Public Sector Finance
Holding to Account, Lord Sharman’s review of the audit and accountability for central government, is a welcome opportunity for the updating of the central government system in the UK. Our parliamentary democracy is based on the premise that the Crown, in the form of the government, has its tax and spending plans approved by parliament, and that expenditure is accurately reported against those approvals.
But in recent years there has been a growing need to ensure the system of accountability has kept pace with changes in government and new, diverse methods of delivering services.
The review recognises the benefits of central government adopting elements of private sector best practice, suggesting government should recognise the value of an effective risk management framework in managing its activities.
Clearly any public sector framework will follow a different profile to a private company – you would expect the government to be risk averse with taxpayers money. But the accountability framework should act as a driver for the provision of innovative and effective public services while at the same time providing the level of protection that can rightly be expected with public money.
According to the Public Audit Forum, auditors can support and encourage worthwhile change without compromising their independence and statutory role.
Often some officials and parts of the media have aired the view that the audit can prevent new approaches being considered. From their published papers it is clear that the forum believes this perception needs to be confronted. Holding to Account builds on this, pointing out the need for auditors to recognise the danger of being perceived as discouraging well thought out risk taking, and ensure that they live up to statements made on the attitudes to innovation.
However while the support of auditors for well managed risk taking is clearly important, Lord Sharman stresses that effective risk management is dependent on wider issues that encompass cultural factors such as incentives and rewards and also the level of commercial decision making skills in central government. It will be interesting to see how these issues develop as departments work to ensure that robust risk management systems are in place.