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Improving PFM

The need for a Global PFM profession

Alan Edwards, International Director, CIPFA

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The sovereign debt crisis…

‘We traded over-leveraged banks for over-leveraged governments.’

Steve Freer,CIPFA Chief Executive

The Sovereign Debt Crisis (or GFC Mark 2)

Exposure of long standing weaknesses in public finances and public financial management

Bail-outs – at best a temporary fix

What next?

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The root cause....weak PFM

Poor largely cash based reporting

Lack of timely information, clear advice and transparent decision

making

Insufficient professional capacity

Causes of the crisis …

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It’s not as though we were not aware …

“It was an error because Greece

entered with false [economic] figures …

it was not ready.” President Sarkozy

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We should have seen it coming …

“We’ve never had this kind of accumulation of debt in world history” said Bass.

Critically, the big banks were no longer treated as private enterprises but as extensions of their governments, sure to be

bailed out. “The first thing we tried to figure out was how big these banking systems were,” said Bass, “in relation to government revenues. We took about four months to gather the data. No one had it.”

The numbers added up to astonishing totals: Ireland had debts of more than 25 times its annual tax revenues, Spain and France of

more than 10 times their annual revenues. Historically, such levels of government indebtedness had led to government default.

Summer 2011 I returned to see Kyle Bass, Greek credit default swaps were up from the 11 basis points he had paid to 2,300.

Michael Lewis describing Hedge Fund Manager Kyle Bass

The man who sold the worldThe Texan investor who made a fortune in the sub-

prime chaos. Now gambling big money on the collapse of entire countries

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Even in mature economies PFM can be improved…

German finance ministry officials own up to accounting mistake that overstated national debt by €55.5 billion.

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International standards are revealing new information …

First set of Whole of Government Accounts shows pension liabilities of

£1 trillionLandmark documents show that the government’s liabilities for

public service pensions are more than £1.13 trillion.The figures, which also show Private Finance Initiative liabilities

of more than £40bn, are included in the first set of Whole of Government Accounts, published by

the Office for Budget Responsibility in its first report on the sustainability of the public finances.

The documents showed total public service pension liabilities of £1.13 trillion or 78.7% of gross domestic product. Meanwhile,

total capital liabilities arising from PFI contracts amount to £40bn, or 2.9% of GDP. Only £5.1bn of these were included on

the public sector balance sheet inthe National Accounts. The publication of Whole of Government accounts is the culmination of ten years work. It was delayed to

2009/10 to tie in with the introduction ofInternational Financial Standards.

Public Finance July 2011

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New analysis suggests we all have PFM issues to address …

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Implications for equity, accountability, trust and confidence in government

Impacts service delivery outcomes, living standards, quality of life

Affects investor confidence, economic performance, development and opportunity

Outcomes of poor PFM are huge …

“It directly affects the quality of decision-making and gnaws

away at public trust in governments.”

Steve Freer,CIPFA Chief Executive

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In the public interest...

A global step change in public financial management

Collaboration throughout the profession and with all the other players and stakeholders

Growing professional capacity to sustain PFM for the long term

Is there a solution that we can effect …

“We plan to shift this issue from the 'Too Difficult' tray and make it happen .”

Chris Bilsland,CIPFA President

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Making high quality PFM the norm – building on…

IPSAS

ISSAIs

Donor commitment – reconfirmed at HLF4 in Busan

PEFA assessments

CIPFA’s Whole System Approach

ICGFM

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What more is needed …

Global PFM qualifications

Global PFM community

Global PFM thought leadership

In short a Global PFM profession

Global PFM bursary fund

Global approach to PFM capacity building

Global PFM products and services

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The characteristics of a professional body… members bound to act in

the public interest

entrance by examination

practical skill blended with concepts

members trained to appropriate standard

skills kept up to date

regulation, ethics, discipline gives assurance

of qualitySustainable

organisation and genuine capacity

development

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Outputs from PFM professionals…

prepare budgets and financial statements

design PFM systems

give assurance

provide advice

certify accuracy and integrity

monitor compliance

Quality accounts and unqualified audits

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Outcomes from PFM professionals…

better quality decision making

more effective targeting of resources

stronger accountability

more efficient use of resources

greater comparability

Donor/ lender confidence in country

systems

improved transparency

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CIPFA’s experience of professionalisation…

South Africa

Lesotho

Egypt

Tanzania

Eastern Europe

Canada

Australia

New Zealand

Nigeria

Different approaches

different results

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CIPFA cannot do this alone. We want global alliances…

International agencies

National governments

Multi lateral development banks

Charitable foundations

Professional accountancy institutes

Accountancy and other firms

Academic institutions

Representative international bodies

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CapacityDevelopment

ValidatedQualificationFramework

AccreditedExaminations

CIPFAInternationalMembership

Public Financial Management Training

Influencing Accounting and Public Financial Management Organisations

Influencing Governments, Donorsand other Stakeholders

CIPFA International PFM Certificate

CIPFA International PFM Diploma

a global PFM profession …

Global PFM Certificate and Diploma

Global PFM Professional and

Strategic Qualifications

Advanced PFM Certificate

CPD

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We know partnerships work eg Nigeria…

The Accountant General of the Federation

The Auditor General for the Federation

The Federal Treasury Academy

The World Bank

The Institute of Chartered Accountants of Nigeria

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Scope of the Nigerian programme…

joint qualification

capacity development plan

quality assurance system

business strategy & planAim to train 2,000 Federal level

staff within 5 years

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Together we can help create a sustainable Global PFM profession…

PFM and professional training

Systems and

processes

BehaviourNorms

Short course training and IFMIS

Support from national

governments

50,000 PFM students by 2020

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Meanwhile pressure for change continues to mount…

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improving PFM

The need for a global PFM profession

Alan EdwardsInternational Director

CIPFAalan.edwards@cipfa.org.uk

Tel +44 207 543 5690