Central government has made great strides over the past five years in improving financial performance across the public sector ­ but it remains a ‘work in progress’.

Praise abounds in many areas. In some departments, such as the Department for
Business, Enterprise and Regularity Reform, this has been accompanied by a cultural change that recognises the importance of sound financial management, according to a review by the comptroller and auditor general at the National Audit Office, which is monitoring the government’s progress in financial management.

Nonetheless, two departments ­ the Ministry of Defence and the Crown Prosecution Service ­ still do not have a qualified finance director and four departments do not have their finance director on the board.

Most of those who are working with government to ‘professionalise’ finance staff and financial management are positive about the changes.

Nigel Johnson, a partner at Deloitte who has worked closely with government departments, says: ‘Some departments are better than others. Those that have been involved in commercial activities such as trading departments are better. It’s a plus to have got the FDs qualified. What’s going on now is that they are assessing their teams’ capabilities and there will be some hiring needs.’

Room for improvement

Despite the praise , the NAO identified three areas where departments need to make further progress.

The first of these is in ‘upskilling’ staff outside the finance functions of each department. Linking financial and operational performance information to improve service delivery and achieve better value for money, as well as improving the reliability of forecasts of future resource needs, are the other two areas.

The NAO seems relatively happy with the government’s efforts overall ­ but still has concerns. ‘We feel good progress is being made. The lack of financial skills and awareness among many non-finance staff remains a significant barrier to improving financial resource management across government,’ the NAO notes.

‘Take up of the new learning opportunities on offer has been patchy and the Cabinet Office does not yet have a robust way of measuring the number of civil servants who now meet the professional skills for government standard for financial management.’

There are a number of training programmes underway to ensure wider financial knowledge across the public sector. One of those initiatives is the postgraduate diploma developed by CIPFA in collaboration with the Warwick Business School.

Initially responding to the professional skills in government programme, the organisations have worked with the Treasury to develop a fast-track route to CIPFA membership.

Adrian Pulham, director of education at CIPFA, who is also due to complete the diploma, says: ‘So far we have had 100 people that have been through the programme. We are also working with government to identify up-and-coming talent for the future and ensure they have the necessary qualification.’

Gus O’Donnell, cabinet secretary, head of the Home Civil Service, says: ‘Taking such a qualification will help overcome some of the difficulties faced by non-accountants in finance posts, or help those wishing to prepare themselves for finance posts.’

CIPFA is also set to provide all continuous professional development needs across the public sector.

Recruitment drive

Although recruiting from outside the public sector appears to be limited, certain skills have to be brought in from the outside. For example recruiting staff to deal with the transition of government accounting to international financial reporting standards is inevitable.

Listed public companies undertook the switch to IFRS accounting in 2005 so the majority of the skills and knowledge can only be found in the private sector.

Public sector recruitment experts say that knowledge of IFRS is in great demand within government at present with salaries commensurate to the private sector.

Results are tangible, despite the amount of work left to do. Johnson says: ‘The link between input and output is much closer now than ever before. I suspect the outcomes are also sharper. The Spending Review process was a painful exercise for lots of departments but it will now stand them in good stead and help them monitor themselves against their delivery requirements.’

Good, but could do better, is likely to be the current grade for government eff

IFRS and the public sector

Having initially set themselves an audacious target of 2008/09 for full transition to international financial reporting standards across the public sector, the Treasury announced in March that it would delay adoption of IFRS until 2009/10 after a select committee meeting revealed two of the government’s largest departments – the ministries of defence and health – were not ready for the switch.

Indeed, with just under a year to go, it is doubtful that all government departments and agencies will meet the deadline. The level of preparedness across the sector is patchy and experts warn that many public bodies could face some surprises in the transition process.

Julian Rickett, the partner leading public sector IFRS conversion at PricewaterhouseCoopers, says: ‘It’s fair to say that the current degree of preparedness is mixed.’

Although the public sector has the opportunity to learn valuable lessons from the private sector experiences in adopting IFRS, it has to deal with some unique factors such as fiscal constraints imposed by the Comprehensive Spending Review settlement.

It’s unlikely that complex issues such as currency hedging, pensions and share-based payments will cause too many headaches, but the public sector has its own challenges in dealing with issues such as PFI, leases, holiday pay and segmental reporting to name a few.

‘One big issue that we think the Treasury and NAO will have to get to grips with is consistency. So many of the standards require a degree of judgement there could be future problems. The NAO will have to make sure that it monitors consistency to ensure, for example, assets are dealt with consistently,’ says Rickett.

To aid transition the Treasury has set ‘trigger points’, the first of which fell in September, when all departments were to restate the opening page of their balance sheets of March 2008 accounts in accordance with IFRS.

Privately IFRS experts say it would surprise them if the departments ‘met the deadline fully or in part’. The NAO, where the balance sheets are to be sent for auditing, says it cannot comment on whether the departments met the deadline, as ‘we have not yet assembled this information’. The Treasury was unable to comment at time of going to press.orts.