International Journal on Governmental Financial Management published

ICGFM is happy to announce the publication of Volume 10, Number 1, 2010 of the International Journal on Governmental Financial Management.

Table of Contents
1. A Science-Based Approach to the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities
Petri Vehmanen
2. Public Sector Accounting: Democratic control of public money by using administrative cameralistics
Norvald Monsen
3. Sovereign Wealth Funds
Hany H. Makhlouf
4. Public Financial Management in Sudan
Hussein Mohamed El-Nafabi
5. Independence of Supreme Audit Institutions in Sub-Saharan Africa
Andy Wynne
6. A Prescriptive Model of the Transition to Accrual Accounting in Central Government
Hassan A. G. Ouda
7. A proposed definition of the Modified Cash Basis
Michael Parry
8. The Four Dimensions of Public Financial Management
Michael Parry
9. Recent Public Financial Management Publications and other Resources
Andy Wynne

The world appears as a set of contradictions. High levels of government spending have prevented, for the present at least, a full-scale economic decline. But it is not clear that economic revival will be achieved soon nor the jobs and real economic growth which are needed to eradicate the poverty that still scars the globe. There are also contradictions over government spending. So, for example, whilst the US, UK and other governments face large scale opposition to their military interventions, it is social spending which is still questioned by many of their legislators. Barak Obama faced sustained opposition to the introduction of health reforms which will eventually give access to modern health-care to around 30million Americans. In the UK strikes are threatened in universities and the public service as a reaction to reduced spending whilst the government appears powerless to prevent the continued payments of bonuses to directors, even in banks which have been taken into public ownership. In addition, both the main parties in Britain are promising significant reductions in public spending to bring government debt down to a ‘sustainable’ level.

Greece appears to be the test case, with a series of general strikes in opposition to the draconian public spending cuts aiming to reduce the level of the government’s budget deficit. It is ironic that it was the toxic debts of the banks that led to the credit crunch and the resulting world recession. However, it is these same financial institutions who are now determining whether government debt, arising from the need to save their own banking and financial sector, is sustainable.

In this situation it is to be hoped that public sector financial managers and auditors will gain greater self-confidence. After two or three decades of criticism of so called public sector inefficiency and exhortations for the public sector to adopt private sector approaches, the experience of the global recession should lead to some serious re-thinking – a process which this Journal is attempting to play an active role.

The first paper of this issue, by Petri Vehmanen of the University of Tampere, Finland provides an insightful critique of the draft conceptual framework recently issued by the International Public Sector Accounting Standard Board. Petri observes that whilst the prime aim of private sector financial statements is to provide information for investors to make decisions about the entity, the prime purpose of public sector financial statements is to enhance accountability. This should be recognised and would result in the definitions of such prime elements as assets and liabilities being revised. His paper also recasts the qualitative characteristics of public sector financial statements. Petri concludes by saying that his proposals “are by no means radical”. However, they do provide a comprehensive and damming critique of the work of the International Public Sector Accounting Standard Board and so it is re-assuring that so few countries have yet to adopt their approaches to accrual accounting or indeed the cash basis of accounting.

Our second paper is a further part of the series of articles in which Norvald Monsen has outlined a uniquely public sector approach to accounting and book keeping – cameral accounting. This was developed in German speaking counties and, until now, has remained largely unknown to English readers. Norvald provides an overview of the main tasks of traditional public sector accounting, followed by a detailed exposition of administrative cameralistics, focusing on the closing of the accounts and budgetary comparisons. A commentary section then explains how the four tasks of traditional public sector accounting are taken care of within cameral accounting. This is finally compared with both traditional commercial accounting and the new public sector accounting outlined in the International Public Sector Accounting Standards.

The next paper, by Hany H. Makhlouf, provides a useful introduction and overview of sovereign wealth funds. These funds managed by 23 countries, mainly those with significant income from natural resources, for example, oil, have been of increasing interest in recent years and are expected to grow in the future if, as expected the price of crude oil triples in price over the next 20 years. However, the global economic meltdown had a major impact on their success and led many to a re-think of their strategic approach.

Our next two papers consider two aspects of public sector audit. The first by Hussein Mohamed El-Nafabi considers the issue of corruption in Sudan and the important role of the Auditor General in the fight against it. The objective of this study is to address the perverse incentives for financial corruption and try to provide practical solutions. It is recognised that, as in many countries, financial corruption is deeply rooted and institutionalized and the fight against it is likely to be long and difficult. However, the paper ends with a series of recommendations to assist with this struggle.

In the next paper, Andy Wynne considers the key issue of independence for supreme audit institutions (auditors general in English speaking countries). Models of public sector ‘external’ audit type institutions are described for English and French speaking African countries. Neither approach can claim to fully meet international standards for independence, but different approaches to the provision of audit type services are considered to be acceptable. This emphasises the need to understand existing systems before external models are adopted as part of a reform process.

In the next paper Hassan A. G. Ouda returns to the issue of the introduction of accrual accounting. He describes a comprehensive model of the transition framework that aims at explaining the whole reform process including all relevant factors. The model takes into consideration the fact that the transition to accrual accounting is a major cultural, administrative and technical change and, in order to successfully be adopted, must take place in phases with a clear plan of progress established from the outset. However, the challenge of demonstrating the actual (as opposed to the assumed) benefits of moving to accrual accounting is not taken up in this paper.

In two relatively short articles, Michael Parry first proposes a definition of the modified cash basis of accounting and then describes the four dimensions of public financial management. We welcome this approach of relatively short articles addressing key issues in governmental financial management and would encourage other authors to follow Michael’s example in future issues.

As initiated in our last issue, we end this issue with a section introducing recent public financial management publications and other resources which we hope will be of interest to readers of the Journal. We would be pleased to receive reviews and suggestions of other resources which we should refer to in future issues.

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If you would like to continue the debates raised in this issue please start thinking about contributions for the next issue of this Journal, the ICGFM blog or attend future ICGFM events. We look forward to hearing from you!

Andy Wynne Doug Hadden Jim Ebbitt
Editor Vice President: Communications President