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Public Accounting for Public Accountability

Governments impose rigorous demands on private entities to provide accrual-basis accounting, including an audited balance sheet showing all financial and real assets and liabilities that define conventional net worth. Yet their own balance sheets rarely meet the same standards, undermining economic governance and management.

NEW YORK – In a typical modern nation-state, the public sector accounts for a larger share of economic activity than any other economic actor. In 2021, general government primary expenditure for the G7 member states ranged from 39.41% of GDP in the United States to 57.66% of GDP in France. Successful emerging-market economies – such as India (24.93% of GDP) and the People’s Republic of China (31.8% of GDP) – are set to follow the same pattern. Given this, reliable and transparent public-sector accounting is essential to proper economic governance and management.