News that the accounts of six government departments had failed to pass
through the National Audit Office without qualification caused considerable
consternation. “A huge wave of embarrassment for the government” chirruped one
newspaper, while another pointed out that for the first time in 350 years the
Treasury’s accounts had been questioned.
The departments that suffered qualification were the Treasury, Department of
Work and Pensions, Her Majesty’s Revenue and Customs, the Ministry of Defence
and the Home Office. The Human Rights and Equality Commission, a tiny department
by comparison, also received a black mark.
Revealing its findings, the NAO pinpointed failings including poor speed of
response, variable quality of financial information, and the low ratio of
qualified staff in finance departments.
Adding to the criticism, Public Accounts Committee chairman Edward Leigh
criticised HMRC, saying: “It is far from reassuring to learn that the
department’s management of customs activities is fragmented and disjointed, that
accountabilities are blurred and that management information is poor.”
But does this point towards a fundamental failing of public sector
accountants or is it simply a freakish result of the recent financial crisis
putting extra pressure on various Whitehall fiefdoms? Are the rules governing
public sector finance now so unwieldy as to defy understanding?
E&Y partner in financial reporting advisory, Amin Mawji, has long
experience of working with public sector accountants. In his view, the
qualifications need to provide a wake-up call to government finance managers.
“First and foremost there seems to be a recognition that there are serious
systems issues,” he says. “The old legacy systems simply haven’t been able to
keep pace with the complexity of the business of government.
“So, for example, the NAO identified a number of errors in the MoD’s payroll
systems as well as an inadequacy of evidence to support its inventory
management. The level of inventory the department has is obviously huge and the
type of system you’d need to keep track of that needs to be robust and
sophisticated. And the audit points to the systems not being up to scratch.”
Alongside the issue of IT investment, staffing levels will inevitably come
under scrutiny. Despite the investment in systems, the fact is that in 2007 only
14.3% of staff working in government finance departments are qualified
accountants, though that has climbed from 12.6% a year earlier. However, it
remains a ratio far below the private sector and a cause for concern for many
Despite this, Ken Wild, national director of accounting and audit at Deloitte
who also sits on the Financial Reporting Advisory Board, the body which consults
with the Treasury over how it runs the public accounts, says the ratio of
non-qualifieds is a red herring.
“That ratio is a little misleading as there are loads of bright people there
who might not be qualified. The nature of the civil service is to get people in
and train them to do what they need them to do. And I also think you will see
that number rising, partly because people will want the qualifications and
partly because there was under-resourcing in this area – but that’s now
Wild has been a long-time observer of developments in public sector
accounting. In his view, the government is tackling the issue. “I think the UK
genuinely is one of the leading edge countries that is moving towards what I’d
call proper accounting. That is a pretty rocky road to go down, so a few
qualifications popping out isn’t that surprising. And that is because it’s
leading edge rather than having inherent problems. Now I’m sure there are
problems, but I’d be staggered if they are not solved in the next couple of
To that end, efforts are being made to improve financial management.
Programmes such as Finance for Non-Financial Middle Managers are aimed at
spreading greater awareness of financial issues across the departments.
ACCA’s Gillian Fawcett speaks on public sector issues. She says the genuine
commitment to ongoing training aimed at upping the game of finance professionals
in government is good news. “My overall view, and I’ve worked around this
before, is that improvements are being made and the Treasury’s commitment to the
government finance professionals programme is evidence of that.”
She adds: “A few years ago you never had qualified accountants heading up
departments whereas that’s now commonplace.”
Encouraging signs, though it’s come too late for this year.
As in most questions surrounding taxpayers money, a definite answer is hard
to come by. What’s certain, though, is the public finances are unlikely to stop
being used as a political football any time in the near future.
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