THIS WEEK’S PUBLICATION of unaudited whole of government accounts (WGA) was a landmark for the UK and experts lined up to applaud the development.
Transparency and fiscal accountability are being trumpeted and the government said the numbers will allow parliament and the public to “better understand and scrutinise how taxpayers’ money is spent”. But what do the accounts really mean, and how do they differ from previous years?
In the past, National Accounts have brought together headline numbers such as gross domestic product, income and expenditure. Not only do WGAs go further, showing the accounts of around 1,500 public bodies, they also make sense when examined as a whole.
The information contained in WGAs has always been available on an individual basis but is now being presented in one convenient bundle. Government bods will have chalked up many hours eliminating transactions that cancel each other out within group accounts, ensuring expenditure in one area is matched with income in another.
“The Treasury has smoothed out the wrinkles. Doing this work yourself would have been very difficult,” said CIPFA chief executive Steve Freer.
One major difference between National Accounts and WGAs is how they are prepared: WGA follows international financial reporting standards (IFRS) adapted for the public sector while National Accounts (NA) adhere to an internationally agreed system followed by numerous countries.
The value of these accounts lies in their comparability with other data; on this basis, NAs still have one up on the new numbers. Nevertheless, WGAs will become increasingly useful as the years go on and if, as officials hope, other governments follow suit.
Steve Freer is confident that increasing numbers of countries will “naturally click into place”, aping the UK drive for consolidation. Australia and New Zealand are the only nations that already publish WGA, though their definitions of “whole” do not match ours because they exclude local government. Nevertheless, supporters say with this publication that the UK is “joining the premier league” of transparent government reporting.
If the value of WGAs lies in their comparability, there is one other factor that could derail their usefulness. Other governments use International Public Sector Accounting Standards (IPSAS) for their national accounts; it is adherence to this code that makes the figures comparable. If peers choose to stick with IPSAS reporting, the UK’s move to WGAs could lose much of its value. Freer disputes this though, saying the difference between IPSAS and public sector-adapted IFRS is “small”.
WGAs follow IFRS reporting because it produces accounts that are very similar to those in the commercial sector. For this reason, accountants and business brains alike will find it easier to interpret the numbers and the government hopes that this will reinforce transparency and accountability.
However, it is questionable if the target audience will pay much attention to this barrage of new data. “Parliament and the public” are among those it is hoped will put the figures to good use but the prospect of riffling through hundreds of pages might not inspire many to hold their leaders to account.
It is not easy to identify lobbyist groups or campaigners whose arguments will be materially enhanced by this great wedge of data, though it seems likely they will make themselves known sooner or later. The figures are unquestionably useful for someone interested in the whole-of-government status – for example, on public sector pay – but arguably, interested parties will already have been rifling through the relevant data before it was repackaged under WGAs.
One argument for the WGA is that it removes the risk for misinterpretation of the figures because the government has already done the hard work. However, this raises another question: how much ‘interpretation’ has gone on to arrive at the bottom line? In collating data from 1,500 organisations, numerus judgment calls must have been made and the very depth and breadth of the project makes it hard to challenge the final numbers.
Freer disagreed, saying that the majority of calls are made on the accounts of individual entities, making it very hard to massage the data: “In many ways it’s a very mechanical process: the numbers have already been laid out, this is just an exercise in aggregation.”
Despite these potential pitfalls, industry leaders are united in welcoming WGAs; all are looking forward to publication of the final audited accounts later this year, while most agree that the accounts will boost transparency as well as support public and parliamentary interrogation of government finances.
ACCA called it “a significant move in the right direction”, while CIMA warned that it could fuel unease over hot topics such as public pensions; the ICAEW said it “brings home the breadth and depth of public finances and more importantly the challenges we face as a nation”.
For the time being, the publication could be little more than a clever public relations coup. The weighty document will be off-putting for those without a special interest, while anyone ready to dissect the tome will probably already have scrutinised individual accounts relevant to their cause. Nevertheless, once a bank of past WGAs has been built up – and if other countries follow suit – the accounts could prove a handy resource for financially minded citizens and add to the growing feeling that government should be held accountable for its spending, which most would agree is no bad thing.
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