 questions and preparing for the future. Were a not-for-profit organisation. Find out more at RETHINKING PUBLIC FINANCIAL MANAGEMENT The Covid-19 pandemic showed the importance of good public financial management. Now is the time to learn from this experience and think about how public financial man

7、agement arrangements need to evolve so that governments are able to respond to crises in the future, quickly, effectively and transparently. Gary Bandy PFM Specialist AUTHORS Alex Metcalfe Global Head of Public Sector, ACCA Foreword This timely report comes at an important inflection point for publi

8、c finance professionals. The risk from legacy government systems and processes came to unfortunate consequences during the COVID-19 pandemic. Has the pandemic exposed opposing government policy forces of economic growth and citizen wellbeing? It would seem so, based on media reporting. What the pand

9、emic has really shown are policy linkages among economy, health, inclusion, and environmental outcomes. We no longer need to think of wellbeing as a “cost centre”, but rather as a “profit centre” that accrues long-term prosperity. Finance ministries, enabled by effective Public Financial Management

10、systems, are the backbone for effective policy decisions and spending allocation. Programme and performance management provide underlying tools to optimize public investments. This includes “social public investments”. How do finance ministries effectively measure policy outcomes? Recent trends for

11、wellbeing, gender, and sustainability budgeting show how citizen values impact perceptions of government performance. For example, the World Happiness Report 2021 advocates the use of the WELLBY (Well-Being Year) formula to evaluate social policy changes. There is more to government performance than

12、 economic growth. Modern finance ministries drive good policy decisions through analyzing complex fiscal and performance data. These finance ministries benefit from public finance reform with multiple-year perspectives, performance indicators tied to policy strategies, and public servants empowered

13、with tools and skills. The migration towards accrual accounting enhances finance ministry capabilities to evaluate policy and budget proposals. Participatory budgeting improves the linkage between citizen values and spending. When combined with fiscal transparency, and government accountability, civ

14、il society engagement enhances trust. Trust is a major theme in this report. Trust encourages investment and growth as credit and risk ratings improve. Trust reduces the “brain drain” migration to more advanced economies. The pandemic resets governance reform in many countries: the priorities of pub

15、lic finance modernization domains, and the pace of implementation. Country context situations became visceral. Reform sequencing tied to the citizen context delivers resilience. Resilience to economic shocks. Resilience to health shocks. Economic, health, and government finance impact from shocks ar

16、e modelled in scenario planning when formulating budgets. Improved response to shocks benefits from integrated fiscal data tied to outputs and outcomes. Momentum for service delivery improvements, particularly through the use of digital technologies, accelerated during the pandemic. Service delivery

17、 effectiveness and prioritization rely on the public finance backbone through resource allocation. It is through fiscal data tied to performance measures that governments learn the cost per output and outcome. This provides comparability across sectors, programmes, and regions, to assist in evidence

18、-based decision-making to improve service outcomes. It is through effective resource allocation integrated with citizen values that provides the healthcare and education services necessary for inclusive and sustainable growth. Families prosper, and communities prosper. Manuel Schiappa Pietra Preside

19、nt the other four regions had more respondents disagreeing with the statement than agreeing with it. Figure 1.1 suggests that there were significant differences in the performance of governments. North America, the Middle East and Western Europe comprise relatively wealthy countries with larger publ

20、ic sectors and well-established PFM systems and were therefore probably in a better starting position to respond to the pandemic. The International Monetary Fund (IMF) Fiscal Monitor Database showed, as of July 2021, that countries in North America and Western Europe had made fiscal responses to Cov

21、id-19 that were equivalent to 7.5% of GDP or more (IMF 2021a). This does not completely explain Figure 1.1 because fiscal support in the Middle East region is much lower, while countries including Australia, Brazil, Chile, Japan and New Zealand all made large fiscal responses. The wealth of a countr

22、y clearly makes a difference to its ability to respond to Covid-19. Overall, according to the IMF (2021a), advanced economies averaged a fiscal response of 15% of GDP, while emerging economies averaged about 4% and low-income developing countries averaged 2% of GDP. There are other differences and c

23、hallenges among countries and regions. The global survey and roundtable discussions, for example, drew out that the move to remote working by government staff was much more difficult in emerging economies than it was in higher- Since the Covid-19 virus emerged, governments have shown agility and inn

24、ovation in keeping public services running and managing economies that were in crisis. ACCA asked respondents whether they agreed that the public sector in their country had responded effectively to the pandemic. Overall, 48% agreed their government had been effective but the responses show notable

25、regional differences. 1. Governments responses to the pandemic FIGURE 1.1: The public sector in my country responded effectively to the pandemic analysed by region -20%-10%0%10%20%30%40%50%60% North America Middle East Western Europe Asia Pacifi c South Asia Caribbean Central being able to transitio

26、n to remote working (42%); and having the necessary technological/ digital capacity (42%). In fourth place on this list, cited by 41% of respondents, was maintaining accountability and transparency of government spending. Governments clearly had to act fast to respond to the virus, both to protect c

27、itizens health against the imminent threat of illness and death, and to protecting citizens current and future well-being through measures to protect and sustain their economies. The speed with which the virus was transmitted proved to be faster than many, if not all, governments existing PFM system

28、s could respond. Governments needed to make and implement policy decisions quickly and these involved trade-offs. As the IMF (2020) put it, do whatever it takes, but keep the receipts. At one of our roundtables, Andrew Kalonga Chimbaza, finance director of Corpus Globe Corporate Solutions, Zambia, s

29、aid, The challenge comes with audit and accountability. The International Budget Partnership (IBP 2021: 5) argues: When putting in place fiscal policy responses to the pandemic, governments are taking a series of measures out of a sense of urgency such as bypassing legislation, relaxing procurement

30、procedures and not seeking citizens input that undermine accountability. Globally, the data indicate a weak performance on oversight (IBP 2020) so it appears that this aspect of PFM was one of the trade-offs. One of the reasons this matters is because SDG 16, Promote just, peaceful and inclusive soc

31、ieties, is about building effective, accountable institutions. Achieving SDG 16 requires increasing and improving accountability mechanisms, not removing or weakening them. In the next section, we will return to the topic of accountability with suggestions for governments to improve the accountabili

32、ty and transparency of their response to crises in the future. Our survey shows different regional responses to the challenge of maintaining accountability and transparency. At one end of the range, only 11% of respondents from the Middle East listed maintaining accountability and transparency as on

33、e of the main challenges, noticeably lower than the overall rate of 41%. It was, however, the top challenge reported by African respondents (it was cited by 53% of respondents) and only one other region, South Asia, had a rate (47%) that was above the average. ACCA explored this whole aspect of gove

34、rnment action further by asking whether respondents agreed or disagreed that their government provided effective transparency on Covid-19-related spending. Overall, 44% disagreed and 32% agreed. As before, the regional picture (Figure 1.4) shows more positive views of government accountability and t

35、ransparency from North America (51% agreed), the Middle East (50%) and Western Europe (41%). The difference is clearly shown in Figure 1.4, where only these three regions have more respondents in agreement than disagreement. In Africa, 17% agreed and 64% disagreed; and in Central and Eastern Europe,

36、 15% agreed and 55% disagreed, with 31% neutral. 17 RETHINKING PUBLIC FINANCIAL MANAGEMENT | 1. GOVERNMENTS RESPONSES TO THE PANDEMIC These findings about transparency suggest that there is a much more significant issue of trust in governments in Africa and Central and Eastern Europe than elsewhere.

37、 The issue of trust as an aspect of government accountability was a topic discussed at our roundtables. Several participants mentioned the importance of trust between government and citizens and businesses. Indeed, Srinivas Gurazada, head of the PEFA Secretariat, warned that: Trust in government wil

38、l go down, particularly in developing countries, if the recovery is not managed well. Later in this report we discuss how PFM systems could be developed in order to improve accountability and transparency. At the time of publication of this report, in some countries the financial statements covering

39、 the first year of the pandemic may not yet have been audited. The findings from those audits, and the audits for the next year or two, will be important for understanding the full extent of the impact of Covid-19 on public income and expenditure, and the impact of the emergency changes that were ma

40、de to PFM systems. The OECD (2020: 12) advises: Stocktaking and audit exercises on how financial management and reporting systems coped with the crisis are necessary. In each individual country, ministries of finance should take stock of how well their financial management and reporting system has p

41、erformed in times of crisis and economic uncertainty. External audits taking on board the perspectives of all key stakeholders ministry of finance, delivery units, parliaments, external auditors, etc. will also be necessary. Governments have proved themselves able to respond to the pandemic in many

42、ways but, as Peter Senge (1990) put it, Todays problems come from yesterdays solutions. The solutions that governments found for the immediate problems of the pandemic will, themselves, bring new problems for governments to solve during the recovery period. Getting (back) to (the new) normal The fin

43、ancial position of every country after the Covid-19 crisis is different and so will be their paths to recovery. Governments need to know their financial position before they can decide on the best approaches to take. The better informed governments are about their financial position, and the better

44、that politicians and officials understand the financial information and its consequences, the better will be their decisions about the recovery. The long-term implications of Covid-19 spending mean difficult policy choices will have to be made. To some extent this is the challenge facing every gover

45、nment every year but the increase in the level of debt associated with Covid-19 will add further pressure to the prioritisation challenge. Ian Ball (2020: 660) writes: Post-pandemic, resource constraints will be tighter. Better resource allocation decisions will be necessary as less productive spend

46、ing will have an even higher opportunity cost. Governments had to make all kinds of urgent changes to their policies and processes to respond to the pandemic. These changes involved trade-offs. Brian McEnery, partner and head of advisory at BDO Ireland, said: The big challenge thats been visible is

47、the balance between the health of the economy and public health. This kind of tension is likely to continue throughout the recovery period. FIGURE 1.4: The government in my country provided effective transparency on Covid-19-related spending, by region -50%-40%-30%-20%-10%0%10%20%30%40% Middle East

48、North America Western Europe Asia Pacifi c South Asia Caribbean Central being able to transition to remote working (42%); and having the necessary technological/ digital capacity. nRespondents in North America, the Middle East and Western Europe were much more positive about the effectiveness of the

49、ir public sector institutions than respondents from other regions. nExisting PFM systems and processes were not always able to deliver the governments policies fast enough and many changes were made. The changes tended to be in the budget preparation, budget approval and budget execution phases. nBudget oversight, accountability and transparency have often been weakened during governments Covid-19 responses. nThe path for every government to get back to (the new) normal will be different because each is in a different place as a result of its Covid-19 responses. The long-term implications of