Examination of Witnesses (Questions 20-39)|
WEDNESDAY 7 NOVEMBER
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
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 questionwhich I think
is probably the most interestingis 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 usand we have looked into itthat 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
24. That sounds like code as well.
(Professor Sir Andrew Likierman) There is a problemif
I can widen itof 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 whichnever mind the PSreallocation of
responsibilities by DEFRA and by the old DAI has affected the
preparation of these accounts. How significant has the problem
(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.
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
36. Would you accept as well, if you compare
central government with local governmentand apart from
being in business, I was a local authority leaderthat 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
37. Would you say in terms of that rather low
ambitionnamely, you decided in 1994 to do something in
2001as 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
(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