Date posted: 29/07/2019 3 min read

Accountants play leading role in public sector reforms

The Public Finance Act cleared the way for the production of high quality and trusted information.

In Brief

  • Conference marks 30th anniversary of Public Finance Act and its pioneering reforms of financial management in the public sector
  • CA ANZ President Stephen Walker FCA tell the conference that accounting, the accountancy profession and individual accountants played key roles
  • He calls for more support for the development of public sector accountancy and the sector’s finance workforce

Thirty-year-old public sector reforms in New Zealand – still regarded internationally as leading edge – relied on quality and credible information provided by members of the accountancy profession, says Chartered Accountants Australia and New Zealand President Stephen Walker FCA.

Speaking at a conference marking 30 years since the passing of the Public Finance Act, he said the legislation cleared the way for the production of high quality and trusted information.

"That information, supported improved decision-making, transparency, accountability and assessment of public sector performance."

Accounting, the accountancy profession and individual accountants also played key roles in supporting the reforms and their implementation, Walker told many of the architects of the Act attending the conference, including former Ministers of Finance Sir Roger Douglas, Ruth Richardson and David Caygill, and Ian Ball FCA, now Professor of Public Financial Management, Victoria University of Wellington. The university hosted the conference and Chartered Accountants Australia and New Zealand was a sponsor.

"One of the biggest issues the public sector and public entities face is ready access to sufficient capacity and capability in the areas where professional accountants play a vital role."
President Stephen Walker FCA

The Public Finance Act's introduction in 1989 represented a radical shift for public sector accountants, moving government accounts from cash to accrual accounting and introducing reporting on the delivery of public services. Under the previous cash regime, public money was appropriated for activities without a link to what the activities were intended to achieve.

Parliament and ministers had no way of knowing whether they were getting value for money from public service. At the same time, public sector managers had no reliable means of knowing whether they were delivering value for money.

Risky and ambitious

Walker described the Act as "world leading, risky, ambitious … and just the start in terms of effective change".

He said the new regime redefined responsibilities with ministers responsible for outcomes and chief executives responsible for outputs. This ensured a stronger link between Parliamentary appropriations and agency performance, provided greater flexibility and transparency for decision-making, and lifted the focus of accountability.

"One of many side benefits was the increased focus on strategic financial management in the public sector and the broader role given to CFOs and their teams. That continues to be a strength of our system."

"Without those reforms 30 years ago, it's unlikely that we would have seen the passing of the world's first Wellbeing Budget a couple of months ago, nor would we have seen many of the decisions made by successive governments over the last 30 years."

He said the ultimate prize was then, and still is, "to lift social, economic and cultural well-being. I equally think the reforms were necessary to build something perhaps even less tangible, but equally as important…trust and confidence in Government."

"Ironically, without the reforms, I like many others wouldn't have had the careers they have had, or be standing in front of you today."

Despite the New Zealand reforms taking place 30 years ago, around the world today, only a quarter of governments report on an accrual basis. Although that proportion is expected to significantly increase over the next five years.

One of the consequences of the reforms was a rapid growth in the accounting workforce in the NZ public sector, including tapping into the private sector and developing those already in the public sector. Between 1989/90 and 1994/95 there was a near 50 percent increase in the number of CA ANZ members working in the public sector.

The Public Finance Act resulted in a dramatic need to upskill the accountancy profession in its areas of strength, including financial management, budgeting, reporting, internal controls, management accounting and costing, and internal and external auditing.

However, now "One of the biggest issues the public sector and public entities face is ready access to sufficient capacity and capability in the areas where professional accountants play a vital role".

Walker said he believed larger public entities needed to work together to be doing more to support the development of public sector accountancy and the sector's finance workforce generally.

The accountancy profession, he said "plays a vital role within the public sector system and was a critical interface between the public sector and New Zealand business and society".

Act has proved its worth in good times and bad

Ian Ball FCA says that when the Public Finance Act was passed in 1989, it represented a set of changes that was both radical and untested.

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Both sides now

The Act drew accountants and auditors to the public sector. MBIE CFO Stewart McRobie CA compares what it’s like to work in New Zealand’s public and private sectors.

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