Modernizing accounting in the public sector developments in accountability and governance

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Modernizing accounting in the public sector -
developments in accountability and governance

• Brussels, 23 October 2008
• Thomas Müller-Marqués Berger

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Developments in accountability and governance

• Contents

• 1) Developments in public sector governance
• International contributions to the discussion
• Issues in the public sector governance
  discussion
• Objectives of public sector governance codes
• Public corporate governance in Germany

• 2) External audit responsibilities
• FEE discussion paper
• Objectives in public sector auditing
• Applied standards in auditing

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Decentralization, management by objectives and
accountability
Developments in accountability and governance
Allocation ofresources
Tranfer ofresponsibility
Accountability
Requires trans-parent information
Strategic control, in terms of Dos and Donts,
through allocation of resources.
Allocation of resources is inseparably tied to
the transfer of responsibility for conformal use
of funds.
Responsibility results in accountability. The
discharge of accountability is not possible
without disclosure of the use of funds and the
associated target achievement.
Accountability requires transparent information
about disposition and use of funds.
This principles applies for external and internal
control of public sector entities
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Developments in public sector governance (1/3)

• International contributions to the discussion
• IFAC Public Sector Committee (2001)Study 13
  Governance in the Public Sector A Governing Body
  Perspective
• OECD (2005)Guidelines on corporate governance of
  state-owned enterprises
• What are the issues in the public sector
  governance discussion?
• Multidimensional target system due to
  not-for-profit orientation
• Multitude of organizational forms / wide range of
  internal structures
• Inadequate exercise of (control) functions
• Absence of sanctionability if disregarding a
  governance code?

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Developments in public sector governance (2/3)

• Objectives of public sector governance codes
• Clarification of the target system
• Best practice advancement of structures
  (particularly the flow of information)
• To ensure accountability rules for accounting
• Assistance in exercise of (control) functions

Enhance efficiency and transparency!
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Developments in public sector governance (3/3)

• Public corporate governance in Germany
• At the federal level
• German Corporate Governance Code (2002)
• A Public Corporate Governance Code (PCGK) is in
  progress
• Federal Ministry of Finance draft (Summer 2007)
• Code (still outstanding expected 2008/2009)
• At the regional (federal state) level
• Public Corporate Governance Code in place
  inBerlin (2005), Brandenburg (2005), Bremen
  (2007)

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External audit responsibilities (1/3)
Discussion paper from the FEE Public Sector
Committee Implementation of accrual accounting
impact on public sector audit

• Accrual accounting has been introduced at the
  local level
• Audit is performed by private sector auditors in
  several countries

Private sector Auditors
Centralized audit institution
Depends
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External audit responsibilities (2/3)
Objectives in public financial statements
auditing ? objectives in corporate financial
statements auditing
External audit responsibilities?
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External audit responsibilities (3/3)
Challenge To ensure high quality auditing! To
minimize any potential gap in expectations

• General accepted auditing standards are necessary
  to ensure uniform audit quality.
• Applied standards in auditing
• Public sector perspective (PSP) of ISAs at the
  end of each ISA
• International Organization of Supreme Audit
  Institutions (INTOSAI) Standards

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Thank you!