28 May 2020 — Publication

Coronacrisis: actions for the public sector

Coronacrisis: actions for the public sector

The coronavirus crisis has resulted in the most rapid deployment of government financial resources outside of major wars. Most governments have produced  support programmes with admirable speed.

Here we provide ideas on how the public sector can counter the crisis’ impact on the short-term and long-term.

Short-Term Actions

We explore the short-term actions in detail here; our key takeaways are:

  • Controls over public sector expenditure have been necessarily relaxed. It is essential that governments are transparent as to the amount of funds received by beneficiaries and that such payments are retrospectively audited to ensure they have been correctly used
  • Public sector entity reporting and auditing requirements may need to be temporarily relaxed in certain circumstances. But transparency is important, and they should report what truly matters
  • Central governments should urgently provide guidance for public sector entities on reporting of going concern, post balance sheet events and management commentary

 Long-Term Actions

We explore the long-term actions in detail here; our key takeaways are:

  • Public sector balance sheets will be more important than ever with public sector assets and liabilities set to balloon. Taxpayers’ money has been used to provide grants or loans, which must be carefully managed to ensure value for money and that monies lent will be repaid
  • Policymakers need to ensure that they have enough resilience to cope with the upcoming economic turmoil – which could be recession or even depression. Higher inflation is more likely (depending on central bank policies) and so stress testing of government borrowing will be paramount. The government guarantees to the private sector could be expensive should the level of company defaults/insolvencies be high
  • Post coronavirus crisis, the public sector finances will need to be restored and economies will need a kick-start. The public need to be on board for the hard decisions to be made – for example, higher taxation, more spending on health care and infrastructure. Robust accruals-based accounts provide the foundation necessary for forward looking estimates and economic models. They also improve the quality of statistics
  • Governments will need record levels of borrowing, much of it from open markets and investors will want to see reliable, internationally comparable and timely information. Adopting internationally recognised public sector accounting standards would provide such foundations
  • Governments should review, update and enhance
    • risk management procedures and action plans to minimise exposure to unpredictable threats and better manage contingent liabilities
    • public sector IT infrastructure to facilitate remote working by employees and remote access by citizens

It will not be, and should not be, business as usual once the crisis of over. Governments should seize the opportunity to drive forward programmes that support sustainability, social equality and long-term fiscal resilience.

Improve the public sector for a better future

The coronavirus crisis has had a negative short-term impact on dealing with other pressing issues such as climate change and poverty, thereby hindering  implementing the Paris Agreement  and the Sustainable Development Goals.

Many lessons can be learned from the coronavirus crisis that can apply to dealing with other crises. The aftermath of this crisis provides a unique opportunity to build a better system, putting people first and transforming to more resilient and sustainable economies.

The public sector has a unique role to play in this, with direct and indirect powers to promote and developing, for example:

  • building renovation for modern working practices and for lower emissions
  • renewable energy
  • green transport systems
  • circular economy
  • clean public infrastructure that is climate change-proof

This implications that the coronavirus crisis has had on other sustainability issues are further explored in our publication Corona crisis: lessons for a more sustainable future (May 2020).

The IPSASB has also published a Staff Questions and Answers addressing how its Standards and Recommended Practice Guidelines can be used to address climate change issues and support delivery of the UN’s SDGs.