Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 20-39)



  20. Yes, he was a tax accountant. His name was Mr Michael Stern. He was a Member of Parliament.
  (Professor Sir Andrew Likierman) The reason I asked the question is that in preparing resource accounts, cash is an integral part of resource accounts. We are not abandoning cash accounting, we are not abandoning cash control. Parliament continues to vote cash and resources when it votes Supply. Therefore, far from having less control, Parliament has, if I may say so, more control. It has far more information that it has ever had before. Indeed, if perhaps I can wave around yet another booklet, this red booklet, it is potentially of enormous value to those who wish to understand how to analyse resource accounts. We have produced an analysis framework which anybody can use to understand how better to get the information out of these accounts. So I would suggest, with deference to the source of this question, that the gentleman perhaps may not have appreciated just how much information is now available in the resource accounts which simply was not available before, and that includes a great deal of information about cash.

  21. Could I go through some of the concerns expressed by the Comptroller and Auditor General in relation to particular problems, and perhaps ask you to address each one of them in turn. He mentions questions of staff, having enough skilled staff; questions of procedures and systems, and whether they are robust enough; and then the third question—which I think is probably the most interesting—is about effective senior management review of financial information. The first one is about staff and whether there are enough skilled staff. Could you talk about that in the context of each department and whether there are any problems specifically in relation to staff?
  (Professor Sir Andrew Likierman) First of all, I should say that we have acknowledged that adequate staffing has been a problem, there is no question about that. We are at one with the National Audit Office on being concerned about the question of skilled staffing in departments. The Comptroller and Auditor General, as I recall, mentioned five departments in his memorandum, for which there were specific staffing concerns. We have plans for all five of those departments. Three of the departments have assured us—and we have looked into it—that they feel that their staffing problems are not now as great as they were, and they feel they have enough qualified staff. Two have plans to get the relevant qualified staff. Again, I should say on staffing, if a key person leaves a department, there can be an issue immediately, and again we are very concerned that it is not just a question of saying, "Is the right staffing in place now?" but "Is there a staffing regime in place which enables the department not to be vulnerable?" I do not think we have got where we want to go yet in quite a lot of areas of Whitehall, but this is something of which the departments have become very much aware as problems which have arisen in the preparation of the accounts. So all I can say is that we have asked for assurances on the staffing front, we are monitoring staffing and, indeed, in many cases we are helping departments to recruit and then retrain the qualified staff that they have. So we do see this as a role where we can be helpful from the Treasury's perspective.

  22. What about procedures and systems and whether they are robust enough?
  (Professor Sir Andrew Likierman) Again, I think it was four departments mentioned in each case by the Comptroller and Auditor General in his memorandum. It is quite difficult at this stage, until we see the results of this year's audit, to see whether these departments have delivered or not. The departments themselves have said that they have made improvements, they have indicated to us how they have made improvements, but the proof of the pudding will be in the Comptroller and Auditor General's report where we see whether that is so. Again, we are monitoring that all the time to try to make sure we are aware of related staffing problems. Indeed, if we feel there is a staffing problem that the department has not notified us about, we are going in to say, "We think you have a problem. Is there something here we can do to make sure that you solve it?"

  23. The most interesting thing, I think, is probably effective senior management review of financial information. That sounds suspiciously like a code for saying that there are some senior managers in some departments who are simply not taking this seriously enough. Is that fair?
  (Professor Sir Andrew Likierman) There is a cultural problem here.

  24. That sounds like code as well.
  (Professor Sir Andrew Likierman) There is a problem—if I can widen it—of both culture and history. There is no history in this field and this Committee has had before it many who have been afflicted by the problem. There is no history of people using this kind of information as part of the way they manage on a day-to-day basis. As I said before, I think one of the huge benefits of moving from the previous system to the current system is that we will get much greater awareness of financial matters, especially by senior management. I think it is fair to say that senior managers have not had awareness of this kind, and again we are doing whatever we can to try to remedy that. Perhaps I can give you a specific example.

  25. I want to ask you something here, because I do not have much time. The pink, green, blue and various other coloured booklets you are producing are obviously very welcome, but what else is being done? Rather than just giving them a book and saying, "Go away and read this", what specifically is being done to draw to the attention of senior managers in the departments the profound importance of taking this seriously? Are you dragging them off for away weekends and things like that?
  (Professor Sir Andrew Likierman) No, we hope we are going to be even more effective. We have at the moment a project to deal with the senior management throughout Whitehall. This month we are meeting the personnel directors of—

  26. To "deal" with them? Excellent.
  (Professor Sir Andrew Likierman) Could I strike that from the record. To "help" the senior managers in Whitehall.

  27. Who do you think needs the most help?
  (Professor Sir Andrew Likierman) Quite a lot of departments I think need quite a lot of help. Perhaps I can answer your question directly. We are meeting with personnel directors to consult with them on how best to reach the senior management in departments with specifically targeted training programmes. We think this is the right moment to do so, because now resource budgeting is coming in and their attention is very much focussed on the implications of the changes for their own departments. So what we are doing is trying to see how best to target individual departments. You mentioned away days. It may be that some departments find it best to have an away day and some departments find it best to have some other means of communicating. We are seeking to provide them with the material and, if necessary, the resources to do that, so we are seeking to help to enable them to raise the skill levels of the senior civil service.

  28. In paragraph 28 of his note the Comptroller and Auditor General says that "Any failure to meet the deadline this year will increase the risk that, if problems emerge from the audit, they will not be resolved ahead of the statutory deadline for laying before Parliament on 31 January." Could you tell the Committee where are you really worried, in relation to which departments are you really worried?
  (Professor Sir Andrew Likierman) For this year's accounts?

  29. Yes, and going forward.
  (Professor Sir Andrew Likierman) I think it has to be said that if I took the balance of risk, it would probably be DEFRA and the Home Office who have very substantial backlogs of issues to deal with. So I think those probably are the two where I would feel most concern.

  30. You did say it is not rocket science, and of course accruals accounts is something which is done in the private sector, so it is not rocket science. Lots of departments are making progress on getting it right or increasingly right, and some are not. That can only be down to people in those departments not getting it right, is that right?
  (Professor Sir Andrew Likierman) To be fair, I think that in the example of DEFRA, DEFRA has had a great deal on its plate, and I guess therefore that has possibly taken their eye off the ball in this particular respect. So I am not saying that these two departments have necessarily not done what they ought to have done because of negligence. I am saying that these are the two departments which have turned out to be furthest behind.

  31. I want to go away completely from the management question. One of the questions I wanted to ask you was about the degree to which—never mind the PS—reallocation of responsibilities by DEFRA and by the old DAI has affected the preparation of these accounts. How significant has the problem been?
  (Professor Sir Andrew Likierman) We have not received notification from departments that this has been a problem in accounts so far. We are clear that there will be some implications here for departments, including the two I have just named, as a result of the reallocation of responsibilities, They will have issues for this coming year, but this has not figured as largely as we might have expected. This could be because we have not been notified about the problems, but again the auditors are probably in a better position than us to answer that question.

  32. I want finally to ask you a question about financial information and using that information on a regular basis month by month. Some years ago, when I was working for the Management Consultancies Association, we wrote to you and indeed to Sir John Bourn stressing that the experience of consultants in terms of implementing resource accounting and budgeting was that time and time again people were not taking resource accounting and budgeting and using it for the management information which it made available but purely as another accounting device, and that approach was having consequences for how seriously it was taken by management, while in fact it could only effectively be used as a management tool if it were to be taken more seriously. The Comptroller and Auditor General says in his note in paragraph 32: "In other areas of financial management, such as using accrual information to support better decision making, the practices in departments are less well developed and departments are only just beginning to appreciate the full potential of the information systems now available to them." You mentioned the cultural and historical difficulties. What steps do you think need taking to ensure that we get, if you like, a quantum shift that does not carry on being a problem two, three, four, five years down the road in terms of management in the public sector?
  (Professor Sir Andrew Likierman) I have mentioned already a number of steps that we are taking to bring these things to people's attention and disseminate best practice around Whitehall, but I must say, I am not completely surprised that a number of people in the higher levels of departments have not yet got the full message. It is only when we have resource budgeting fully in place that it will begin to bite in a way that affects departments on a wide scale rather than simply a few people preparing the accounts. Similarly, only when the accounts are resource accounts and departments are accountable on those accounts, as primary documents for Parliament, will it begin to be most effective at the highest reaches of the departments. So I think there is a question of a timescale here. We have always had a catch 22 problem. Until such time as we have brought it in, people have not taken it seriously, but we have not been able to bring it in until people have taken it seriously. That is why, going back to your first question, we have, I hope, broken the logjam to bring this information in and now seek to get the best out of it.

Geraint Davies

  33. This document is very interesting. May I ask you, incidentally, why the Treasury are not here? I do not know whether there is an answer to that.

  Chairman: Presumably the Treasury are not here because the Treasury are here as witnesses, is that right?
  (Sir John Bourn) I understand that with regard to Mr Glicksman, who is the Treasury Officer of Accounts, his brother died either today or yesterday, so it is for a personal reason of that kind.

  34. Obviously one of the departments you are looking at is the Treasury, is it not?
  (Sir John Bourn) Yes.

  35. Clearly we are in a situation where we are about to move into resource accounting. When I was first exposed to this issue in 1997, the Government then, and the previous Government presumably, had been talking about resource accounting for years. Are you not disappointed as a professional that so many mistakes are being made and so many departments are late?
  (Professor Sir Andrew Likierman) Yes, to answer your question directly.

  36. Would you accept as well, if you compare central government with local government—and apart from being in business, I was a local authority leader—that the local authorities are regarded as unprofessional by central government in some sort of prejudiced way? Would you accept that they have effectively been doing resource accounting in terms of revenue and capital accounting for years, and that central government is miles behind?
  (Professor Sir Andrew Likierman) Two comments, if I may. I said "Yes" because, as I have indicated, I am always disappointed if an account is qualified. I should say that when this project started in 1994 we said that we would wish to introduce it in April 2001, and that is what we did. So in that sense, in terms of the way the project has gone, I am not disappointed.

  37. Would you say in terms of that rather low ambition—namely, you decided in 1994 to do something in 2001—as an accountant and a business manager, do you not think that that was an ambitious target, that we are now seeing a situation where everybody is rushing around and failing, and that that really is an appalling indictment of the management of the civil service?
  (Professor Sir Andrew Likierman) No, I am afraid I do not accept that.

  38. That is a relief.
  (Professor Sir Andrew Likierman) If I can go back to the presupposition, that timescale was based on a number of very important considerations. The first thing is that we wanted to minimise the cost by giving departments the opportunity to replace a lot of the systems as part of the normal replacement cycle, rather than having to rush in and introduce lots of new systems. Secondly, in terms of the position of departments at that time, we felt that was the realistic timescale, and that anything more ambitious than that would mean that we would be late and could go horribly wrong. I believe that was the right timescale to set, and in that sense, therefore, that I am not disappointed with the way in which things have gone.

  39. In light of the latest evidence, are you confident? Clearly you are not confident, are you, that we are going to reach those ambitions set in 1974, because clearly we are failing?
  (Professor Sir Andrew Likierman) I am sorry, I do not accept that, because some accounts were qualified even under appropriation accounts, and we are talking here about some accounts being qualified under resource accounts, which are very, very many times more complicated than appropriation accounts. An unqualified resource account is a much greater undertaking than an unqualified appropriation account, because of the different dimensions that it provides.

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