Post-Covid Fiscal Management.

In the post-Covid world, government balance sheets are getting bigger as their fiscal positions weaken. The combination of governments being larger players in the economy and their fragile fiscal positions makes it even more important that their finances are well managed.

Better decisions

There are two ways in particular that government financial management needs to be improved. First, financial management systems need to produce a more comprehensive information set that enables them to make better decisions. With the complexity of modern governments’ financial activities, this necessitates the use of accrual accounting as the basis for the whole budgetary and reporting system.

Better Asset Management

Second, the comprehensive information available with accrual accounting enables a step change in balance sheet management. A balance sheet approach to financial management means, first, a focus on net worth rather than debt as the key indicator of fiscal position, and second, the use of the additional information to achieve better asset management.

Ian Ball, the architect of the New Zealand financial reforms