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Welfare reform debacle highlights need for a government CFO

THE ICAEW has called for urgent changes to the way government manages public money following a damning report into the botched introduction of David Cameron’s flagship programme of welfare reforms.

In a scathing assessment, the National Audit Office said the Department for Work and Pensions’ universal credit scheme, which will replace various welfare benefits with a single payment, has suffered from “weak management, ineffective control and poor governance”.

According to the NAO, the £2.4bn project has been riddled with IT failures, with the DWP already having to write off £34m of its new IT systems amid questions over whether they will be able to support an already delayed national roll-out of the programme.

The report also identifies several weaknesses in financial management and controls, including inadequate financial control over spending, ineffective accounts payable processes, unclear financial reporting and poorly managed and documented financial governance.

Writing in his blog, Michael Izza, chief executive of the ICAEW, said the problems with universal credit are “neither unexpected nor unusual” and highlighted the need for government to adopt the corporate practices of big business.

“Governments of all colours have struggled to procure and manage big new projects, particularly where a major IT system is involved,” Izza said.

“We need to turn HM Treasury into a proactive group finance function. We need a group CFO to lead the charge on financial discipline across government. And finance directors in every department need to be given more profile and power to step in when public money is being badly managed.”

Separately, questions have been asked of the government’s ability to plan and manage major infrastructure investments like HS2. In his report into long-term infrastructure planning, Sir John Armitt, who chaired the Olympic Delivery Authority, suggested successive governments had failed to “set strategic priorities around infrastructure investment”.

When long term decisions are made, they can be taken in silos with little acknowledgement of the interdependencies between sectors. An example of “silo-thinking” is the absence of a National Policy Statement for transport networks. As a result, the debate around High Speed Two is taking place independently of any assessment of options for the strategic roads network, the Armitt Review found.

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