1. cipfa.org.uk Improving PFM The need for a Global PFM profession Alan Edwards, International Director, CIPFA

2. cipfa.org.uk 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?

3. cipfa.org.uk  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 …

4. cipfa.org.uk 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

5. cipfa.org.uk 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 world The Texan investor who made a fortune in the sub- prime chaos. Now gambling big money on the collapse of entire countries

6. cipfa.org.uk 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.

7. cipfa.org.uk International standards are revealing new information … First set of Whole of Government Accounts shows pension liabilities of £1 trillion Landmark 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 in the 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 of International Financial Standards. Public Finance July 2011

8. cipfa.org.uk New analysis suggests we all have PFM issues to address …

9. cipfa.org.uk  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

10. cipfa.org.uk  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

11. cipfa.org.uk 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

12. cipfa.org.uk 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

13. cipfa.org.uk 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 quality Sustainable organisation and genuine capacity development

14. cipfa.org.uk 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

15. cipfa.org.uk 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

16. cipfa.org.uk CIPFA’s experience of professionalisation… South Africa Lesotho Egypt Tanzania Eastern Europe Canada Australia New Zealand Nigeria Different approaches different results

17. cipfa.org.uk 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

18. cipfa.org.uk a global PFM profession … Global PFM Certificate and Diploma Global PFM Professional and Strategic Qualifications Advanced PFM Certificate CPD

19. cipfa.org.uk 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

20. cipfa.org.uk Scope of the Nigerian programme… joint qualification capacity development plan quality assurance system business strategy & plan Aim to train 2,000 Federal level staff within 5 years

21. cipfa.org.uk 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

22. cipfa.org.uk Meanwhile pressure for change continues to mount…

23. cipfa.org.uk improving PFM The need for a global PFM profession Alan Edwards International Director CIPFA alan.edwards@cipfa.org.uk Tel +44 207 543 5690