Lack of transparency in public finances Inadequate financial reporting in the public sector Inadequate monitoring of public sector activity
Accounting in state-controlled enterprises has been such as to reduce transparency, namely the ability to assess the financial implications of public sector activities in advance, to evaluate them after the fact, and to identify who bears the costs and who receives the benefits. This severely inhibits the task of decision-makers who are supposed to be accountable for their actions.
Traditionally, public finance analysts and policy-makers have focused their attention on the central government budget as the main determinant of fiscal policy. Few attempts have been made to to monitor state-controlled enterprises in the aggregate or to compile fiscal data for all levels of the public sector. Where efforts have been made to gather the information, the rapid growth of state-controlled enterprises has often outpaced the ability of analysts to collect and evaluate it. Such enterprises often do not follow uniform accounting standards, so their financial statistics are difficult to consolidate with other public sector statistics. This problem, and the existence of underground public sectors, is of importance in all countries. But lack of transparency has been particularly disruptive in developing countries, creating unexpected fiscal difficulties (when the economic or political fortunes of a country deteriorate) by exposing the weaknesses of substantial segments of the economy that had directly or indirectly come under public sector control.
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