The National Audit Office’s review of financial management has reassured the Home Office it’s on the right track
Not many organisations look forward to an inspection, yet the Home Office welcomed the chance to be among the first Whitehall departments for the National Audit Office’s review of financial management, and the first to be discussed by the Public Accounts Committee.
It was an opportunity to check the progress of our improvement and to show the outside world we had overcome many of the problems we encountered just a few years ago. Etched on memories were the bruised feelings of the Home Office finance community in 2006 when the NAO disclaimed the 2004/05 accounts and PAC chair Edward Leigh said: ‘Such failings must never be repeated.’
We had already passed some major landmarks, including 2007/08 unqualified accounts. And the Institute of Public Finance, in an assessment using the CIPFA financial management model, concluded late last year that ‘the Home Office performance was impressive’.
But although the NAO promised to take account of these findings, there was no guarantee it would agree. So it was a great relief when it concluded: ‘The Home Office has made substantial improvements in its financial management’ and Leigh said: ‘Its financial management is stronger and accounts are being kept in better order.’
It is unusual for the PAC to offer praise but by recalling the Home Office to discuss the report, it gave the committee an opportunity to claim credit for the progress that has been achieved and to pick out areas of continuing concern, including capital underspends in recent years.
The report goes significantly beyond the standard brief on financial reporting to look at the whole system of budget and financial management. Its main findings include:
- Progress achieved – sustained strong visible leadership; more qualified finance staff; better financial planning and budgeting; more robust financial decision making; and strengthened financial monitoring, forecasting and reporting.
- Areas for further improvement – embedding good financial management across the Home Office; capital programme management; providing longer-term funding agreements with partners; and establishing clearer links between use of resources and outcomes.
The sustained senior leadership commitment has been crucial but the wider professional team has also been strengthened as we are a firm supporter of the Warwick University/CIPFA fast-track qualification programme. The number of qualified accountants has risen by more than 50% since 2006 and we have a pipeline of trainees. We are taking on 16 financial management trainees this year, who will be qualified in three to four years with varied experience across the Home Office.
The NAO was also impressed by the regular operating reviews of each business; tighter controls, which have resulted in resource spend in 2008/09 coming in at more than 99% of budget; the embedding of financial advice in policy making; and the progress on the accounts at a time when we had to deal with major machinery of government (and other) changes.
Both the NAO and IPF rightly pointed out that we have some way to go if we are to achieve our ambition of providing ‘world-class financial management’. We need to encourage all staff to see good financial management as a core part of the day job, particularly in the tough times ahead. We need to get the right data more smartly to allow us to focus on the value added part of the job: ‘right first time’ is our mantra. We must understand better the link between the investments we are making and the outcomes we are achieving: not easy, given the complex environment we are working in. And we need to recruit and retain enough high-quality finance staff, a task we hope will be made easier by the headlines from this NAO report and changing market conditions.
Improvement work is under way in many areas. Our capital programme planning achieved an outturn of 97% against the budget in 2008/09, a significant improvement on previous years. This reflects the steps we have taken to ensure realism in profiling capital spend, redeploying resources at an earlier stage if slippage occurs and strengthening programme management.
The NAO review has reassured us that we are on the right track to achieve world-class standards. We are already looking forward to the next one…
Peter Kane is director of performance and finance at the Home Office
