3 March 2011
Lack of financial expertise at the highest levels of the civil service is jeopardising Whitehall’s ability to devise effective spending cuts.
That conclusion has come in a National Audit Office report Progress on improving financial management ingovernment published today. It found that no Whitehall department has reached the highest level of financial management and called for a cultural change programme to put this right.
‘Effective strategic financial management has never been more important [as] the scale of cost reductions proposed in the public sector means that departments are looking beyond either reductions in discretionary spending or efficiencies in existing operations,’ it said.
Last October’s Comprehensive Spending Review called on departments to identify spending priorities based on accurate assessments of costs, benefits and risks. But auditors found that ‘active management of cash flows and the balance sheet remains generally inadequate across government’.
The NAO has defined four levels of capability in financial management. The highest – ‘enterprise’ – would see the finance function as a centre of excellence with its information central to decision making.
No department had achieved this level, while some were at best only ‘showing elements’ of reaching the second ‘enhanced’ level.
But almost all had reached the ‘core competence’ level, improving from the lowest ‘inadequate’ tier.
This lack of financial capacity meant ‘financial matters still do not have sufficient influence over strategicdepartmental decision-making’, auditors found. Many departments did not fully understand the costs of their activities, while the possession of good information on unit costs, productivity and value ‘remains unusual’, the NAO said.
Departments were also found to be ‘generally weak at monitoring their overall financial position’, with balance sheet information provided to boards only to approve accounts.
The NAO called for a culture change programme that would see accounting officers demonstrate a clear commitment to achieving ‘enterprise’ status and to fully involving qualified finance professionals in decisions.
NAO head Amyas Morse said: ‘There have been some important improvements [since 2008]. However, 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.’
