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You and whose army?

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16 September 2010

By Dan Herbert

The government’s data-sharing revolution has begun and armchair auditors have an array of website weapons to choose from. This is not a threat to the public sector but an opportunity for greater accountability, argues Dan Herbert

One of David Cameron’s first actions as prime minister was to write to all government departments outlining plans to open up government data. He believes greater transparency leads to improved accountability and better value for money. His vision is that individuals, groups, companies and not-for-profits will build websites and applications to analyse the newly available data.

It is easy to see this as an unrealistic ideal. Indeed, David Walker’s September 3 article in Public Finance, ‘Are you sitting comfortably?’, suggested just this. However, just four months on from the election there are signs that the Cameron plan could radically change ­accountability models for public bodies.   

One of the more significant moves was the requirement for public bodies to disclose far more detail about their spending. For central government, this started with the decision to publish the Treasury’s Combined On-line Information System. Coins contains, among other data, details of spending plans and outturns across central and local government: an estimated 3.3 million data items just for the 2009/10 ­financial year.

Almost immediately, groups, ­newspapers and companies started to mine the data. The Guardian produced a tool that allows individuals to explore the complex figures, and spending analysts Rosslyn Analytics used their software to study the data in detail. A more novel approach is the wheredoesmymoneygo.org website, which produced a ‘dashboard’ of the spending data broken down by function.

Local authorities are being asked to go even further than central government. By January next year, they will have to publish details of all purchases from suppliers worth more that £500. Many authorities have released this information already.

When Local Government Secretary Eric Pickles announced the abolition of the Audit Commission, he said his vision was for an ‘army of armchair auditors’ to do the work of the watchdog using this newly released spending data. And there is indeed at least one armchair auditor. Adrian Short’s website, armchairauditor.co.uk  has taken the spending data for the Royal Borough of Windsor & Maidenhead and presented it in a format that allows users to explore it right down to individual payments to suppliers. More importantly, he is distributing his application under an open licence, allowing others to use it for any other authority.

Another website, openlylocal.com, ­provides comprehensive and accessible information on local authorities. It has used the data to allow users to see spending at transaction level, alongside other detailed information about each authority. Then there’s spotlightonspend.org.uk, developed by data analysts Spikes Cavell. This publishes data for authorities and lets users explore spending by type, using Standard Industrial Classifications.

There have been teething problems and not all data has been published in user-friendly formats.  For example, with PDF files, analysts have to extract the data manually before they can use them. Much more useful is a machine-readable form such as .csv, which can be used for ­automated ­analysis applications.

Sometimes the categorisation of data itself can lead to misunderstandings. On Spotlight On Spend, Woking Borough Council appears to have spent £18,254 on lingerie. The payment is actually a refund of business rates but the use of Standard Industrial Classifications as the basis for analysis does not make this clear.

These issues aside, it is clear that, in a relatively short space of time, what Adrian Short refers to as a little platoon, rather than an army, of armchair auditors has appeared. In a slightly haphazard and uncoordinated way, they are producing applications that provide a whole new approach to public accountability. Bodies publish their data and the armchair ­auditors do the rest.

As Lisa Evans, the lead researcher for Where Does My Money Go?, says: ‘If you publish your data in machine readable form, you pretty much don’t have to worry about presenting this data — there is already a community who will do it all for you for free. Everyone wins.’

Once the data is available and ­presented, the real power of web-based disclosures kicks in. Public sector accountants have long struggled to involve the public in discussion about financial matters. But the perceived complexity of accounting reports, the professional jargon and the degree of aggregation is offputting to non-experts.

The annual reporting cycle also ­limits the extent to which the public can be involved in discussion of accounting reports. Evidence of this is the poor use of the public right to inspect local authority accounts. The discursive possibilities of web-based disclosures overcome this to some extent. The Armchair Auditor allows comments on individual transactions. Openly Local contains not just spending data but details of councillors, with their e-mail addresses and committee memberships. Asking ­direct questions is easy and quick, using information from a single source.

It would be easy to dismiss the work being carried out by these new analysts but it has struck a chord not just with the coalition government but with the public. In many ways, it is the antithesis of the approach taken to reporting by the accounting profession. It is unregulated, without standards and based on granular, rather than aggregated, information. The data released is unaudited. The analysis undertaken is personal and subject to possible error. The open data community would not see these as particular weaknesses. If data is made open, then the community can comment on it, improve analyses and correct errors. The power of web communities to develop complex applications should not be underestimated as ­Wikipedia and others have shown.

But is Pickles’ claim that the armchair auditors can replace the Audit Commission valid? If transactions are being scrutinised by individual members of the public, then there are checks on the probity of spending. As Jeremy Bentham said in 1791: ‘The more closely we are watched, the better we behave.’ More problematic is the judgement of processes and controls, which cannot be assessed merely from looking at transactions. Nor can the outcomes of spending. The information being released is limited; there is no salary data, nothing on small transactions, nothing on internal transfers and nothing that links budgets to outturns. There is no information on asset management, borrowing or reserves. So, yes, there is a limited armchair auditing role but not a full replacement for audit yet. However, there is huge potential to extend and ­improve the open data made available.

The focus on auditing is perhaps ­missing the most important implication of all this –  that a new channel of financial accountability is being opened up. For example, Freedom of Information requests about specific transactions can be made more easily. Combining spending analysis websites with sites such as ­whatdotheyknow.com, which provides a channel for automated FoI requests, has built a new accountability mechanism.

These developments give public bodies an opportunity to involve citizens in financial matters and, at a time of spending cuts,  to explain the decisions that have to be made. Bodies that treat the release of spending data as a tick-box exercise will miss out on the possibilities. The people working on this are highly skilled at analysing and communicating data but they are not finance professionals. And they are certainly not just local busybodies with an axe to grind. 

Chris Taggart, who runs Openly Local, emphasises that there is an opportunity here for forward-looking finance professionals to liaise with analysts and the wider community to improve accountability and public participation. Perhaps the failure of the public to embrace accounting information, as noted in David Walker’s article, is due to the way that the profession has presented the information. Armchair auditing could be a powerful tool to build involvement through improved communication; an opportunity rather than a threat.

Dan Herbert is MSc Accounting programme director at the School of Business, Oxford Brookes University
Comments
This idea will just stretch what will become limited resources. Data on its own can be misleading and the amounts of questions and queries will tie up hundreds of officer hours and outweigh any benefits. Freedom of Information queries are bad enough.It is not best use of what will become scarce resources and £500 is too low a level – what about grouping types of spend i.e monthly spend on equipment? This idea won't be popular and won't last long

jane kenny (20/09/2010 21:12:33)

Our new "armchair auditors" should remember the objective is not simply to be more efficient and effective - important though that is. The primary objective must be to inform and thus improve our framework of political debate. And the latter must remain, at base, a subjective political process and one that demands essentially political judgements. So as a practical matter better information systems are indeed required, but first to see what has actually happened and if it was as intended - and then to see all this has been taken on board as the formal estimates go forward for decision.

Sir Tim Berners-Lee's invention of the Internet has indeed changed the world in intensely political ways but information theory still contains no chapter on political leverage. So in the meantime it is naive to imagine that just festooning the internet with financial data and stimulating ad hoc comments can somehow compensate for the deficiencies in our public audit systems and the abiding scandal of the UK parliamentary supply procedure. As the Hansard Society famously reported: 'To draw an analogy, the government decides the value of the cheque, to whom it should be paid and when, and Parliament simply signs it', (The Fiscal Maze, 2006).

In these circumstances just publishing masses of data without a coherent framework of debate is the proverbial 'Tower of Babel' - with Coins a further example! Of course the government has proposed improvements to both our audit and supply procedures. But none has yet surfaced to address the above fundamental deficiencies. We may soon have a system of 'sofa government' that relies on armies of 'armchair auditors' – and moreover as we begin to face the constituency fallout from totally unprecedented public expenditure cuts! I recall Winston Churchill calling democracy the worst form of government except for the others that had been tried. As a Churchill Fellow myself I would say – now is the time to make sure!

Des McConaghy (21/09/2010 09:14:44)

Jane: You can't have it both ways. For years public sector accountants have bemoaned the lack of public engagement in financial reporting. Indeed, many of the recent developments in public sector accounting (including the move to IFRS) have claimed to be in the name of improved public usefulness. Then when a development that really has potential to improve engagement comes along you moan it will be too intrusive. The knack will be to engage with this process in a way that improves transparency and engagement without the unnecessary burdens. This is where you need to talk to the folk behind Openlylocal and Armchair Auditor. They are far more expert than anyone in a finance department at public engagement.

Des: I don't think I or anyone else has said that the system as it is now can replace public audit. But as you well know audit and accountability are not the same thing. This is where the Audit Commission went wrong; they 'improved' their audit processes and reports but forgot the accountability process. Accountability works when those in who a trust has been placed answer directly to those placing the trust. Festooning the internet with data is not an end in itself but it does have the potential to reforge the direct link between principals and agents that has been lost in the ever more abstract performance measures and assessments. The data publication situation at the moment is very fluid. It is in essence a piece of action research. What it has shown is that there is potential here to extend (and possibly in time improve) the debate around public spending and financial accountability. The other thing it has shown is that there are members of the online community who can harvest, analyse and communicate complex data much better than the professionals inside public bodies.

Dan Herbert (30/09/2010 14:11:01)