EUROPEAN UNION countries have been told to get their public sector accounting in order by the ICAEW.
According to the ICAEW, many EU member states have not got the capacity or capability to implement international reporting standards.
The continued use of cash-based accounts is one of the greatest weaknesses of public sector finances, ICAEW says in its submission to Eurostat’s consultation on whether International Public Sector Accounting Standards (IPSAS) are suitable for adoption across the EU.
In cash accounting, transactions are recorded only when cash is received or paid out, whereas accruals accounting recognises transactions when they occur.
Martin Manuzi, regional director, ICAEW Europe, said: “We need financial reform in the public sector. However, many countries in the EU haven’t yet got the capability to implement international public sector accounting standards and must therefore focus on getting the basics right. Moving from cash to accruals accounting is a critical first step.”
Many EU governments still employ relatively few qualified finance professionals. Manuzi warned that attempting a move to any set of international standards could be “hugely difficult”.
“Education and further development of finance skills within the public sector therefore has to be a priority across the EU,” Manuzi said.
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