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Despite good progress in improving the professional capability and capacity of government finance departments since the National Audit Office last reported in 2008, good financial management is still not embedded in the civil service culture, and financial matters do not have sufficient influence over departments’ strategic decision making, according to the spending watchdog.

In recent years, the NAO has reported extensively on financial management in government departments. Using this body of work, the spending watchdog concludes that departments have achieved a core level of competence in financial management, but that further improvement in financial management capacity and capability throughout their organisations is required to enable them to meet the challenge of delivering the savings set out in the Spending Review 2010. 

There has been important progress –all departments now have a professionally qualified Finance Director, supported by an increased number of qualified finance staff. The Treasury is also implementing accounting changes to bring greater transparency to government financial reporting. There are some examples of substantial improvement, including at the Home Office. However, achieving further progress will require all Accounting Officers as the leaders with the most influence on Whitehall culture to demonstrate clearly, through their leadership of departments, their commitment to putting financial management at the heart of their organisation.

Whitehall’s central finance functions competently capture and report the transactions and financial position of the departments. Annual accounts are delivered before the July Parliamentary recess. The number of overall overspends against the amounts approved by Parliament is low. However, departments are generally weak at monitoring their balance sheets and at forecasting cash flow in the medium term.

Departments do not fully understand the costs of their activities, and it is rare for them to have good information on the unit costs of outputs, levels of productivity or the value of outcomes. Departmental Boards are not normally presented with balance sheet information, such as on stock levels and investment in assets. Departments generally focus on monitoring against the agreed one-year budget, with a few looking as far ahead as the current spending review period of four years.

Amyas Morse, head of the National Audit Office, said today:

“Since the Public Accounts Committee last reported on financial management in government, in 2008, there have been some important improvements. However, there is scope for still more progress in two significant areas:

• Despite a clear commitment from the centre, we do not yet see good financial management strongly positioned as an indispensible part of departments’ deficit reduction strategies; and
• We do not feel that the culture of the Civil Service has yet taken information-led management, and financial management in particular, to its heart.” 

Notes for Editors

1. Press notices and reports are available from the date of publication on the NAO website, which is at http://www.nao.org.uk/. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
2. The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

All enquiries to Phil Groves, NAO Press Office: Tel: 020 7798 5339

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