IFAC and CIPFA Issue Good Governance in the Public Sector—Consultation Draft for an International Framework
The public sector, including national, regional, and local governments and related governmental entities, plays a major role in society. In most economies, public expenditure forms a significant part of gross domestic product (GDP) and public sector entities are substantial employers and major capital market participants. The public sector determines, usually through a political process, the outcomes it wants to achieve and how it wants to achieve them. These include enacting legislation or regulations; delivering goods and services; redistributing income through mechanisms, such as taxation or social security payments; and the ownership of assets or entities, such as state-owned enterprises. Governments also play a role in promoting fairness, peace and order, and sound international relations.
Effective governance in the public sector leads to better decision making and the efficient use of resources, and strengthens accountability for the stewardship of those resources. Effective governance is characterized by robust scrutiny, which provides important pressures for improving public sector performance and tackling corruption. Effective governance can improve management, leading to more effective implementation of the chosen interventions, better service delivery, and, ultimately, better outcomes. People’s lives are thereby improved.
The International Federation of Accountants (IFAC) and the Chartered Institute of Public Finance and Accountancy (CIPFA) recently issued a Consultation Draft for an International Framework on good governance in the public sector. Good Governance in the Public Sector follows an initial review of relevant governance literature and includes input from public sector governance experts.1
This proposed Framework will be important to public sector entities, and their stakeholders, who want to improve their governance at all levels across the globe. It offers a set of core principles for good governance in public sector entities, supplemented by practical implementation guidance.
The proposed Framework is not intended to replace national and sectoral public sector governance codes. Instead, it was designed as a reference for those who develop and set national governance codes for the public sector when updating and reviewing their own codes. Where codes and guidance do not exist, the Framework provides a shared understanding of what constitutes good governance in the public sector and a powerful stimulus for positive action.
Definition and Key Principles
In the Framework, governance is defined as the arrangements, including political, economic, social, environmental, administrative, legal, and other arrangements, put in place to ensure that the intended outcomes for stakeholders are defined and achieved.
The Framework says the function of good governance in the public sector is to ensure that entities act in the public interest at all times, which requires:
A. Strong commitment to integrity, ethical values, and the rule of law; and
B. Openness and comprehensive stakeholder engagement.
In addition to the requirements for acting in the public interest, achieving good governance in the public sector also requires:
C. Defining outcomes in terms of sustainable economic, social, and environmental benefits;
D. Determining the interventions necessary to optimize the achievement of intended outcomes;
E. Developing the capacity of the entity, including the capability of its leadership and the individuals within it;
F. Managing risks and performance through robust internal control and strong public financial management; and
G. Implementing good practices in transparency and reporting to deliver effective accountability.
These core principles for good governance in the public sector are high level and bring together a number of concepts.
Practical Guidance for Implementation
The Framework takes each of the principles and provides an explanation of the underlying rationale, together with supporting commentary for each of the key elements of that principle and supporting sub-principles. Each principle is followed by practical examples and evaluation questions for entities to consider in assessing how they live up to the Framework as well as in developing action plans to make necessary improvements.
The Framework also includes a limited list of relevant resources from CIPFA, IFAC, IFAC member bodies, and other relevant organizations. To access the Consultation Draft and submit a comment, visit the Publications and Resources section of the IFAC website at www.ifac.org. Comments on the consultation draft are requested by September 17, 2013.
An overview of how the proposed International Framework maps to this literature is available on the IFAC website. Members of the International Reference Group are listed Good Governance in the Public Sector.