THE CIVIL service has been slammed for failing to take financial management to its heart and for failing to place it at the centre of deficit reduction plans, the public spending watchdog has concluded.
A National Audit Office report on improving financial management in government said that Whitehall departments would need to improve financial management and accounting skills if they are to meet the demands of the government's cuts set out by George Osborne in June 2010. It said finance departments were weak at monitoring balance sheets and cash-flow.
The report said there had been progress. "However, achieving further progress will require all Accounting Officers as the leaders with the most influence on Whitehall culture to demonstrate clearly, through their leadership of departments, their commitment to putting financial management at the heart of their organisation."
MPs lined up to criticise. Lib Dem MP Stephen Williams, who has previously challenged the competency of civil servants, said: “It almost beggars belief at this time when the government has imposed incredibly tight budget settlements to have departments whom we cannot be confident can deliver spending reductions if the departments do not have the professional expertise of qualified accountants to monitor progress against the CFR figures.
“It is disappointing that the Civil Service does not embrace the importance of having staff with the appropriate qualifications.” He added that recruitment plans needed an “urgent” rethink.
Senior Tory public accounts committee member Richard Bacon said: “The fundamental problem is we are still trying to get rid of the culture that has been there for generations which has not really taken a serious interest in the careful husbandry of resources and marshalling them to achieve specific ends.”
Bacon recalled one permanent secretary saying of accounts: “It is only numbers.”
The NAO report concludes that departments “do not fully understand the cost of their activities” and that good information is “rare” in some cases. It said management tends to focus on performance against annual sending budgets rather than balance sheet information or stock levels and investment in assets.
Central government finance functions have some characteristics which limit their potential contribution. First, they lack influence relative to finance functions in other sectors; and second, their efforts are biased towards accounting and reporting, rather than supporting managers and policy makers to make decisions.
It’s not just (as the NAO suggest) that too much attention is paid to reporting against annual budget at the expense of managing the balance sheet or cash flow. Its that too much attention is paid to financial accounting and reporting generally – the priorities seem to be to ensure the propriety of transactions, that expenditure is within (but not too far below) budget, is expended on the activities specified and correctly allocated to the numerous codes in the chart of accounts. What is relatively neglected includes performance management, cost leadership and generally, the generation of information for decision making and its associated analysis and insight.
We should recognise the efforts made to professionalise finance functions in central government – for example all departments now have professionally qualified accountants as finance directors and HM Treasury has initiated a finance transformation programme for central government. Exceptional individuals (whether long serving civil servants or recent imports from the private sector) are no doubt working within their immediate spheres of influence to prove they are critical partners in the decision making (or policy making) process, and are catalysts for good financial management. Finance professionals should market themselves, but they deserve to do this in a receptive environment which understands what contribution the finance function can make.
Posted by: Louise Ross (Performance Mgt specialist, CIMA), 03 Mar 2011 | 14:57
Though the vast majority of finance staff in the public sectors are members of professional bodies, they rarely seem to care or think about their dotted line responsibility to the UK taxpayer. Many are self satisfied, in well paid positions in Whitehall. Consequently, will not challenge or question bad /flawed financial practices. The mantra of 'spend your budget' to avoid criticism did not help reinforce such a culture.
Posted by: purple tree, 04 Mar 2011 | 11:26
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