Ethical Government Accounting is our global campaign to change three critical standards for government accounting, statistics and disclosure to treat mining as the sale of our shared inheritance. The basic rationale is that since minerals are not recognized as assets, governments are highly incentivized to enter into arrangement to sell them without concern about the value received, because the mineral sale proceeds are treated as “windfall revenue”, which the governments can spend. Proper accounting would disclose that in most cases, the mineral sale proceeds are lower than the value of the minerals (the “Resource Rent”) and consequently the real transaction is a fire-sale of the family silver. This cheats present and future generations of their inheritance and drives the resource curse as well as makes our economies unsustainable. This is unethical.
The main international standards that need updating are
(a) IMF’s Global Finance Statistics Manual 2014 (GFSM)
(b) the accounting standards of the International Public Sector Accounting Standards Board (IPSASB)
(c) UN Statistics‘ System of National Accounts 2008 (SNA)
In our mind, this is our single most important campaign, as it is necessary to change the framing of royalties from “windfall revenue” to capital receipts on account of the sale of a “shared inheritance”. The reframing cannot happen without changes to the underlying standards, especially IMF’s GFSM.
Where have we reached?
In 2019, the IPSASB placed a new IPSAS on Natural Resources as their top priority for the Work Plan 2019-2023. IPSASB has a page for the IPSAS on Natural Resources. At present (Dec 2021), a Consultation Paper is being discussed, which is expected to be approved in March 2022.
In 2020, UN Statistics’s Advisory Expert Group (AEG) to the Inter-Secretariat Working Group on National Accounts (ISWGNA) discussed draft guidance notes on Accounting for Economic Ownership and Depletion of Natural Resources. Subsequently, a consultation was held in mid-2022. The expectation is that the guidance note will be trialled, and after gathering experience, the System of National Accounts would be updated.
Most recently, IMF has begun an update process of its Government Finance Statistics Manual. The Government Finance Statistics Advisory Committee is working with the UN Advisory Expert Group on National Accounts and IMF’s Committee on Balance of Payments Statistics (BOPCOM) to update the GFSM along with the UN SNA and IMF’s Balance of Payments and International Investment Position Manual (BPM6).
Key articles
Academic
Minerals as a shared inheritance: Accounting for the resource curse (preprint / published)
Mitigating the Resource Curse by improving Government Accounting
Government Accounting and the Resource Curse — Response to FAQs
Accounting for the resource curse
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