Keeping the public purse

These are some of the issues that accountants in government have had to resolve in recent years. Developing accounting policies for motorways, military hardware and the prime minister’s home-cum-office has been tough for government accountants.

Now central government’s financial planning and reporting is on a basis comparable to the rest of the economy. This means that disclosures about these and the £400bn+ annual expenditure – as well as all those assets – are available so you know where your taxes are going. It also means greater opportunities for accountants and accountancy in central government.

For those of us already working in central government, the new figures mean we have much better raw material. Take the cost of student loans.

The transparency of an accruals-based treatment means that decisions on loan expenditure by the Department for Education and Skills can be made on the basis of full long-term cost, not the cash transactions in the early years. The cost of subsidy is identified so that the choices between offering loans rather than grants is clear.

On defence assets, a more rigorous assessment of what government departments own helps them to manage their assets better. The Foreign Office has been better able to manage its property assets by recycling revenues from the sales of properties no longer needed into much needed new assets – both buildings and IT.

Transparency on liabilities is just as valuable. The need to account for future clinical negligence claims gives the Department of Health far better information for planning.

The government’s new financial systems have been created under the heading of resource accounting and budgeting. Now the transition has been made they are an integral part of planning and reporting. The control mechanism moves to the new basis from April next year based on plans agreed in July’s 2002 spending review.

Disciplines familiar to the rest of the economy have now become part of the normal way departments do their business. To take just one area, working capital is clearly identified and the sums, to the surprise of many who had not realised that central government has a lot of working capital, are in many cases very large indeed. In the last set of published accounts the Department of Work and Pensions had no less than #1.75bn of debtors and more than #2.5bn of creditors. The department is now better able to manage its cash flow and working capital, improving its ability to identify, record and collect debts and pay creditors correctly.

At a decision-making level, too, the changes have made a difference.

Customs and Excise was able to use better information to replace its fleet of cutters. The Ministry of Defence is rightly proud of its use of a balanced scorecard, which help them link their strategic plan to output, process, resources and development.

The move from cash-only accounts gives accountants a new field to exercise the full range of their skills. As with the rest of the economy, this also means that they need to work increasingly closely with non-accountants and to have communication and wider management skills as well as technical accountancy knowledge.

At the same time, there is a greater civil service awareness of what accountants can offer and how to use their skills. This was a problem for accountants in the past because a cash-based system didn’t require much knowledge from’generalist’ civil servants.

There is still a backlog of knowledge to fill, but now that spending plans and reporting to parliament are in accruals terms, there has been a huge increase in the demand for financial knowledge. Departments have taken this seriously. The DTI, for example, has trained more than 1000 staff and is sponsoring others to take professional qualifications.

Greater accountability and improved financial information is good news for taxpayers and good news for the better management of public money.

At a time when accountancy is under attack, accountants working in government can be proud that the UK, which was always rightly highly regarded as a model for public service, is now recognised as a world leader in accountancy in government. For those who want to help us keep it there, it’s a career worth considering.

  • Sir Andrew Likierman, head of the government accountancy service.

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