G20 Call to Action: Building Public Sector Resilience Must be Part of Pandemic Recovery
Sheila Fraser, Alta Prinsloo | September 29, 2020
The COVID-19 pandemic has made clear the need for well-funded, well-run public institutions. Without strong public health systems in place—and the funds to support them—the health of citizens will remain at stake, even after the pandemic has passed.
In the face of the enormous challenge presented by the pandemic, governments need to make fiscal and policy decisions that support both citizen wellbeing right now and sustainable service delivery far down the road. Operating without a robust roadmap—and in the face of steep fiscal debts—is not an option.
At a time of enormous public sector spending, accountability in the public sector has become even more central to the social contract between governments and citizens. Building a strong public sector requires the contribution of a wide range of stakeholders. The accountancy profession remains ready to play its part.
Accountants in the public sector work every day to support systems that underpin strong economies. In 2020, this has meant helping to manage the unprecedented levels of fiscal aid being deployed to citizens and businesses.
These are the actions needed to achieve more resilient, transparent public sectors across the globe.
1) Seek clarity on governments’ fiscal standing now and in the future
The COVID-19 pandemic will have a profound and long-lasting impact on government finances and—consequently—economies. In fact, the International Monetary Fund (IMF) estimates the total fiscal policy response to the COVID-19 pandemic to be $9 trillion. This is no small change.
Many governments have launched unprecedented fiscal interventions to alleviate the economic impacts of COVID-19. It is essential that governments understand how their response to the pandemic will impact their financial performance and position. High-quality accrual-based financial reporting is needed to not only provide the full picture, but also to yield better information for decision-making, improve transparency on how public resources are used, and deliver accountability for decisions makers.
Adopting and implementing full-accrual International Public Sector Accounting Standards (IPSAS) are fundamental steps governments can take to gain a comprehensive picture of their financial performance and position.
The good news is that many governments have taken steps toward meaningful public financial management reforms, including adopting accrual accounting and IPSAS. In 2018, the International Public Sector Financial Accountability Index found that there is significant accrual adoption underway across all regions of the world. The challenge will be to sustain this momentum during and after the crisis.
There is always cause for optimism—it is never too late for a country to adopt high-quality accounting practices. To provide immediate support, IFAC, the Zurich University of Applied Science (ZHAW), and the IPSASB have created a step-by-step process and assessment tool to help governments evaluate various types of intervention programs related to COVID-19. This is meant to help improve understanding of the impacts on public finances of interventions made to-date, as well as to inform any future efforts.
The IPSASB has also provided technical insight into the financial reporting issues associated with COVID-19 government responses, and relevant guidance already available.
In short: Quality public financial reporting, a cornerstone of sound public financial management, support strong decision making. It informs government policy and helps to make public services—and economies—more sustainable and resilient over the long term.
IFAC is committed to supporting governments around the world in making better decisions and becoming more transparent and accountable.
2) Heighten efforts to detect and mitigate fraud and corruption
According to the Financial Action Task Force (FATF), the pandemic has also led to an increase in COVID-19-related financial crimes, including fraud, cybercrime, and misdirection or exploitation of government funds or international financial assistance, which is creating new sources of proceeds for illicit actors.
Suffice it to say that the challenges are many—and the public sector is at particular risk. Public sector entities must carefully assess the risks inherent in the current environment and strengthen their people, processes, and systems to ensure that the pandemic is not used to misappropriate much-needed resources.
Fighting corruption is a key way in which the accountancy profession serves the public interest. As a member of the B20’s Integrity & Compliance Task Force, IFAC believes that the three key themes of the Task Force’s policy recommendations and attendant actions are now more important than ever. These include:
- Applying new technologies to manage corruption and fraud, including beneficial ownership transparency
- Enhancing integrity and transparency in public procurement processes; and
- Implementing high standards of ethics and integrity in private and public sectors, including coordinating enforcement of extra-territorial anti-bribery laws.
At the current moment, accountants can advise governments and other relevant institutions on the design, implementation, and operation of effective systems of internal control to track and report on the use of funds intended to deal with the impact of the COVID-19 pandemic.
But, remember, the drive for accountability post-pandemic will be long-lasting. At some point in the near future, when the world returns to some level of economic normalcy, citizens, the media, watchdogs and whistleblowers will begin to shine daylight on the activity that took place during the chaos of the pandemic. If past crises are any guide, public outcry for accountability will ensue. Enforcement officials around the world will investigate, follow the money and prosecute.
The accountancy profession is standing ready to follow the money once all is said and done.
In short: Although exceptional times require exceptional measures; they should not give rise to short cuts in key areas. The failure to fight corruption and money-laundering during the pandemic will affect countries’ ability to rebuild their economies and—ultimately—citizens’ trust in governments.
IFAC supports UN SDG 16 Peace and Justice: Strong Institutions, as well as efforts to combat money laundering at the national and international levels, including the activities of the FATF.
IFAC also advocates for whistleblower protection legislation in all jurisdictions and applicable to all sectors, consistent with the G20’s High-Level Principles for the Effective Protection of Whistleblowers, the OECD’s Guiding Principles for Legislation, and the International Bar Association’s Whistleblower Protection Guidance.
3) Maintain trust and integrity in tax systems
Before the outbreak of COVID-19, the world was already anticipating the strain that a growing world population and deepening climate emergency will put on the world’s infrastructure, public services, and tax revenues. The impact of COVID-19 on global economic activity and government spending and—as a result public finances and tax revenues—is significant. Tax and fiscal policy responses are key in the current environment and will continue to be key as governments pursue economic recovery.
Tax law is complex, subject to interpretation, and varies by jurisdiction. To ensure sustainable, trusted tax systems, all stakeholders—citizens, government, politicians, accountants, and others—need to act in good faith. It is crucial that taxpayers comply with a credible interpretation of the law and not engage in tax evasion.
Accountants have a unique advantage in building trust and confidence in tax systems. The G20 Public Trust in Tax survey found that citizens in the G20 continue trust accountants more than any other participant in the tax system, including lawyers, government, NGOs, and media. To maintain this trust, the work carried out by accountants must uphold the strongest standards of ethics and integrity.
Furthermore, to maintain trust, tax systems must be aligned with the needs of the 21st century. Finding solutions to the tax policy challenges posed by the digital transformation of the global economy and accelerated by the COVID-19 pandemic, while avoiding regulatory fragmentation, must be a top priority for the G20 and the OECD.
In short: With strained public resources, maintaining strong tax systems has become an even larger priority that it has been in recent years. All participants in the system must act with integrity.
IFAC supports global tax policy solutions that are fit for the future and believes consensus on smart tax policies is essential as economies continue to become more interconnected in a digital world.
In conclusion, it is no surprise that the challenges ahead of us are formidable. But we can act now to alleviate the same stressors to the system moving forward. For the public sector, the legacy of the COVID-19 pandemic must be one of improvement. Putting the public interest first serves us all.