December 1, 2000
This is a comprehensive 30-page overview of the financial management reforms introduced in New Zealand. Learn about the most advanced public sector financial management system in the world - the adoption of accrual accounting and budgeting; introduction of a capital charge and decentralized authority by departments to buy and sell assets; output-based management and budgeting; and devolution of financial decision making to departments coupled with increased accountability. this high performance system replaced the centralized, input-focussed, limited accountability model that remains the standard in Canada.
Reforming Financial Management In The Public Sector
Ian Ball, Tony Dale, William D. Eggers, and John Sacco
In governments across the world, public-sector financial systems are being transformed more fundamentally than at any time in decades. The changes taking place-in governments from Wellington, New Zealand to London, England-respond to a number of deficiencies of government accounting and financial-management systems, specifically,
Moreover, an important consideration for fiscal policy is intergenerational fairness. By allowing governments to hide both their liabilities and the real state of their finances, traditional government financial reporting enables governments to pass off present costs to future generations.
These problems can be addressed by moving from traditional financial management systems in government based on modified cash accounting (officially called modified accrual) to the business model of accrual accounting.
In Canada, our governments are also inching towards more useful financial and accounting systems. They could find no better model for how to get from traditional to new practices than that in New Zealand. It has moved further than any other government in the world in revamping its financial management, accounting and budgeting systems.
New Zealand's reforms have four main features:
Together, these reforms have had a dramatic impact on the New Zealand public sector. Thanks in part to these reforms, the quality of financial information has vastly improved, efficiency has increased, assets are managed more proactively, accountability is stronger, and public disclosure of information has improved immensely.
For policymakers embarking on overhauling and modernizing their financial management and accounting systems, the highly acclaimed New Zealand reforms offer powerful lessons. This study concludes with seven strategic lessons on financial-management reform for our own policymakers.
Full Text of Policy Series No. 6 - (PDF, 38 pgs, 218 Kb)
The Frontier Centre for Public Policy
is an independent public policy think tank whose mission is "to broaden the debate on our future through public policy research and education and to explore positive changes within our public institutions that support economic growth and opportunity."