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