The Development and Use of Public Sector Balance Sheets

The increasing use of accrual accounting by governments around the world has led to an increase in the availability of balance sheet information both at a whole-of-government level and for individual public sector entities. One of the main benefits of the accrual accounting process is perceived to lie in the provision of a balance sheet as a summary statement of financial health. However, balance sheet information can be useful only if it is of good quality and if it in fact gets used. This chapter explores some of the barriers that have become evident both in developing public sector balance sheets and then in attempting to use balance sheet information for decision making and accountability purposes. These barriers are substantial, and this fact should be acknowledged by those promoting the benefits of producing public sector balance sheets. The case in favor of developing and using balance sheet information primarily rests on the rigor and precision of the information presented. Examples are provided showing how the greater precision provided by balance sheet information can improve public sector management.