HM TREASURY: RESOURCE ACCOUNTING AND RESOURCE
BASED SUPPLY
RESOURCE
ACCOUNTING
8. Under cash accounting, payments and receipts are
accounted for only when cash is paid or received. But under resource
accounting the cost of goods and services will be accounted for
when they are received; income will be accounted for when it has
been earned; and a balance sheet will be included which records
capital items as assets.[11]
9. The Committee asked the Treasury what they considered
were the main benefits of resource accounting. They said that
it would provide departments with better management information
on their costs and assets; help them to manage working capital;
focus more on outputs and not just on inputs; and make managers
more financially aware. It would also help government to allocate
resources on a better basis and have very substantial benefits
for Parliament through new and better-focussed information.[12]
10. The Committee were concerned to know whether
departmental staff had the necessary skills and training. They
asked whether the Treasury were satisfied that departments had
sufficient numbers of people who were qualified and had enough
experience in accounting to produce accounts to the timetable
envisaged. The Treasury had a great deal of information about
the recruitment processes for trained accountants and, also, about
the good quality of accountancy as practised by non accountants
in departments. They were very concerned to ensure that the initiative
was supported by both trained accountants and non-accountants.[13]
11. As training in resource accounting would be absolutely
crucial for staff in departments who did not have degrees in accountancy
we asked the Treasury about the kind of training programmes being
undertaken and whether the programmes would impart the necessary
expertise. The Treasury explained that in their own department
one of the initiatives associated with bringing in resource accounting
had been to identify a level of competence for each Treasury job
and then provide a training programme to ensure that staff had
the competencies to do that job. It was a very much more systematic
analysis of financial training needs than there had ever been
before. This approach was mirrored throughout Whitehall including
the Ministry of Defence. They were using the initiative to raise
the overall level of financial awareness.[14]
12. When asked how the training was being delivered
the Treasury replied that it was being delivered by departments
and, in some cases, it was validated by external accountancy bodies.[15]
The Treasury told us that there were variations between departments
but that mirrored their different requirements. They noted too
that for the past two years there had been a mechanism for exchanging
information about training in Whitehall which the Treasury chaired.
The Treasury did not themselves have the ability to deliver training
throughout Whitehall rather, their role was to encourage and co-ordinate.[16]
We asked whether the Treasury were satisfied with the quality
and consistency of training throughout Whitehall. They responded
that quite a lot of the training led to certificated qualifications
from accountancy bodies which were therefore externally validated.
However, much of the training was quite basic because a qualification
was not needed for a lot of the specific tasks involved.[17]
13. The White Paper[18]
on resource accounting and budgeting envisaged that departments
would have resource accounting systems in place by April 1998
and this was re-affirmed in the Treasury's memorandum of July
1997.[19] However, in
the memorandum, the Treasury had identified two departments, the
Ministry of Defence and the Department of Environment, Transport
and Regions, as being unlikely to meet the April 1998 target.
When asked about the progress departments generally had made in
achieving that target the Treasury told us that they and departments
were confident about meeting the stage one target by December
1998. They noted that stage one meant not just putting in systems
but having a number of elements of the systems in place to safeguard
the integrity of information. In that sense they considered the
overall time-scale was on schedule.[20]
They said that the task for the Ministry of Defence was greater
than that of any other department and perhaps as great as all
the other departments combined.[21]
The Treasury intended to provide the Committee with a further
progress report before the Summer Recess.[22]
14. Following a recommendation by our predecessor
Committee the Financial Reporting Advisory Board to the Treasury
was established in 1996.[23]
It comprised members drawn from the private and public sector.
The Board's remit was to introduce an independent element into
the process of setting the financial reporting standards for resource
accounts; to help ensure the accounts were governed by generally
accepted accounting practice and that any departures or modifications
were fully explained; and to examine the Treasury's Resource Accounting
Manual and keep it under review. In July 1997 the Board completed
its initial work of reviewing the Manual and provided a report
to the Treasury which the Treasury presented to the Committee.[24]
The Board's report endorsed the Manual. It, however, identified
a few issues which the Board intended to follow up such as whether
the accounting boundary of resource accounts should be widened
to include the results of the department's executive non-departmental
public bodies and trading funds.
15. The Board's report, while generally endorsing
the forms of the financial statements comprising the resource
accounts, also acknowledged that Parliament had a key interest
in these statements and that its views would need to be taken
into account.[25]
Conclusions
16. Resource accounting has the potential to improve
the financial information available to departmental managers and
Parliament. The aim set out in the 1995 White Paper and in the
Treasury's memorandum of July 1997 was to have systems ready by
April 1998. The Committee note the Treasury's view that all departments
will have reached stage one implementation by December 1998, which
includes having systems in place and controls to safeguard the
information. If the purpose of dry-run accounts for 1998-99 is
to test the new systems, then it is essential that the December
1998 target is met. We look forward to receiving the further report
on departmental progress which the Treasury are to make before
the Summer recess.
17. Resource accounting and its benefits will not
be achieved unless staff are trained to operate the new systems
and to make use of the information they provide. We note the assurance
that the Treasury have provided about the range of training programmes
being introduced across Government. A firm commitment by managers
throughout departments will be essential to making the changes
work.
18. In the light of the report of the Financial Reporting
Advisory Board we endorse the adoption of the Resource Accounting
Manual as the basis for preparing resource accounts. We note that
the Board will review the Manual in the light of its application
in practice and follow up outstanding issues. We shall be interested
in their views, particularly on widening the resource accounting
boundary. Parliament has a key interest in the form of the resource
accounts as they will replace Appropriation Accounts and will
become the main form of accountability to Parliament. We are content
with the proposed form but we intend to review it again once the
accounts have been published by departments.
11 Evidence, pp 90-103 Back
12
Q3 Back
13
Q10 Back
14
Q23 Back
15
Q25 Back
16
Q26 Back
17
Q27 Back
18
Cm 2929 "Better Accounting for the Taxpayer's Money",
Annex D Back
19
Evidence, pp 1-87, para 21 Back
20 Q6 Back
21 Q13 Back
22 Evidence,
pp 107-108 Back
23 15th
Report of the Committee of Public Accounts, Session 1994-95 (HC
407) para 22 Back
24 Evidence,
pp 87-88 Back
25 ibid Back
| 
