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Managing resources to deliver better public services
12 December 2003
In a recent report, Managing resources to deliver better public services (available from: http://www.nao.gov.uk/publications/nao_reports/03-04/030461.pdf) the National Audit Office concluded, on the move to accrual accounting, (first announced more than 10 years earlier):
"In most cases it is too soon to identify any discernible benefits from better resource management in terms of contributing to improved public services from, for example, enhanced efficiency." (Page 31)
Thus the NAO appears to take a very critical view on the introduction of accrual accounting in the UK, although it is sometimes not explicit about this criticism, for example, the report also says that, "Just over a quarter of departments and agencies we examined have made good progress in implementing accruals-based accounting and were using it effectively to manage resources".
Thus, at least by implication, nearly three quarters of the departments and agencies were not using accrual based accounting information within their organisations to improve resource management. In only two departments and agencies (4 per cent) is information on their activity "reliable, regularly produced and underpins decision making and future investment strategy".
In addition, the NAO found that:
"Around half of the departments and agencies examined consider that for smaller organisations the arrangements under resource accounting and budgeting for requesting resources has created a level of administrative effort disproportionate to their size and the focus of their work" - page 6.
"Around 16 departments and agencies (35 per cent) still rely mainly on cash based management information and the preparation of accruals financial statements was a separate one-off exercise at the year end to meet external reporting requirements" - page 6.
"Progress in improving resource management is constrained in some departments by insufficient IT system capability and not enough financial expertise" - page 12.
"Greater use should be made of resource based information to improve efficiency to release resources for front line service delivery. Accruals based information in providing more comprehensive and complete cost and performance information is a powerful tool to identify scope to improve efficiency and make better use of resources. As yet it is not widely used in this way by departments" - page 13.
"Accruals accounting is, however, complex and requires more resources both financial and people to operate and many of the necessary skills are still being developed in departments" - page 28.
"At a general level accruals accounting is methodologically more complicated than cash accounting and some departments have encountered difficulties through their failure to implement full accruals accounting" - page 29.
"Departments identified a number of barriers which they considered explained why progress has not been more uniform or achieved more quickly. These were:
- Insufficient financial expertise. Some 63 per cent (29 departments) considered that this was a barrier though many are making good progress in addressing this.
- Understanding and awareness. Some 39 per cent (18 departments) consider that the main barrier to changing the focus of control from cash to accruals was raising awareness and understanding among operational managers who often lacked the necessary financial expertise.
- IT systems' capability. Some 11 per cent (5 departments) consider that their existing IT systems were not capable or not sophisticated enough to produce integrated financial and output performance information" - page 29.
"The Highways Agency's existing financial systems for example, were not designed for the production of resource accounts. Its first set of resource accounts in 1990 [sic] - 2000, were produced by consultants and temporary staff. This was an expensive process, costing more than £2.5 million or around three per cent of its total administrative budget" - page 30.