APPENDIX 4
Memorandum by the Chartered Institute
of Public Finance and Accountancy (CIPFA)
CIPFA is one of the leading professional accountancy
bodies in the UK and the only one that specialises in the public
services. It is responsible for the education and training of
professional accountants and for their regulation through the
setting and monitoring of professional standards. Uniquely among
the professional accountancy bodies in the UK, CIPFA has responsibility
for setting accounting standards for a significant part of the
economy, namely local government. CIPFA's members work (often
at the most senior level) across the public services, in the national
audit agencies and major accountancy firms. They are respected
throughout for their high technical and ethical standards, and
professional integrity. CIPFA also provides a range of high quality
advisory, information and training and consultancy services to
public service organisations. As such, CIPFA is the leading independent
commentator on managing and accounting for public money.
1. INTRODUCTION
AND SUMMARY
1.1 CIPFA is pleased to submit to the Treasury
Committee this Memorandum of comments on Public Service Agreements
(PSAs).
1.2 In general terms, CIPFA welcomes the
publication of Public Service Agreements as an important development
in increasing the public accountability of Government, by outlining
in detail government aims, objectives, performance targets and
the related resources available over the three-year planning period.
1.3 In summary CIPFA believes that:
— the publication of PSAs will lead
to improvements in the planning processes in central government;
— future publication of PSAs should
provide a clear link between planned resources, individual outputs
and intended outcomes;
— the division between Departmental
Expenditure Limits and Annually Managed Expenditure should be
reviewed;
— the traditional accountability structures
within central government should be reviewed given that there
is now a tendency for there to be shared objectives, between different
departments and agencies;
— consistent data definitions should
exist across government, to support the credibility of performance
reporting; and
— the performance data produced by
departments should be subject to external validation.
1.4 The comments which follow examine these
points in greater detail.
2. PSAS AND
THEIR IMPACT
ON PLANNING
2.1 In CIPFA's opinion the publication of
PSAs will provide an important stimulus to improve the planning
processes in central government and the related costing and financial
planning systems.
2.2 It is CIPFA's view that the Output and
Performance Analyses will result in a more detailed record at
departmental level of the outputs achieved on an annual basis,
within the longer term framework of objectives and targets set
out in the PSA. This, together with the introduction of resource
accounting and budgeting, will mean that for the first time there
will be a planning and reporting system in place for central government
that can support and enhance effective accountability.
3. LINKING RESOURCES
TO OUTPUTS
AND OUTCOMES
3.1 This first publication of Public Service
Agreements, whilst setting out total resource available to Departments,
does not explicitly link resource to individual planned outputs.
CIPFA suggests that future publications of PSAs should provide
this information.
3.2 A further challenge to Government would
be to provide an indication of the planned link between outputs,
as set out in the PSAs, and Government's intended outcomes. CIPFA
recognises the complex uses inherent to such a presentation but
believes publication of the relationship between intended outputs
and intended outcomes would serve to complete the accountability
chain the Government's new fiscal framework provides.
4. DEPARTMENTAL
EXPENDITURE LIMITS
AND ANNUALLY
MANAGED EXPENDITURE
4.1 PSAs set out Departmental Expenditure
Limits for departments and main programmes for the three Comprehensive
Spending Review years and also, in some cases, Annually Managed
Expenditure figures. CIPFA has some reservations that the absolute
boundaries between Departmental Expenditure Limits, which are
fixed for three years, and Annually Managed Expenditure, which
is subject to re-negotiation between government departments and
Treasury each year, may present artificial boundaries which could
inhibit the most cost effective application of public funds to
achieve Government objectives.
4.2 This is particularly the case when modest
increases in departmental expenditure limits may achieve more
significant reductions in Annually Managed Expenditure and bring
the achievement of objectives set out within PSAs to fruition
more rapidly. This may be the case, for example, in relation to
expenditure on the improvement of management and control systems
which may produce material payback in reduced programme expenditure.
CIPFA suggests that the absolute boundary between Departmental
Expenditure Limits and Annually Managed Expenditure should be
looked at again.
5. CONFUSED ACCOUNTABILITIES
5.1 Public Services for the Future: Modernisation,
Reform, Accountability includes three cross cutting PSAs for
the Criminal Justice System, Action Against Illegal Drugs and
Sure Start. There are also many examples embedded within individual
PSAs of inter-departmental and cross-government working and what
are, in effect, shared objectives between different departments
and agencies.
5.2 This recognition of the complexity of
public services across government challenges the traditional accountability
structure within central government and in particular the accountabilities
of individual Ministers and individual Accounting Officers within
each government department or agency. CIPFA is aware of some practical
impediments at the detailed level to resourcing of Government
initiatives which flow from the application of the rules of government
accounting in the more complex and integrated service delivery
environment which is reflected in the published PSAs. CIPFA believes
that a review of the accountability framework through Accounting
Officers would be worthwhile to support the effective administration
of Government finances in this more open, accountable and complex
environment.
6. CONSISTENCY
OF DATA
DEFINITIONS
6.1 In CIPFA's opinion the monitoring of
performance against PSAs, which will be included in the publication
of output and performance analyses, requires the development of
standard definitions and data sets for similar or equivalent measures
in different departments and over time.
6.2 If the publication of PSAs is genuinely
intended to herald the beginning of accountability for performance
over time within central government a standard set of definitions
for each of the objectives and targets set out within the White
Paper is needed. This would ensure the credibility of future performance
monitoring information. CIPFA does not underestimate the magnitude
of such a task, but as such data sets will be required in any
case for internal management purposes as well as for external
reporting it is worth undertaking.
7. VALIDATION
OF PERFORMANCE
DATA
7.1 CIPFA would welcome an indication of
the means by which future performance reporting against PSAs will
be assured. Just as financial reporting is subject to audit review—in
the case of central government by the Comptroller and Auditor
General—public reporting of performance against such a complex
range of output measures requires a degree of formal assurance.
7.2 In CIPFA's opinion performance against
PSAs should be subject to independent audit and verification.
Sound and meaningful performance data subject to independent validation
would provide a reliable basis for the scrutiny of the achievements
of departments and of particular spending programmes. Furthermore,
independent validation would establish the appropriateness of
measures and underlying systems, giving departments an opportunity
to reach an agreed set of measures and systems from the outset.
CIPFA recognises that there would be limitations to measuring
some of the performance data and that contextual issues will have
an influence. However if public confidence is to be enhanced,
it is essential that performance data can withstand scrutiny.
9 April 1999
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