I will just take a few minutes to summarize the past two daysIt has been two days of strong speakers and lively discussion, and I am confident that we are on a good path forward. I also want to thank our sponsors, who supported this worthwhile event. And our presenters, who contributed to a great exchange of ideas.
We envision this seminaras the beginning of an international conversation. Ultimately, we hope that this conversation will prompt meaningful reform—meaningful transformation—including the convergence to one set of international standards. Our sincere hope is the path that we are on will ultimately lead to resolution, enhanced transparency and accountability on the part of public sector entities around the world, long-term fiscal sustainability, and the avoidance of new fiscal crises.But along this path—as part of this international conversation—we need activities to prompt reform. So let me tell you what I have heard over the past two days.
We heard about the need for fiscal responsibility and fiscal governance. About the need for leadership. About the need to work together on this issue. And about the need to change the rules of the game and accomplish real institutional change.We heard about the benefits of IPSASs—almost nothing about the disadvantages—but a lot about the challenges we need to overcome. I think we all are convinced of how better public sector accounting will lead to better decision making and the ability to avoid future financial crises. As David Walker said, we are clearly at a crossroads. And the accountancy profession is on the front lines. We have an opportunity to make a difference.Politicians have a short-term focus, and are always thinking—or should I say many of them are thinking—about the next election. They are not necessarily taking a long term view, and doing what’s right.And as we heard from Jim Turley, rules create incentives that drive behavior, and today's governments are incentivized to mortgage our long term futures for short term benefit.Governments want to set their own reporting standards, not simply adopt international standards.Citizens are often apathetic. Many of them lack of awareness of these issues—although the current crises have made them more aware.Staff is not trained in accrual accounting or IPSAS. And finally, change is never easy. In this case—as Göran Persson said, “It’s not so difficult to realize what to do. It’s difficult to do it.” It is a big, complextransformation, and can be quite daunting. But it IS doable.Let’s not let these excuses become barriers to change. Surely similar things existed after the Enron crisis, and yet private sector reforms were implemented.
But we also heard some good news—success stories of countries that have completed the transition to IPSAS and/or accrual accounting. And we heard how, as a result of their efforts, they now have improved transparency and more openness.Gerhard Steger told us how taking a staged approach can work. And that training staff can be quite effective and, in fact, have a snowball effect.These countries now have the tools to make better decisions, based on the needs of their citizens, and there has been a shift in political behavior and public discussion. They have reduced sovereign debt to prudent levels and, as Ruth Richardson noted, have a way to “keep the bastards honest.”We also heard case studies about the countries that have not fared as well. One outcome of this conference may be that we prepare written or video case studies to share these stories with governments and politicians.
We also heard that investors no longer see government debt as a safe haven. Going forward, they are likely to be more demanding, and to insist on audited, accrual-based financial statements.And citizens—who are, in effect, shareholders of government—have an awareness now that they didn’t have before. This awareness is an asset and, as Jan Sturesson pointed out, we shouldn’t waste it.In addition, we’ve seen a generational shift. The new generation is rooted in social media and transparency. They will not stand for the old ways much longer.And, as Jane Scott Paul mentioned today, credit rating agencies are another leverage point we may have.
So what is our agenda going forward?First, we must ensure that the IPSASB has—and is perceived to have—strong governance and legitimacy, as well as financial and operational stability.In order to do so we must have public interest oversight of IPSASB and I ask for your support to urge the Monitoring Group to take this responsibility as they have done for the IAASB, the IESBA and the IAESB.And we need broader engagement in funding of the IPSASB – IFAC along with a few governments and the World Bank cannot do this alone.We must reach out to critics. Ensure them that the IPSASB is indeed an independent standard-setting board. And, we must continue to respond to users’ needs – for example on long-term fiscal sustainability and social security benefits.
We must position the IPSASs and accrual accounting as keys to the truth, openness, transparency, and accountability.As a problem solving tool; as a tool for making better decisions.And we must assure governments that they can take a staged approach—as long as they keep the end in mind, and keep the momentum going. And that it is the big picture that is important.
In terms of international organizations, we must urge the necessary changes.I am particularly encouraged during these two days to hear about the willingness of the 6 big firms to get together on these issues.However, there are things others can do. For example:Ian Ball encouraged the Financial Stability Board to consider the institutional changes necessary.Vincenzo La Via call for a supranational regulator to oversee all government reporting.Yoseph Asmelash, from the audience, called for more frequent, available events such as this one.And IFAC will certainly plan on having some communications generated by this Seminar, including posting videos and presentations on our website.And, I, for one, encourage all of you to react and respond to the Eurostat consultation.
The bottom line, I think, in what we heard, is that we need to get buy-in from politicians, governments, and ministers of finance.How do we go about this? How do we reachthem? That is the big question.One thing we heard is that we need to all work together. We need to work more closely with auditors general, through Intosai. And we need to work through the rating agencies, the investment community, and citizens.It’s clear that nations may see adopting international standards as a threat to their sovereignty.But, as Vincenzo La Via said, they can look at them the same way they look at international treaties… the public sector isn’t so different.And, as Göran Persson said, the cost of inaction could actually be the loss of sovereignty.And he also said that we need to while there is awareness of the crisis. Otherwise political interest and institutional barriers and the existing “machine” will block the way. This was supported later in the agenda by Jim Turley, David Walker, and others.We have to refine our messages, and communicate the benefits of different aspects to each area – not necessarily the whole package every time. We need to communicate that the long term benefits are worth the short term challenges, as seen in New Zealand.We also heard about the importance of bipartisanship, from more than one speaker.
As Ian said yesterday, the real work begins after this seminar concludes. And so we are asking everyone here—all of you, who care as deeply about this issue as we do—to commit to speaking out for reform.Thank you.
IFAC President, Göran Tidström IFAC Sovereign Debt Seminar
Closing RemarksGöran TidströmIFAC PresidentThe Sovereign Debt Crisis, aMatter of Urgency – fromLessons to ReformVienna AustriaMarch 20, 2012 Page 1 | Confidential and Proprietary Information
The Road to Recovery andLong-Term Fiscal Sustainability Outreach, Today’s communication, Seminar education, etc. Plan activities More effective, efficient governments Page 2 | Confidential and Proprietary Information
Challenges to Overcome• Politicians are election-minded• Governments’ sovereign focus• Citizens’ apathy• Staff training• Change is not easy Page 3 | Confidential and Proprietary Information
Success Stories• New Zealand• Chile• Spain• Austria• Sweden• Australia Page 4 | Confidential and Proprietary Information
Key Leverage Points• Investors – Government debt is not a safe haven – Need credibility financial reporting• Citizens – Citizen-shareholders – Crisis has brought awareness – Generational shift: social media, transparency• Credit rating agencies Page 5 | Confidential and Proprietary Information
Go-Forward Agenda:IPSASB• Governance and legitimacy• Financial and operational stability• Reach out to critics• Continue to respond to users’ needs – Guidance on reporting on long-term fiscal sustainability – Consider impact of and accounting for social security benefits Page 6 | Confidential and Proprietary Information
Go-Forward Agenda:IPSASs and Accrual Accounting Positioning• Truth, openness, and transparency• Tool• Staged approach• Focus on big picture Page 7 | Confidential and Proprietary Information
Go-Forward Agenda:International Organizations• FSB• Supranational regulator• More meetings like this one• Communications out of this event Page 8 | Confidential and Proprietary Information
Go-Forward Agenda:Buy-in from Politicians• How do we reach them?• Work together• Sovereignty• Capitalize on the crisis• Refine messages• Bipartisanship Page 9 | Confidential and Proprietary Information
Go-Forward Agenda• What did I miss?• What will you do? Page 10 | Confidential and Proprietary Information
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