15 July 2005
Public sector organisations lag far behind their private sector counterparts when it comes to accurate and timely financial reporting, auditors said this week.
The Audit Commission said action was needed to improve the present situation where a quarter of councils have to resubmit their accounts because of errors. This is a deterioration on last year's figure of one in five.
'Because local authorities are being required to produce accounts earlier they are focusing on speed and sacrificing quality in that process,' Audit Commission chief executive Steve Bundred told Public Finance.
Matters are better in the NHS, where auditors reported a significant improvement in 2004 compared with the previous year. But concerns remain about the quality of accounts at 18% of primary care trusts.
Bundred said it was disappointing that managers in both local government and the NHS were not taking their financial reporting responsibilities seriously enough.
'In local government, there is no requirement to have internal audit committees, whereas in the NHS audit committees are standard,' Bundred said.
However, he added, in the NHS it was the growing number of individual organisations in deficit that was a major concern.
CIPFA chief executive Steve Freer agreed that many councils and health trusts need to improve aspects of their financial management. But he added that part of the problem lay with the budget process, which swallowed up large amounts of interest and attention in public bodies. 'It is the forum in which often controversial decisions about services and, in local authorities, tax levels are taken. In many ways, end-of-year financial reporting lives in the shadow of the budget,' Freer said.
He added that more streamlined and efficient budget processes were needed.
The Audit Commission's July 13 report, Stewardship and governance, calls for local authorities to be required to produce an annual report to improve accountability.
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