While the European elections have focused, in many countries, on immigration, little attention has been paid to an issue which has seen the European project facing an existential threat – the failure to establish sound fiscal fundamentals, including high quality fiscal information based on international standards for financial reporting and auditing.
Not all governments are equal, whether in the quality of the financial information they produce, the quality of their fiscal decisions, or their resulting fiscal condition. In the absence of good information, markets and voters have been, and remain in, a poor position to understand the real fiscal condition of member states.
The financial condition of many European governments prior to the crisis was already fragile, the subsequent bailouts have exacerbated the situation, leaving the Union facing significant financial risk.
Europe, and many member states, have yet to accept that high quality fiscal management relies on high quality financial information, which in turn requires accounting in line with international public sector accounting standards.
CIPFA remains concerned that even if there is recognition of the need for action, there is a risk that the reform process will be too slow and will result in accounting standards that do not meet the international benchmark.
CIPFA therefore reiterates the call it has made for urgent action, and advocates that the new Parliament and Commission move quickly to put in place accounting and auditing reforms that will enable citizen and investor confidence in the finances of European countries.
CIPFA Chief Executive, Rob Whiteman, has said:
“Despite the financial instability caused by the sovereign debt crisis, and the significant social and economic costs it generated, little action has been taken to address the issues which helped trigger the crisis – the quality of accounting and auditing by the Greek Government. Despite the success of the bailouts in calming the crisis, little or nothing has been done to improve the poor quality of public financial management in these areas, in either Greece or many other European countries.
“CIPFA therefore calls on the new Commission and Parliament to act urgently to prevent further crisis. Confidence in financial management by governments cannot be restored without significant improvements in accounting and auditing by many, or most, member states.”