RESOURCE ACCOUNTING
AND BUDGETING
5. A note describing progress in implementing
resource accounting and budgeting would be helpful. In particular:
(a) Are you producing "practice"
resource accounts for 1997-98?
The Department has produced "practice"
accounts since the 1995-96 financial year, continually improving
the format and content and will be producing similar accounts
for 1997-98. The `practice' resource accounts have been reviewed
by the National Audit Office.
(b) Have you systems now in place for
producing full audited accounts for 1997-98?
Accounting systems have been introduced and/or
enhanced over the last few years. The only system that remains
to be introduced is one that records grant creditors; this is
expected to be in place for March 1999. The 1997-98 practice accounts
will be the last of their type; full audited accounts are to be
prepared for the first time for the 1998-99 accounts.
(c) What do you now estimate the costs
of implementing resource accounting and budgeting to be?
The estimated cost of implementing Resource
Accounting from 1 April 1993 to 31 March 2001 (the latter date
being the end of the financial year for producing the 1999-2000
accounts, the first set of accounts to be audited and published)
and the initial development work on Resource Budgeting to the
same date is of the order of £1.5 million. Further detailed
work on developing and implementing Resource Budgeting has still
to take place and will involve all areas of the Department. This
could add up to another £0.5 million between now and 2000-2001.
The transfer of functions to the National Assembly for Wales may
have implications for these costs.
(d) What advantages and disadvantages
have you identified so far?
The advantages identified are:
— Potential for improved cash management;
— Better control over fixed assets;
— Improved control of stock;
— Greater emphasis on outputs, rather
than inputs;
— Clearer picture of Department's financial
position; and
— Potential for maximising use of budgets
within and across years.
The disadvantages identified are:
— Greater cost of gathering additional
information required and maintaining systems;
— At present a more limited internal
and external knowledge of accrual accounting and thus lower level
of understanding than for cash accounts (this will be addressed
through training); and
— Potentially complex Resource Budgeting
requirements with cash and budgetary controls (still under consideration
with Treasury).
(e) What have been the implications for
management?
There have been a number of changes resulting
from the advent of resource accounting and budgeting:
— Managers have had to produce extra
information for inclusion in the accounts, for example—asset
details, stock levels, prepayments and accruals, staffing details.
This has meant greater attention to these aspects for all level
of managers, ensuring that all these systems are up-to-date, accurate
and that value for money is being obtained.
— Managers are developing systems to
apportion their time and costs to Objectives and further developing
information on targets and outputs. The full cost of the Department's
Objectives will be shown in the annual accounts, along with the
previous year's outturn for comparability. Supporting the Objectives
will be an Output and Performance Analysis which details the Targets
which demonstrate the achievement of the Objectives. Senior managers
will be responsible for and report on these each year.
— There has been a steep learning curve
on this initiative, particularly with resource budgeting. The
latter element will continue over the next two years and will
have the largest implications for managers as they come to terms
with monitoring budgets on a resource (accrual) basis. A pilot
study on how this new system will actually work is to start this
summer.
ESTIMATES
6. What are the implications for the Estimates
and Vote structure of (a) resource accounting and budgeting and
(b) devolution? (A "mock-up" would be helpful.)
We anticipate a simplified Estimate and Vote
Structure for the Secretary of State and the Welsh Assembly; the
details are still being worked on.
CAPITAL EXPENDITURE
AND THE
PRIVATE FINANCE
INITIATIVE
7. What is the planned decrease in total
capital expenditure for 1998-99? To what extent will this be offset
by PFI investment?
Between 1997-98 and 1998-99, capital plans will
reduce by about £64 million.
Assuming that projects are signed on time, some
£233 million of investment is expected to
result from PFI deals secured during 1998-99.
8. A consolidated list of all of the Department's
current PFI projects would be helpful, showing the capital value
of the assets and total and current expenditure commitments. Details
of the six "pathfinder" local authority PFI projects
(paragraph 7.17) would also be helpful.
Private Finance Initiative: Welsh Office
Projects 1
