Senior government accountants are pushing the British Treasury department to include billions of pounds of extra debt on its balance sheet, according to a British accounting journal.
Government accounting guidance with the obcscure title of “Technical Note 1 to Application Note F of FRS5” has “hidden the government’s liability for PFI schemes for nearly a decade,” reports a British construction magazine. Senior government accountants and advisors want the note scrapped, arguing it doesn’t paint a true picture of the British government’s financial books.
The debate centers over whether PFI schemes should appear on public or private sector balance sheets. The party shouldering the bulk of the risk also bears the financial liability. Problem is, the government and private sector have conflicting definitions of risk.
“What has emerged is a clash of systems wherein, in many cases, neither party has ended up with the liability. It is as if the school, hospital or prison system concerned simply does not exist,” writes journalist Mark Leftly.
One senior accountant in the British Treasury says his government’s accounting guidelines were “designed to get the right result” – meaning, hiding debt from the books.
International accounting standards require PFIs to show up on government balance sheets. Overturning the guidelines could add billions of pounds to the British government’s books, exposing PFIs for the expensive shell game they really are.