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Whole of Government Accounts delay has oversight implications, PAC warns

Author: ICAEW Insights

Published: 13 Oct 2022

Public Accounts Committee criticises slipping timetables, “poor” use of IT and a failure to get on top of the crisis in local audit for the delay in producing the UK’s consolidated financial statements for 2019/20.

Significant delays in publishing the Whole of Government Accounts for the financial year ended 31 March 2020 are undermining the value of “a uniquely comprehensive view of how government manages taxpayers’ money and of the position of public finances”, a House of Commons’ Public Accounts Committee (PAC) report has concluded.

The Treasury took too long to deliver the 2019/20 Whole of Government Accounts, having been unrealistic with its timetable, the report by the UK’s ‘national audit committee’ has found, with the pandemic exacerbating existing failures in the local audit market in addition to delays in producing central government departmental financial statements. 

Only 45% of 2019/20 local government audited accounts in England were published by the statutory deadline of 30 November 2022 and just 9% of 2020/21 audited accounts were published by the 30 September 2021 deadline. The Committee expressed concern about the reliability and completeness of the Whole of Government Accounts given that 23 local authorities were excluded.

Some delays were due to the impacts of COVID-19 on finance departments’ priorities and capacities, but they were made worse by HM Treasury's poor implementation of its new financial consolidation system, OSCAR II. Delays reduce the value and transparency of information in the Whole of Government Accounts to the public and to decision makers in government, and reduces the certainty of any consequent insights, conclusions or decisions. 

The PAC also warned that failures in the local audit market in England are resulting in poorer-quality financial information to use in overseeing local government, as well as contributing to the delays in preparing the Whole of Government Accounts. 

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said: “Failures in local government audit have left councils operating in the dark, without the management information needed to make key spending decisions in the round and balance their books. Now we see the same picture emerging in the cross-government national accounts. 

“We still desperately need to see the big picture as the government balances one massive intervention after another – from the pandemic response to the interrelated energy, climate and cost-of-living crises we face now and into the future. The public also deserves a clear and transparent record of the full costs and liabilities that generations of current and future taxpayers have been committed to.”

Almost all local authorities are individually immaterial to the consolidated financial position, and HM Treasury has raised the component audit threshold for the 2020/21 Whole of Government Accounts, such that just 10 local government returns will require audit clearance, speeding up the consolidation process. The PAC warns that this may have negative consequences for the quality and reliability of data unless the Treasury undertakes additional assurance work to mitigate this risk. 

ICAEW’s Public Sector team submitted written evidence to this inquiry (ICAEW Representation 47/22),highlighting the importance of Whole of Government Accounts for accountability and for informing decision-making, and warning that the extended delay in publishing the Whole of Government Accounts 2019/20 was detrimental to good governance. 

The Public Sector team highlighted that the crisis in local audit was one of the causes of the delay, and that radical action beyond the package of measures announced by the Department for Levelling Up, Housing and Communities is needed to put audit timetables back on track. 

Oliver Simms, ICAEW’s Manager for Public Sector Audit and Assurance and co-author of ICAEW’s submission to the PAC inquiry, said: “We welcome the Public Accounts Committee’s recognition of the importance of the Whole of Government Accounts and share their disappointment in the 26-month delay to the publication of the 2019/20 accounts. 

“The Committee is also right to highlight how the crisis in local audit is undermining the timeliness and quality of the financial information available to central government in its essential oversight of local government finances. Our submission to the Public Accounts Committee stressed the importance of urgent action by the government to address the problems in local audit in England and get the Whole of Government Accounts back on track.”

The report also flags up inconsistent presentation of data between years, and lack of reflection of current Government policies and economic context, which it says reduces the usability of the Whole of Government Accounts. And despite improvements to the narrative content of the Whole of Government Accounts, it does not transparently report against all key areas of government spending. 

The Committee also called for a report on specific areas including spending on net zero, government emissions, fraud across government and the long-term costs of COVID-19 interventions. It also recommends including the equivalent of a viability statement in future Whole of Government Accounts.

HM Treasury is also being urged to review the causes of its optimism bias in its timetable for 2019/20, and revisit future timetables to ensure they are realistic. The Committee has asked HM Treasury to confirm in writing whether it remains on track to deliver the 2020/21 Whole of Government Accounts by March 2023.

Martin Wheatcroft FCA, external advisor on public finances to ICAEW and a co-author of ICAEW’s PAC submission, commented: “HM Treasury continues to deserve praise for its continuing efforts to improve the quality of the Whole of Government Accounts, a world-leading set of consolidated financial statements for the public sector prepared in accordance with International Financial Reporting Standards.

“However, the Public Accounts Committee is also right to criticise the extended delays in publishing the 2019/20 accounts and to call for further improvements, especially in narrative reporting where there is still some way to go to match best practice in the private sector.

“The Whole of Government Accounts provide a much more comprehensive picture of the public finances than that available from the traditional fiscal measures of deficit and debt, providing better information to support decision making as well as enhancing transparency and accountability. At a time when the public finances are under significant pressure, up-to-date accounts are more important than ever.” 

Dame Meg Hillier MP, Chair of PAC, will be giving a keynote address at the virtual ICAEW Public Sector Conference on 9 December 2022. You can book your free place here.

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