Meeting report: Public accountability and democracy in times of crisis—the CIGAR Network 2023 conference

Introduction

The CIGAR Network’s biennial conference was held for the first time in Asia in June 2023 at Waseda University in Tokyo, Japan. The theme was ‘Public accountability and democracy in times of crisis’. This report is a brief summary of the main issues discussed—for the full list of presentations see program details: https://cigar2023tokyo.jp/conferenceprogram/

Today, the world is exposed to a variety of risks, both short and long term, which can have tremendous impacts on people and societies (World Economic Forum, 2023). The most recent of these are the Covid 19 pandemic and the Ukraine–Russia war, which began in 2022. Looking to Japan, we experienced a major crisis caused by the Great East Japan Earthquake in March 2011.

In times of crisis the public sector—central and local governments—must implement policies to protect those most affected by the crisis, often with limited budgets. Policies implemented by the government will generally be accompanied by large public spending, with the risks of triggering a crisis of fiscal sustainability.

Government spending during the Covid 19 pandemic increased in most countries (OECD, 2023). In Japan, the need to respond quickly to the crisis prevented the central government (the Diet) from fully debating budgets for various policies. This is a problem from the perspective of fiscal democracy. Therefore, the Board of Audit of Japan has conducted special audits for Covid 19 related government projects. Similar situations have occurred in other countries.

Furthermore, it has been pointed out that the Covid 19 pandemic has exacerbated the situations of poverty, and will likely lead, in many countries, to missing Sustainable Development Goals (SDGs) targets (World Bank, 2022; OECD, 2023). For example, climate change is now seen as a critical issue that will lead to a crisis for humanity. Therefore, in order to achieve the reduction of at least 2°C, set out in the Paris Agreement, countries have pledged to achieve net zero greenhouse gas emissions as a long-term goal. This requires a huge amount of investment and response costs for climate change mitigation and adaptation (for example OECD, 2017). The long-term fiscal sustainability of governments will continue to be a challenge, as it is expected that governments will have to keep spending a large amount of money on other issues.

While it is important for governments to address the environmental, social and governance sustainability challenges to their own activities as organizations themselves, governments are also in a position, as regulators, to promote the pursuit of sustainability for people and communities through policies and other means (IPSASB, 2022). In light of these characteristics, the IPSASB is moving toward standardization of sustainability reporting by governments.

To highlight these problems, CIGAR 2023 featured three thematic keynote speeches, 57 papers, and a standard setters’ session. This article outlines some of the points in the keynote speeches, focusing on fiscal sustainability and democracy, and on the state of public administration in times of crisis.

Fiscal sustainability and democracy in the public sector

This issue was particularly addressed in a speech given during the Opening Session by Mari Kobayashi, Chair of the CIGAR 2023 Organizing Committee. Public sector fiscal sustainability is addressed in Reporting on the long-term sustainability of an entity’s finances published by the IPSASB (2013). This reporting guideline defines financial sustainability as ‘the ability of an entity to meet service delivery and financial commitments both now and in the future’ (para. 9), and requires reporting that enables information users to assess the entities’ long-term financial sustainability, including the financial risks faced by public sector entities (IPSASB, 2013). It provides forward-looking information on revenue, debt and service provision based on scenarios that make various assumptions about future economic and geopolitical conditions.

In times of crisis, it is very difficult to accurately assess the long-term fiscal sustainability of governments, as future economic growth and geopolitical conditions are extremely difficult to predict and pose significant risks. For example the reconstruction from the Great East Japan Earthquake was budgeted at about 45 trillion yen from FY 2011 to FY 2020. Although the actual spending was about 38 trillion yen, this has had a significant negative impact on achieving fiscal sustainability. In addition, the government financed these budgets by introducing surtaxes for reconstruction funding and issuing reconstruction bonds, but the gap between budget measures and spending amounts can also be recognized as an issue (Board of Audit of Japan, 2023).

Furthermore, the Covid 19 pandemic necessitated such measures as medical care for infected patients and prevention such as vaccines, as well as dealing with economic issues—for example supply chain disruptions, bankruptcies, and unemployment as a result of the suspension of economic activities due to lockdowns. All this led many countries to increase their fiscal spending, resulting in higher government deficits and debt (Anessi-Pessina et al., 2020; Leoni et al., 2021). In Japan, for example, the Covid 19 emergency was addressed through vaccinations, subsidies to medical institutions, benefits to businesses, and other programmes, with 94 trillion yen budgeted for FY 2020–FY 2021 in the form of reserve funds and other expenditures not approved by the Diet (Board of Audit of Japan, 2022).

In addition, due to the global food and energy price increases caused by the Ukraine crisis, countries are taking further fiscal measures to support their citizens and businesses. In Japan, about 15 trillion yen were budgeted as a reserve fund in FY 2022 for measures against oil price increases and stable supply of food and raw materials (Cabinet Office, 2023). The Japanese central and local governments have already incurred in long-term debts excess of 1,200 trillion yen (Ministry of Finance, Japan, 2023), and it is clear that the road to realize sound fiscal status is not easy. In the UK, the Office for Budget Responsibility has been raising the alarm about the sustainability of public finances, and these crises are also contributing to a decline in revenue and a sharp increase in spending and debt (Heald & Hodges, 2020).

In his CIGAR 2023 keynote speech, ‘Sustainable public administration in times of turbulence governance’, Geert Bouckaert (Public Governance Institute, KU Leuven, Belgium) raised the issue of the nature of public administration in times of crisis as described above. In order to deal appropriately with the transformation of goals and objectives in the public sector during this crisis, he argues that the public sector needs to change the way it has been making decisions, change the content of its policies, and shift from a strict hierarchical structure to a hierarchy with markets and networks. He then pointed out that the key to this change lies in collaboration, the pursuit of SDGs, micro-meso-macro linkages, and the Neo-Weberian state model.

Sustainability issues and financial issues in the public sector

Public sector accounting and accountability issues represented in the SDGs were formulated to overcome various environmental and social challenges that pose a global crisis, and will impact on humanity and the planet in the future. At CIGAR 2023, sustainability-related research papers accounted for 18 (32%) of the total of 57 papers. In the three keynote speeches given at the conference, sustainability was also addressed directly or indirectly by each speaker. This is a clear indication of the growing interest in sustainability in government accounting research.

The keynote speech by Heidi L. Mendoza, former Undersecretary General for the United Nations Office of Internal Oversight; now a Commissioner of the Commission on Audit (COA), The Philippines, discussed the global impact of the Covid 19 pandemic in terms of causing failures and more inequalities in the current system setting back the achievement of SDG goals (for example see World Bank, 2022). She argued that the solution should be based on the democratic fundamentals of cooperation and solidarity.

In another keynote speech, Yoko Tawada, a Japanese novelist who lives in Germany, explained that fairy tales and novels featuring forests teach us about the fascination, fear and profundity of forests, and forests as a source of life, and emphasized the importance of the fundamental human behaviours in a democracy, such as listening, and talking to each other, in order to tackle sustainability issues and environmental problems.

Geert Bouckaert (mentioned above) also pointed out that, in crises such as Covid 19, the SDGs have emerged at the centre of issues that the public sector must proactively address—changing the nature of public administration. Some SDGs could be a driving force for solving challenging issues using markets and networks. He pointed to the importance of a democratic state with the ‘rule of law’; an open, accessible, participatory, affordable, transparent, sound and trustworthy public sector for citizens; a responsible, accountable, and hierarchical structure with markets and networks; and the importance of the perspective of the entire government and society as a whole.

Also on sustainability, Ian Carruthers (IPSASB) discussed the 2022 consultation paper on Advancing public sector sustainability reporting, which promotes the development of sustainability reporting standards for governments. Public sector sustainability reporting requires both the sustainability of the activities of individual government entities and the sustainability of the region as a whole. For the former, it is necessary to interact with the market through, for example, bond issues; the latter needs a multi-layered structure of sustainability reporting to multi-stakeholders who may have a direct interest in sustainability issues. Therefore, public sector sustainability reporting, especially from a regional perspective, can be seen as promoting a democratic form of government to solve sustainability issues through the appropriate implementation of accountability to citizens for sustainability issues. IPSASB has also recognized the overall financial impact of the sustainability-related government programmes on an entity’s long-term financial projections and has issued Reporting sustainability program information—Amendments to RPG 1 and 3: Additional non-authoritative guidance (IPSASB, 2023). It is important that this guidance demonstrates the connectivity between sustainability reporting and public financial management. In other words, sustainability issues for governments are closely related to fiscal sustainability as discussed in the first part of this meeting report.

Concluding remarks

CIGAR 2023 re-examined the role of government, the nature of public administration, and the accountability of government in the context of the various crises facing the world. The presentations highlighted that the relationship between governments and their stakeholders has shifted from one of governance to one of collaboration with citizens and other economic agents—providing an opportunity to reaffirm the importance of democracy. Given the large amount of government spending during the Covid 19 crisis, and the fact that some of that spending took place without democratic control, it is important to implement adequate accountability for such spending and, for this reason, government reporting on fiscal sustainability, and sustainability in general, have a major role to play going forward. It has been noted that emergencies like Covid 19 provide an opportunity to improve on public sector accounting and accountability (Cohen et al., 2020). Ideally, citizens, as sovereign taxpayers, should be able to understand the information published on fiscal sustainability and act democratically toward their governments.

Thus, not only governments, but also citizens, need to have sufficient skills to understand information that contributes to the implementation of accountability issued by governments. More research on the state of public administration and government accounting during crises, both in theory and in practice, is therefore urgently needed.

This first Asian CIGAR Biennial Conference had over 100 participants from 28 countries around the world, including from Australia, Brazil, China, Europe, Indonesia, Korea, Malaysia, New Zealand, the UK and the USA.

It was a great honour for Japanese CIGAR Network members to hold the CIGAR conference at Waseda University and we really appreciate all the participants and the strong support we received from the CIGAR executive board. We look forward to the next annual CIGAR meeting, which will be held in Udine, Italy in June 2024, in collaboration with the IPSASB research forum (see https://www.cigar-network.net).

Additional information

Notes on contributors

Mari Kobayashi

Mari Kobayashi is a Professor at the Graduate School of Political Science at Waseda University, Japan. She is an IPSASB Board Member and the former President of Board of Audit of Japan. Her main research areas are accounting reforms, management control and performance management in the public sector.

Akira Omori

Akira Omori is Professor of Accounting at Yokohama National University, Japan. His main research areas are sustainability management and accounting for corporations, regions and resources, and national accounting.