We specialize in a number of technical practices designed to help governments and other stakeholders in their efforts. The areas we focus on are described here.
State-owned enterprises (SOEs) are significant players in many countries around the world, providing sizeable contributions to GDP, creating jobs, and supplying essential services to citizens, such as light and power, healthcare, water, transportation and education. As a result, the performance of SOEs has a direct impact on the social, political, and economic development of a country and on people’s everyday lives. Economies with inadequate governance and low accountability of SOEs tend to face poor delivery of essential public services, stifled competitiveness and restricted economic growth, as well increased opportunities for political patronage and corruption. One of the key challenges that countries are facing in building effective state ownership is to ensure proper governance and transparency of SOEs.
Transparency and disclosure are vital to holding SOEs accountable for their performance, an important issue for the public and the private sector: SOEs can deliver on their mandates while contributing to the economy via dividends and taxes when they perform well. Reliable financial information is essential for establishing the accountability mechanisms, allowing well-informed decision making on the part of management, board of directors, government acting as shareholder, potential and current investors and lenders, as well as civil society and citizens, as ultimate owners of SOEs.
CFRR team is working with the client-governments in implementing robust frameworks for accounting, reporting, and auditing of SOEs - as well as an oversight mechanism for these – to progress towards well-governed, transparent, and accountable SOEs, contributing in a positive way to the economy and society.
An expanding and vibrant SME sector is often a vital ingredient for sustained success in economic and social development for emerging economies. SMEs need to overcome common impediments on their path to improved performance and growth. For example, SMEs are often unable to access the additional financial capital and relevant skills they need to grow their businesses. Furthermore, they are often disproportionately burdened by new regulation. The CFRR works with Professional Accounting Organizations (PAOs) to build their capacity to support their members that provide core accounting and auditing and business advisory services to SMEs and to improve the awareness and role of the accounting profession in an active business support ecosystem. The CFRR, in collaboration with PAOs and others, may also work directly with professional accountants and small and medium-sized practices (SMPs) to improve their skills to comply with new SME financial reporting and auditing requirements and to provide SME financial management and business advisory services.
Producing high quality financial information is supported by sound accountancy education systems that develop and improve the competence of professional accountants and contribute to enhanced public trust and confidence in the quality of their work. The CFRR supports the implementation of International Education Standards and works with recognized international institutions and education providers to advance client countries education reforms. The CFRR has unique experience in tailoring accountancy educational and capacity-building activities in developing and transitional economies and alongside capacity building, CFRR technical experts provide diagnostics and technical assistance in implementing educational reforms, develop education tools and resources and raise awareness through publications and outreach.
External auditing plays a key role in assuring that financial reporting is reliable and trusted. However, an international consensus has developed that the auditing profession cannot regulate itself. Independent monitoring and oversight is needed. The CFRR offers experts with a deep grounding in best practices in audit oversight and quality assurance to address this need in client countries, including former senior ranking officials from leading audit oversight boards and professional accountancy organizations. We offer technical advice and build capacity in the areas of legislation, regulations, and standards governing external audit; board composition, structure, funding, and functions of audit oversight; and training, tools, templates and manuals to implement effective inspections and quality assurance for external auditors, among other areas. Our work is informed by unparalleled experience in addressing the particular challenges of implementing audit oversight and quality assurance in emerging and transitional markets.
Banks, because of their central role in operating the payment system and in managing customers’ income and savings, have always been subject to stricter financial reporting rules than other companies. The 2008 financial crisis highlighted severe weaknesses in the risk management, control and governance processes of the banks as well as in their statutory audit and financial supervision. This led to increased scrutiny of the respective roles in interaction of banking supervisors and external auditors as well as a review of the reporting obligation of the banks, and the necessity for those to have a stronger capital base. As banks and more generally financial sector companies are an essential engine of growth for developing economies in Europe, and also may carry risks impacting their financial stability, they must be effectively supervised. The CFRR helps supervisors to better understand the importance of financial reporting and how to leverage the auditors’ work. It also train supervisors on new accounting standards, that is recently published International Financial Reporting Standards, including IFRS 9 on financial instruments and others.
The CFRR supports the implementation of public sector accounting and auditing frameworks that are in line with international standards and international good practices, and furthers capacity building efforts in both these areas. The Center assists governments in designing realistic roadmaps to transition to full accrual accounting, often as part of broader public financial management reforms, taking into account constraints in participating countries’ human resource and IT infrastructure. Alongside technical assistance, we aim to build awareness among a wide range of stakeholders of the benefits of improved government financial reporting and effective auditing of public finances, which include improved public sector governance, reduced fiscal risk, and greater accountability and transparency of public sector entities.
Good governance is central to strong economic growth. Continued growth deceleration in emerging and developing economies, coupled with a decreasing trend in foreign resource inflows from developed economies, creates an increased need for governments to better control public resources to achieve effective service delivery. Enhanced budget accountability and control, transparency of public finances and effective management of assets and liabilities can only be achieved through accurate and reliable financial accounting and reporting which lends itself to external audit and scrutiny, and comparison of actual revenues and expenditures with approved budgets. Modern accrual based systems of accounting and financial reporting enable these efforts by capturing all present and future economic benefits and obligations and providing information about estimates, uncertainties, and significant assumptions underlying the financial information that would otherwise not be captured under cash based systems. These elements are key inputs in planning future service delivery and limiting the economic burden on future generations.
Sustainability Reporting involves the systematic measurement, disclosure, and communication of an organization's environmental, social, and governance (ESG) performance. It provides transparency and accountability to stakeholders, including investors, customers, employees, and the public, about a organization's sustainability practices and impacts. Sustainability reporting is important for all types of organizations, regardless of their ownership structure or industry, including both private and public sectors as it helps to drive sustainable development by promoting responsible business practices, identifying areas for improvement, and fostering trust and credibility. Through this initiative, the CFRR seeks to encourage governments and organizations to integrate sustainability considerations into their decision-making processes and enhance accountability to stakeholders. The CFRR also provides guidance to governments on establishing institutional and regulatory frameworks for sustainability reporting and the assurance of sustainability reporting in line with the requirements of EU legislation, particularly for EU candidate countries, as well as with good international practices and international sustainability standards. The aim is to develop the institutional and technical capacity necessary to effectively implement these frameworks, both for corporations and the public sector. By offering guidance, resources, and promoting good international practices, the CFRR aims to foster a culture of sustainability reporting that contributes to the overall financial reporting reform agenda and promotes collaboration between the public and private sectors in achieving sustainable development goal.
Professional accountants are important agents of change, contributing significantly to effective implementation of financial reporting and auditing reform and helping businesses meet their objectives through the provision of relevant business advisory and consulting services. Professional Accounting Organizations (PAOs), to which professional accountants belong, help their membership through ongoing training, guidance and tools aimed to maintain their professional competence. PAOs also provide authorities, such as audit Public Oversight Bodies (POBs), with potential partners in regulation. For example, the performance of quality assurance reviews of non-Public Interest Entities is performed in many countries by the PAO under the POB’s supervision rather than by the POB. PAO’s also undertake other important functions such as; promoting the adoption and implementation of international accounting, auditing and ethical standards, investigating and where necessary disciplining members not meeting professional obligations and overseeing the recruitment of new entrants into the profession to ensure a talent pipeline sufficient to undertake its important role in society on an ongoing basis.