Public sector told: improve financial reporting

The public sector does not take the preparation and monitoring of its
accounts seriously enough and its poor culture of financial reporting needs to
be urgently addressed, the Audit Commission warned this week.

In its annual assessment of NHS and local authorities’ governance, the
commission warned that the quality and accuracy of accounts was poor. And it
anticipated the situation would worsen again next year with its auditors likely
to refer more organisations to the government for action.

Local government is particularly singled out for criticism. The commission
found that councils did not take the process of preparing or publishing their
accounts seriously enough.

Despite 95% filing 2003/04 accounts on time, the commission said this was at
the expense of quality, with a quarter having to resubmit their accounts because
of significant errors. This compares to just 19% resubmitting last year. The
survey highlighted ‘significant’ departures from UK GAAP, and auditors raised
concerns at the delay in bringing the local government system in line with UK

The commission said this level of performance ‘reflected badly on local
government’ and leaders and chief executives must take responsibility for
improving financial management.

Andy McKeon, the commission’s managing director for health, said: ‘The budget
statement is still seen as much more important because it sets out what they are
going to spend and their council tax levels.’

CIPFA chief executive Steve Freer agreed, but added: ‘Organisations need to
consciously shift the balance of emphasis here.’

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