The most recent articles from Accountancy Age

Business insolvencies to surge from public sector cutbacks

Saffron Johnson — 2010-07-26T15:16:00.000Z

Saffron Johnson, Accountancy Age, Monday 26 July 2010 at 15:16:00

Credit professionals predict that the public sector's efficiency drive will push up business insolvencies

Credit managers expect business insolvencies to leap by more than 10% within the next 12 months.

Nearly two thirds (64%) of credit professionals think business failure rates will rise by more than 10%, with 13% of those predicting failure rates to exceed 20%, according to research by commercial credit reference agency Graydon UK.

Martin Williams, managing director, Graydon UK, said: “Despite the prospect of a commercial insolvency boulder gathering momentum as it rolls down the economic hillside, the potential dangers have not yet been recognised by other operational areas.”

Even with the warning from credit professionals, just one third of companies are monitoring their clients’ exposure to the public sector.

Williams said: “Firms need to heed this warning now and ensure they are fully equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent upon government contracts could inflict huge damage to business stability at very short notice.”

He added that the taxman was clamping down on companies’ requests to defer their tax under the Time to Pay scheme. Because of this, there is a risk that other credit lines will shut.

Further reading:

Overpaid tax could run to £3bn

Read Martin Williams' Blog

Video: Public sector consultancy work plummets

2010-07-15T10:31:00.000Z

Accountancy Age, Thursday 15 July 2010 at 10:31:00

How the consultancy industry coping with the cutbacks

Gavin Hinks discusses with Kevin Reed the impact that cuts to public spending is having on the consultancy market, and what the industry can do to fill the gaps left by it.

To download this programme as an audio-only mp3 podcast, click here

Audio: Public sector consultancy work plummets

2010-07-15T10:30:00.000Z

Accountancy Age, Thursday 15 July 2010 at 10:30:00

How the consultancy industry coping with the cutbacks

Gavin Hinks discusses with Kevin Reed the impact that cuts to public spending is having on the consultancy market, and what the industry can do to fill the gaps left by it.

To watch this programme on Accountancy Age TV, click here

Politics hinders improvement to public sector financial management

Kevin Reed — 2010-07-08T09:32:00.000Z

Kevin Reed, Accountancy Age, Thursday 8 July 2010 at 09:32:00

Developing countries held back in improving public sector financial management by lack of political support, says ACCA

A lack of political support and infrastructure is holding back public sector financial management developing countries across the globe, according to a report by ACCA.

It argues that sustainable public financial management requires strong leadership, long-term commitment and momentum, effective partnership working and sound project management.

The report contains case studies from Botswana, Pakistan, Vietnam, Zambia and Zimbabwe.

"Both developed and developing countries face real challenges in the public sector, including improving financial management, managing risk, securing better regulation and eradicating fraud,” said Gillian Fawcett, head of public sector at ACCA.

“But the lack of political support and financial management infrastructure means that these issues are more acutely felt in emerging economies.

“For example, China currently has only half the number of qualified accountants it needs to support its work in financial reporting and corporate governance, and to increase its rate of growth.”

Further reading:

Commons should be scrutinised by the National Audit Office

MPs back reform of government accounting

CIMA slams shortfall of qualified accountants in government

Government announces two-tiered budget bill

Accountancy Age — 2010-07-02T09:45:00.000Z

Accountancy Age, Accountancy Age, Friday 2 July 2010 at 09:45:00

Exchequer Secretary David Gauke brings in "key measures at the heart of our comprehensive five-year plan to put the British economy back on track."

The Government has announced a surprise two-state approach to finance legislation approving the measures set out by Chancellor David Osborne in his Emergency Budget statement and those remaining from former Chancellor Alistair Darling's package before the general election.

The Treasury has published an initial Finance Bill enacting key tax measures at the heart of Mr Osborne's package "to cut the unprecedented deficit, deliver fairness and promote enterprise" which it is intended to push through Parliament as quickly as possible this summer.

It will be followed by a further bill in the autumn which "will introduce minor, technical measures announced by the previous government".

It will be published in draft later this month [July] "to allow thorough pre-legislative scrutiny".

Exchequer Secretary David Gauke said: "The government's inheritance was one of debt and unsustainable spending. We are taking the decisive action needed to pay for the past and plan for the future. That is why today we are legislating the key measures at the heart of our comprehensive five-year plan to put the British economy back on track."

He made no comment on whether this year's arrangements are a one-off or will set a precedent for the future, with an annual "budget bill" which has to be passed reasonably swiftly to enact major tax changes, followed by a more detailed technical bill when necessary in draft, with consultations before Parliamentary approval is sought.

It is a reform many have argued for to remove the pressure to rush through technical changes which require more consideration.

The emergency measure was published earlier today [Thursday] together with detailed "Lobby Notes" on clauses and schedules which are available on the Treasury website together with more detailed notes.

Meanwhile a handful of rebel Liberal Democrat MPs have been gearing up to table amendments to the Finance Bill in a bid to improve "fairness" next week after the main debate approving the budget legislation in principle on Tuesday [7 July].

Party whips are fearful a small number of vociferous dissidents unhappy with the coalition will seek to use detailed line-by-line debates in the Commons itself, due to start on 12 July, and later in committee, if any of them secure places on it, to push for "improvements" largely in the area of helping poorer families.

They will also have an opportunity to act, possibly in concert with Labour, when the bill reaches report stage.

Margaret Hodge questions NAO powers to audit BBC and Royal accounts

our parliamentary correspondent — 2010-06-30T10:07:00.000Z

our parliamentary correspondent, Accountancy Age, Wednesday 30 June 2010 at 10:07:00

Chairwoman of the Public Accounts Committee Margaret Hodge highlights risk to BBC editorial independence from opening its books up to scrutiny

Coalition government plans to widen National Audit Office powers to include the BBC and Royal finances are being questioned by newly elected Commons Public Accounts chairwoman Margaret Hodge.

The first-ever woman chair of the watchdog committee, arguably the most powerful of the Commons committees, said she is unsure of the extent of the apparent 'victory' for the long-running campaigns for the National Audit Office to have unfettered access to the BBC's accounts and those of the monarchy.

The Coalition Agreement underlying the Lib-Con government stated: "We will maintain the independence of the BBC, and give the NAO full access to the BBC's accounts to ensure transparency."

And in his Budget statement, Chancellor George Osborne said: "The Royal Household have agreed that in future Civil List expenditure will be subject to the same audit scrutiny as other government expenditure, through the NAO and the PAC."

Hodge, a former Labour Culture Minister is concerned that the BBC statement contains an internal contradiction, because the BBC maintains opening up its accounts to scrutiny would undermine its independence.

She said: "We need clarification. It is a welcome statement, but juxtaposing the two means we need clarification.

"Does it give us the proper access we need to carry out proper value for money scrutiny for licence fee payers?"

She made it clear she was "100% not" challenging the BBC's editorial independence.

The position on the Queen's finances is more complicated because the PAC has in the past only been able to look at Ministry for Transport grant in aid for Royal Family travel, Department of Culture grants towards the cost of maintaining the Royal Palaces and at second hand at the operation of Prince Charles' Duchy of Cornwall (which is formally audited by KPMG).

The NAO lacks direct access to the accounts of the Duchies of Cornwall and Lancaster and any access at all to the Queen's income from royal estates like Sandringham and other properties which some regard as owned by the monarchy and others by the Her Majesty in person.

Hodge said: "It is early days. I have to understand what precisely is mean by the statement in the Budget.

"If there is to be serious assessment of efficiency and economy and effectiveness (of the monarchy), one has to look at the total income and expenditure. It is difficult to look at just a part."

Video: Accounting for public sector spending cuts

2010-06-24T15:13:00.000Z

Accountancy Age, Thursday 24 June 2010 at 15:13:00

CIPFA’s Steve Freer talk about the impact on accountants of government cutbacks

David Jetuah talks to Steve Freer, chief executive of CIPFA, about the impact of £6bn of spending cuts will have on public sector accountants.

To download this programme as an audio-only mp3 file, click here

Audio: Accounting for public sector spending cuts

2010-06-24T15:12:00.000Z

Accountancy Age, Thursday 24 June 2010 at 15:12:00

CIPFA’s Steve Freer talk about the impact on accountants of government cutbacks

David Jetuah talks to Steve Freer, chief executive of CIPFA, about the impact of £6bn of spending cuts will have on public sector accountants.

To watch this programme on Accountancy Age TV, click here

Public sector FDs face ‘formidable’ workload

David Jetuah — 2010-06-24T00:00:00.000Z

David Jetuah, Accountancy Age, Thursday 24 June 2010 at 00:00:00

Spending cuts will mean jobs losses in the public sector and increased workloads for finance staff

The government’s spending curb will have a huge impact on public sector accountants.

The future is uncertain for many finance staff, but it also means a “formidable” workload for the accountants left at the coalface, according to the chief of the public finance accountancy institute.

Steve Freer, chief executive of CIPFA, warned that, as the government tried to preserve front line services, back–office staff and operations would be sacrificed. The accountants left at the coalface would have a bigger workload to handle but with fewer resources. “There will be no hiding place,” Freer told Accountancy Age. “The workload is going to be formidable. There are some worries about members working under pressure and stress.”

Even government efforts to ring-fence the NHS from the cuts would not fully protect its FDs from resource issues as they try to achieve the massive task of balancing the NHS books.

Very low levels of growth are going to come as a “huge shock”, Freer added. “Even those protected services are going to find it hugely difficult. It’s going to be tough across the health service, central and local government departments.”

However, Freer said the efficiency drive would open up some opportunities for accountants. He referred to his experience of similar cuts in the 1980s which saw an increase in demand for advisers as cuts were made. “When faced with these situations, departments will find they need high quality accounting advice so there will be more opportunities.”

Freer’s optimism is not shared by recruitment experts, who fear that many thousands of public sector accounting and finance staff will hit the jobs market in the wake of the cuts.

Research from recruitment company Ambition suggested 2.3% of the current public sector workforce is made up of accountants and finance staff – around 140,000 permanent employees. With the government proposing £6.2bn of public spending cuts, departments are expected to shed 725,000 jobs – equating to 16,500 finance professionals.

Tim Gilbert, UK managing director of Ambition, predicts public sector staff looking to crack the private sector would have to take dramatic reductions in pay or responsibility. “Qualified accountants with ten years’ post-qualification experience will find themselves having to consider positions for newly qualified accountants,” he warned.

In a new survey of 60 government departments, public sector experts from PwC also flagged up problems that already exist, even before the cuts are made. Particular bugbears for finance functions were managing change, increasing efficiencies and balancing the budget and restructuring as cost pressures continued.

The current economic situation meant that respondents expected little change in the likely major issues facing them in three years time. John Berriman, chair of PwC’s public sector finance board, said: “Taken together, our research confirms our view that finance has some major challenges ahead.”

Public sector finance arms struggling before spending cuts: PwC

David Jetuah — 2010-06-21T10:07:00.000Z

David Jetuah, Accountancy Age, Monday 21 June 2010 at 10:07:00

PwC survey finds only a fifth of public sector finance divisions consider themselves "business partners"

Almost 80% of government finance divisions do not think of themselves as business partners to the rest of their departments, as they brace themselves for spending cuts across the public sector.

A PwC survey of 60 public sector divisions found that 78% did not think the finance function had a hand in designing, influencing or executing strategy.

In the run-up to sweeping public sector cuts, respondents said finance functions would need to be well-developed and fully enabled with supporting tools, resources and skills to be genuine business partners.

"Taken together, our research confirms our view that finance has some major challenges ahead," PwC said.

"And there is still a considerable way to go for finance generally to own its place at the top table as a fully integrated partner to the business."

Further reading:

Regions in recession: is the worst over?

NHS Barking and Dagenham appoints new FD

Kevin Reed — 2010-04-09T14:49:00.000Z

Kevin Reed, Accountancy Age, Friday 9 April 2010 at 14:49:00

CIMA's Margaret ashworth appointed director of finance and productivity management at NHS Barking and Dagenham

Margaret Ashworth is the new finance director for NHS Barking and Dagenham.

CIMA-qualified Ashworth has held senior finance roles at NW London Hospitals and West Herts Hospitals.

Overseeing a £320m budget, Ashworth also sees productivity management included within her title.

"Arriving at the start of the financial year, she can really get her teeth into the role, and I look forward to working with her to make sure we spend our budget wisely, and use it to improve the health and well-being of local people, " said chief executive Stephen Langford.

Further reading:

HMRC career man joins Deloitte

New public sector audit guidelines for Wales

Our Parliamentary Correspondent — 2010-04-08T11:06:00.000Z

Our Parliamentary Correspondent, Accountancy Age, Thursday 8 April 2010 at 11:06:00

Welsh audit guidelines updated for public sector, including hired private sector auditors

Welsh auditor general Gillian Body has published a new code of practice for private sector auditors and her own staff carrying out inspections of public bodies in the principality.

The code includes the formal audit of accounts as well as value for money examinations and studies, plus the certification of claims and returns - making clear both the duties of auditors and the limitations of audit work.

It follows a consultation earlier this year and has been given the approval of the Welsh Assembly.

The code "requires that auditors carry out their functions consistently in accordance with four principles — being public focused, independent, proportionate and accountable".

Body appoints auditors to examine the accounts of local authorities and other public bodies and has local government assessment, study and inspection functions.

The publication of the code is provided for in the 2004 Public Audit (Wales) Act and local government acts of 1998 and 2006.

It makes it clear that the purpose of public sector audit is "holding to account, providing insight and promoting improvement".

It states: "Audit adds value to society by providing assurance, stimulating better decisions and better outcomes, and helping to provide public service transparency.

"But audit cannot act as a substitute for service providers' own responsibilities. It is for service providers to ensure that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded, properly accounted for and used economically, efficiently and effectively."

Budget 2010: Mind the gap...you can’t depend on growth

Michael Devereux — 2010-03-25T09:20:00.000Z

Michael Devereux, Accountancy Age, Thursday 25 March 2010 at 09:20:00

Hitting the public sector is not the answer even if Darling fails to meet his targets

The forecast for the development of public finances in the Budget are based on the assumption that the growth rate of real GDP will be above 3% in 2011 and thereafter.

These growth assumptions are consistent with the government’s predictions in the pre-Budget Report from last December. But they are significantly higher than those expected by independent forecasters, which are roughly 2% for 2010 and 2011.

The growth assumptions used in projecting the deficit are important.

This is partly because the forecast for the deficit is typically expressed as a proportion of GDP. So, other things being equal, a higher growth rate will raise GDP, and lower the deficit-to-GDP ratio.

But also, tax revenues tend to rise in line with GDP, while expenditures can rise more slowly.

So how do these growth assumptions affect the forecast for the deficit reduction?

Based on their optimistic assumptions, the government expects that by 2014 the public sector deficit will be halved, and that the stock of public debt will reach a maximum of less than 80% of GDP, before declining.

At the Centre for Business Taxation, we have simulated the development of the public finances until 2020 under the assumption that GDP growth will be as predicted by the average of independent forecasts until 2011 and that it will remain at this level afterwards. (These independent forecasts are available to view on the HM Treasury website).

Our simulations suggest that, under these independent growth assumptions, the government will fail to achieve its objectives for the deficit reduction. The deficit would decline much more slowly. The stock of debt would increase to approximately 100% of GDP by 2018, which would be the highest level since the early 1960s.

So how should we respond to this information? Not by advocating much sharper and more immediate cuts in public spending. In fact, as a proportion of GDP, the cuts proposed by the government after 2011 are already as deep as anything achieved by Mrs Thatcher in the 1980s.

And in any case, there is still considerable uncertainty about the future of the economy.

More information about the state of the economy will be revealed over time. And as it is revealed, it should become easier to identify whether greater spending cuts or further tax rises will be needed.

Professor Michael Devereux is director at the Centre for Business Taxation, University of Oxford.

Olympic finances are on track, says Locog CFO

Matthew Broomfield — 2010-03-18T00:15:00.000Z

Matthew Broomfield, Accountancy Age, Thursday 18 March 2010 at 00:15:00

London Organising Committee of the Olympic Games finance chief determined to bring games in on budget

Successfully managing the finances of London’s 2012 Olympic Games is still a few laps from the finishing line.

Amyas Morse, head of the National Audit Office (NAO), recently said plans for the Games’ delivery needed to be substantiated, particularly making sure the London Organising Committee of the Olympic Games (Locog) would break even.

Neil Wood, chief financial officer of Locog, has little doubt that the body in charge of delivering the games will reach the tape. “We are determined to come within the £2bn funding envelope. For us that’s the challenge, and we are confident of doing that.”

He maintains that, since the £2bn budget was determined in early 2006, Locog’s planning has never steered outside of it. “We’ve done budgeting rounds every year since 2006 – we completed version four last summer and will start version five this October. Each one of them has arrived at the £2bn revenue versus £2bn expenditure equation.

“We’ve already raised more than £600m out of our sponsorship target of £700m, which is very promising, especially in this climate,” Wood said.

Locog and other delivery bodies have been asked by the NAO to resolve uncertainties over scope and budgetary responsibilities before its next budget in October.

Wood said: “We’ve started looking at raising a contingency fund for the games, in the event of short-term operational needs.”

No figure has been decided for this, but it is expected to be a small proportion of the overall budget.

At the moment, Locog’s staff numbers are just below 600. This will double in the next six months, and be around 3,000 just before the games. Many accountants have been sourced from its sponsor Deloitte, in the form of secondees – a trend that Heather Hancock, Deloitte’s lead client service partner for London 2012, says will continue. “We have seconded 27 employees with CIMA or ACCA qualifications or en route to getting them. This number should increase considerably over the next two years.”

However, Jean Tomlin, director of HR for London 2012, recently said: “It is more difficult to source qualified accountants with strong commercial experience that are able to quickly add value in our environment.”

On that point, Woods said: “For a few senior roles we’ve chosen to use the open market because we want a mix of backgrounds. We need robust individuals with strong negotiation skills. The finance planning function is a particularly wearing role, so they need lots of resilience in order to cope with the budgetary restraints.”

Wood says a key issue is getting the right controlled environment. The incremental expansion of Locog before the games will create a degree of risk. Controlling that risk is a crucial challenge, so they need people who can fit straight into a dynamic, expanding workforce.

“We also need to balance our staffing requirements against our dissolution planning for 2013, which has already kicked off. In practice, this means not creating a large back-office so that we can be in good shape for an orderly and speedy wind-up.”

Further reading:

London 2012 in danger of breaking into contingency fund

HMRC staff down tools as union strikes

David Jetuah — 2010-03-08T09:39:00.000Z

David Jetuah, Accountancy Age, Monday 8 March 2010 at 09:39:00

Public and Commercial Services union takes 48-hour industrial action which sees Revenue staff walk out

HMRC staff are staging a walk out as part of union moves protesting against redundancy pay changes

The Public and Commercial Services union has advised up to 270,000 civil servants including Revenue workers to down tools for a 48-hour strike.

"The dispute is over changes to the civil service compensation scheme which will see staff robbed of up to a third of their entitlements and see loyal civil and public servants lose tens of thousands of pounds if they are forced out of a job," the PCS said.

"The union fears that the government wants to make it easier for whoever wins the general election to cut low paid civil and public servants on the cheap."

An HMRC spokeswoman said the exact number of Revenue staff was not known and customers coul experience delays, but every effort was being made to maintain services:

“HMRC is disappointed with the decision to strike and is doing everything it can to maintain services to the public.

“Whilst our customers may want to delay contacting us until Wednesday when the strike is over those who need to speak to us urgently can do so as our contact centres and enquiry centres are open for business. We are able to take calls on all our aspects of our business but customers may find it takes longer than usual to get through.”

Further reading:

Union outraged as 1,700 HMRC jobs under threat