Governments around the world are increasingly taking steps to improve their accounting and achieve greater transparency – amidst growing recognition that the accounting framework traditionally used by the public sector isn’t fit for the 21st century.

A PricewaterhouseCoppers survey covering 100 countries reveals that while only 24 per cent of governments currently use ‘accrual accounting’, 37 per cent plan to move to this form of accounting in the next five years, bringing the total adoption rate to 63 per cent of governments surveyed and representing an increase of 142 per cent.

The survey data was collected over a 12-month period ending last March, via interviews conducted in-person and by telephone, or via an online survey questionnaire. Malta is one of the countries included in the survey.

The majority of governments today still rely on ‘cash accounting’, which has been the primary method used by the public sector for many years. This form of accounting – which is based on cash payments and receipts being recorded as they occur – fails to capture information on public sector assets and liabilities and therefore presents a very short-term view of public finances.

Jan Sturesson, PwC Global leader, Government and Public Services, said:

“It is important that governments – which regulate accounting in the private sector – lead by example and have a high standard in their accounting system. This is not the situation today, but we see great interest in seeking improvement.”

In accrual accounting, transactions and economic events are recorded and reported when they happen, regardless of when cash transactions occur – resulting in a comprehensive view of a government’s assets and liabilities, and of its financial performance and cashflows. IPSAS (International Public Sector Accounting Standards) are often taken as a reference point.

Public sector financial statements should reflect the full economic impact of political decisions – and this can only be fully achieved by applying accrual accounting. By doing this, governments demonstrate their commitment to achieving greater transparency and accountability, and also to producing better information for decision-making – which in turn should lead to the better use of public resources.

Anna Camilleri, senior manager, PwC Malta Public Sector Practice, said: “Malta is one of the countries that plans to improve its public accounting practices in the coming years, to instil better transparency in financial reporting and enhance fiscal discipline. The move from cash to accrual based accounting on the adoption of IPSAS, as part of a wider government accounting and public financial management reform, will enable the Government of Malta to achieve this goal.”