The Ministry of Finance collaborated closely with the World Bank to prepare and issue public sector accounting standards

The Ministry of Finance collaborated closely with the World Bank to prepare and issue public sector accounting standards 10/06/2019 03:47:00 594

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The subproject on preparation and adoption of Vietnam’s public sector accounting standards is part of the Vietnam Public Financial Management (PFM) Analytical and Advisory Assistance (AAA) Program 2016 - 2020. The AAA Program is co-financed by the Swiss State Secretariat for Economic Affairs (SECO) and the Global Affairs Canada (GAC) and entrusted through the World Bank (WB) with the aim to support Vietnam in its PFM reform at both national and subnational levels. Mr. Fily Sissoko - Manager, Governance Global Practice, East Asia region of the WB has kindly shared his thoughts on the adoption of public sector accounting standards and the benefits it brings to Vietnam with the Ministry of Finance’s Portal.

The subproject on preparation and adoption of Vietnam’s public sector accounting standards is part of the Vietnam Public Financial Management (PFM) Analytical and Advisory Assistance (AAA) Program 2016 - 2020. The AAA Program is co-financed by the Swiss State Secretariat for Economic Affairs (SECO) and the Global Affairs Canada (GAC) and entrusted through the World Bank (WB) with the aim to support Vietnam in its PFM reform at both national and subnational levels. Mr. Fily Sissoko - Manager, Governance Global Practice, East Asia region of the WB has kindly shared his thoughts on the adoption of public sector accounting standards and the benefits it brings to Vietnam with the Ministry of Finance’s Portal.

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Mr.Fily Sissoko – Manager, Governance Global Practice, East Asia of the WB

? Could you please enlighten us about the general development or change in the adoption of public sector accounting standards around the world?

Mr. Fily Sissoko: The switch-over to accrual accounting in the public sector is at a tipping point. 25% of the countries are currently publishing their accounts on an accrual basis. In 5 years, that number is expected to reach 65%. In East Asia, Indonesia, Malaysia, the Philippines, and Singapore have issued IPSAS-compliant public sector accounting standards. Policy makers, civil society organization, oversight institutions, institutional investors, rating agencies are increasingly demanding high quality public financial information. There is also a recognition that comprehensive balance sheet information is not captured under statistical and budget reporting frameworks, which have traditionally been used in public sector financial and fiscal analysis. This was confirmed in October 2018 in the IMF Fiscal Monitor that recognized that public sector balance sheets provide the most comprehensive picture of public wealth. By bringing together all the accumulated assets and liabilities that the government controls, balance sheets present the entirety of what the state owns and owes and therefore provide a more comprehensive fiscal picture on which to base decision making, beyond debt and deficits.

In collaboration with other development partners, the WB is working with the International Public Sector Accounting Standards Board (IPSASB) to support countries in their transition to IPSAS accrual accounting Standards.

? What are the values and benefits Vietnam will gain when adopting public sector accounting standards?

Mr. Fily Sissoko: We believe that the adoption of High-quality accounting standards such as accrual based IPSAS would be of great benefit to Vietnam for several reasons. Let me highlight two:

First, better decision making and fiscal risk management. Vietnam is a thriving middle-income economy, with impressive growth rates. The full transition to high-income status and market economy will require better decision making and management of fiscal risks, especially debt and contingent liabilities. High quality accounting standards will provide the tools and means to policy makers to have a comprehensive view of public wealth; the assets and liabilities at the national and subnational levels.

Second, it will increase transparency and accountability. We believe that high quality financial reports will help increase confidence from citizens and financial markets in public institutions. It could also help Vietnam’s plans to improve its sovereign credit rating. Empirical evidence around the world has shown that high quality financial information is taken into account by credit rating agencies and institutional investors. It also offers the opportunity for a more transparent and broader policy discussion how public wealth can be managed in more sustainable manner.

? Based on international best practices, what is your advice for Vietnam about adopting public sector accounting standards?

Mr. Fily Sissoko: Our experience in other countries shows that this is a long journey which requires strong political support and technical leadership to clarify the objectives of the reform, establish a dedicated reform team, manage the costs, develop an action plan for the transition (taking into consideration the maturity of the accounting system) and build capacity of government staff. Given the scale and ambition of the reform, we are therefore recommending a phased approach starting with less complex accounting standards. IPSAS 33, which applies to entities that adopt accrual basis IPSASs for the first time, is also a good framework to have some transitional exemptions and provisions that may impact the fair presentation of the financial statements. This provision gives first-time adopters three years to sufficiently develop reliable models for recognizing and measuring assets and liabilities during the transition period. Another important aspect to consider is the standard setting process. This would need to be strengthened and could eventually be opened to all relevant stakeholders, including the private sector.

? Could you please give more information on the support the WB has been providing to the Ministry of Finance in its endeavor to adopt public sector accounting standards.

Mr. Fily Sissoko: The Ministry of Finance has collaborated very closely with the WB during the preparation of the roadmap report and action plans to enable the issuance of the first ever public sector accounting standards in Vietnam. The WB, together with other development partners such as Swiss State Secretariat for Economic Affairs (SECO) and Global Affairs Canada, have been providing significant supports to the Ministry of Finance in Vietnam in building the capacity of government official in public sector accounting through training, workshops and providing technical supports though international and local consultancy services under the on-going comprehensive Public Financial Management Analytical and Advisory Assistance (AAA) Program period 2016-2020. This is very timely as a sound public financial reporting framework will support and develop high-quality public financial reporting in Vietnam with the first FY2018 consolidated whole of Government Financial Statements, to be issued in mid-2020. We are also very pleased to hear that the Ministry of Finance is starting the VPSAS issuance and implementation processes. This is truly a joint effort and we greatly appreciate the trust and partnership that we have developed not only with the Ministry of Finance but also with all other relevant stakeholders involved in these important reforms. We stand ready to provide further support as needed throughout the implementation.

Thank you!

WB