3The Accounts and the public
What the public wants from Accounts
13.Professor Sheila Ellwood, Professor of Financial Reporting at Bristol University, said that Government Accounts are “tied up with democratic accountability”.13 Ultimately, Members of Parliament “are the proxy for citizen auditors” and for voters.14 Professor Malcolm Prowle, Professor of Performance Management at the University of Gloucestershire said that the purpose of Accounts “is fundamentally to communicate information, probably financial information”.15 The International Public Sector Accounting Standards Board (IPSASPB) took the view that Government Accounts should provide ‘useful’ information to taxpayers, legislators and service recipients.16
14.Several witnesses told us that citizens needed information to assess the value for money of government services. Professor Prowle said that Governments need to communicate accounting information to their citizens “to discharge the accountability for the use of resources—how well this Government used my money, your money, [collected] from taxation”.17 Craig Mackinlay MP said Accounts should allow “the public [to]… perceive the performance of… different Departments”.18 In that context, he argued that the “the important thing is… [the] performance report” not just the accounts because it allows people to match performance to spend.19 Will Moy, the Director of Full Fact, told us “fundamentally what I think the typical taxpayer wants to know is ‘how is my money being spent and am I happy about that?’”20 PWC have said “financial information should be transparent in order to effectively hold Government accountable for its use of public funds”.21
15.The National Audit Office was clear that readers of Accounts should be able to “track how effectively taxpayers’ money has been used”.22 The Right Honourable David Gauke MP, the Chief Secretary to the Treasury, also drew attention to Parliament’s need for information from Accounts to scrutinise value for money: he said
I welcome in my role Parliament scrutinising public spending. We have a shared objective to ensure there is good value for money for the taxpayer [ … .] In order for Parliament and parliamentarians to do this effectively very often this does require a good understanding of Accounts.23
Julian Kelly from the Treasury said Annual Reports and Accounts should give “taxpayers and in particular Parliament the ability to hold Departments and the Government to account for the way the money has been spent”.24
16.For this objective to be achieved, Annual Reports and Accounts must be clear to the ordinary user. Craig Mackinlay MP, the Parliamentary observer on the Financial Reporting Advisory Board, told us that “the account should be presented in a way that is understandable to the user”.25 In the opinion of David Kilpin, who describes himself as an accountant with public sector experience, accounting “should not become a cottage industry that no one understands”.26 The National Audit Office argued that Annual Reports and Accounts “are most useful to users and stakeholders when they are timely, robust, relevant, understandable and comparable”.27 However, as we shall see below, our witnesses told us Annual Reports and Accounts currently do not completely meet all of these requirements.
17.The public require good quality, well presented financial information to hold the Government to account. As our witnesses, the Treasury and others have said, the public and Parliament want to use this information in order to assess the performance of Government Departments. To perform this function, Annual Reports and Accounts must be clearly presented so that non-accountants can read and make use of them.
Are Annual Reports and Accounts meeting the needs of the public or Parliament?
18.Many witnesses to our inquiry told us that currently, Government Departments’ Annual Reports and Accounts are of limited use to both policy analysts and the public. The King’s Fund told us in their evidence that
in our capacity carrying out research and policy analysis, the Accounts are of limited use.28
The Taxpayer’s Alliance told us that
Most A[nnual] R[eports and] A[ccount]s are currently dense and confusing for outsiders, lacking in meaningful output and performance measures, and bulked out with material not helpful in scrutinising value for money.29
Ian Makgill of Spend Network (a website which “collates the spending data published by public bodies in England and Wales”) commented that Accounts were “hard to interpret, as well as inconsistent”.30 The King’s Fund told us that “our experience [ … ] suggests that many other organisations and individuals are unaware of the existence of the Accounts”.31
19.The academic evidence also suggests that limited numbers of people use the Accounts. Professor David Heald, Professor of Public Sector Accounting at the Adam Smith Business School in the University of Glasgow, told the Committee that there is “not much evidence of actual external use” and pointed to a recent study of devolved administration Accounts (prepared on a similar basis) which “has confirmed the conventional wisdom of limited external use”.32 Professor Noel Hyndman, Professor of Accounting at the Queen’s Management School at Queen’s University, Belfast, said that Accounts were seen within and outside the public sector as “unnecessarily complex [and] very difficult to understand”.33
20.Professor Hyndman’s criticism of the Accounts’ complexity was echoed by other evidence to our inquiry. The King’s Fund contended that whilst they used the Accounts, other organisations found them “daunting to use”.34 Spend Network told us they were “overly complex”.35 The Plain English Campaign told us that Annual Reports and Accounts were “consistently badly-written and in serious need of a rewrite”.36 The C&AG agreed that “some are badly written”.37 The Institute for Government told us that “much of the information in Departmental Accounts could be presented more succinctly than it currently is”.38
21.Witnesses to our inquiry alleged that currently Annual Reports and Accounts are not designed for citizens and Parliamentarians. Professor Ellwood told us that Annual Reports and Accounts were “not designed for the purpose of parliamentary accountability”.39 Professor Hyndman has said that there are concerns the Accounts have been “overly embracing commercial models in their development, not focusing on key public sector issues”.40 Craig Mackinlay MP said that in his view Departments write Annual Reports and Accounts “without really understanding what is the point of them to the user”.41
22.There is some good practice within the public sector. Craig Mackinlay MP pointed to the Annual Report and Accounts of the Department for Work and Pensions (DWP) which he said “have got to a pretty good place”.42 The Taxpayer’s Alliance told us that they also found the DWP Accounts to be “one of the better examples”.43 They pointed to DWP’s use of “easily understood charts and tables showing the key statistics” about their priorities as an example of good practice.44 David Gauke MP, the Chief Secretary to the Treasury, told us that
there are particularly some Departments… where it [the annual report and Accounts] doesn’t just provide dry information, which it needs to do, but also explains more fully and in a more digestible way the way in which a Department works, what its objectives are and how it delivers. Of course there is always room for improvement.45
23.The National Audit Office every year co-sponsors the Building Public Trust Awards: these awards include categories such as good reporting about strategy, risks and outcomes and a separate category for “understandability”.46 For example, for the year 2014–15, the NAO singled out this chart from the Nuclear Decommissioning Authority Accounts which shows how much NDA spends at its sites.
In the same year the NAO pointed to the way that the Department of Energy and Climate Change displayed how it spent its money.
24.The consensus of evidence to our inquiry makes it clear that many Government Departments’ Annual Reports and Accounts remain badly written and difficult to understand or follow, despite recent reforms, and despite being prepared to a high technical standard (as we discuss in Chapter 5). Organisations like the King’s Fund and the Taxpayer’s Alliance say they find the Annual Reports and Accounts difficult to use and do not automatically turn to them to find out about the Government’s actions. Academics have told us that the format and content of Accounts has not been designed for the purpose of democratic scrutiny. Most of the available evidence suggests a very limited community of people actually use the Annual Reports and Accounts. In most cases Annual Reports and Accounts appear to be currently failing in their purpose of explaining to the public and Parliament the effectiveness of Government spending. We believe Accounts would be better used if they were prepared more often with the ultimate readers in mind, for example commentators on public policy, peers and MPs and their researchers.
25.Some Annual Reports and Accounts within the public sector are clearly currently better than others. For instance, witnesses to our inquiry pointed to the presentation of performance data by DWP in its Annual Report and Accounts as a good example of what all Departments could and should do. Whilst no Department’s Accounts are perfect, the Treasury should identify good practice, and share and encourages its adoption by other Departments.
26.At the moment the Treasury does not collect information on who reads Annual Reports and Accounts, making it impossible to assess this problem fully. Professor Malcolm Prowle and Dr. Don Harradine from Nottingham Trent University said there was a “general dearth of empirical evidence in this area and especially in the UK”.47 Professor Prowle suggested that the Treasury should fill this gap by publishing readership statistics.48 The Treasury conceded that this would be possible.49
27.It is clear that Annual Reports and Accounts are hard to follow. Non-accountants and commentators like the King’s Fund and Taxpayer’s Alliance do not find them as useful as they should be. Professor Prowle and Dr. Harradine are right to call for more systematic information about who is using Accounts, what figures and facts they are using from them and what they think about the documents. We recommend that the Treasury carries out research to identify how many people are buying and downloading Annual Reports and Accounts, who current readers are, what those readers think and who the potential readership is likely to, or should, include. We further recommend that the Treasury should regularly seek to find out what potential users of the Annual Reports and Accounts (including those who submitted evidence to our inquiry) think about how they could be improved to make it easier to assess the effectiveness of Government spending.
The success of the Treasury Simplifying and Streamlining reforms
28.The Treasury’s recent reforms to Annual Reports and Accounts contained in their command paper, Simplifying and Streamlining the Statutory Annual Report and Accounts, were intended to better focus the Annual Reports and Accounts on the needs of users, removing unnecessary material and improving structure and clarity (see Chapter 2 for further explanation of the reforms). Witnesses to our inquiry have cautiously welcomed the reforms. David Kilpin described the new structure as a “welcome change” Will Moy from Full Fact, told us that in his view “progress has clearly been made”.50
29.However, witnesses also told us that more work was needed. The C&AG agreed that “the Treasury should be encouraged to continue with its streamlining review”.51 The NAO advocated “removing immaterial disclosures to enable more focus on the material issues, helping readers see the wood from the trees”.52 Full Fact and the Taxpayer’s Alliance said “more progress” was required to make Accounts useful for the public and Parliament.53 Professor Ellwood told us that the format of Accounts barely changed in the Treasury’s recent reforms. She commented that she “welcomed integrating finance into wider performance” but thought that “the accountability part seems to largely mirror the private sector governance statements.” She also pointed out that the actual Accounts are still “very much… the basic statements and the formal disclosures as you would have for a large limited company”.54
30.The first set of Annual Reports and Accounts under the Simplifying and Streamlining reforms were produced for the financial year 2015–16 and published in the summer of 2016. The Treasury were unable to say in December 2016 whether any users of the Accounts had changed the way they interacted with them since the reforms.55
31.We welcome the Treasury’s reforms (contained in Simplifying and Streamlining the Statutory Annual Report and Accounts) and the intention behind them to make Accounts simpler and more user- friendly. Departments and the Treasury should consider always that the demands of public sector users of financial information differ from those of private sector users and therefore they may need to provide them with additional explanations and information.
32.Whilst the Treasury’s reforms are a good first step, the way they have been implemented by different Departments, within a broad framework, currently varies widely. It is clear from the evidence provided to us that, on their own, the reforms as currently implemented will not necessarily provide Annual Reports and Accounts that completely fulfil the needs of potential users. Departments should make concerted efforts to present financial data in a way that clearly links measurable outputs and outcomes, and is useful to readers.
33.It is disappointing that the Treasury have not monitored any changes in the way that accounts have been used since the reforms of 2015–16. As we recommend above, the Treasury should monitor the use of accounts to identify good practice. Where good practice already exists, Departments should be encouraged to learn from it. We also believe further reform is needed to address more directly the need for greater transparency and address needs of users.
34.The Treasury should update its guidance to Departments setting out that Annual Reports and Accounts should include statistics on staff turnover within the Department and also the staff engagement scores for the Department from the latest Civil Service People Survey. The average figures for the Civil Service should also be included.
Further Reform
35.In our view, as well as implementing previous reforms more effectively, further reform is needed before the members of the public can properly assess the performance of Government Departments from looking at a set of Annual Reports and Accounts. The following sections make recommendations for additional improvements that we think will improve disclosure and the helpfulness of Annual Reports and Accounts. In particular we think Departments need to better report spending against activities and services rather than primarily between units of management or organisation. Secondly, the public need better information about what the costs of Government activity are and what the spending actually provides. Thirdly, readers need to be provided with better information about trends and changes in spending over time. Lastly, this information needs to be presented in such a way that it is easy for researchers and the general public to understand and use.
Departmental spend “segmentation”
36.Annual Reports and Accounts need to do more than just report spending by organisation and management structure. While reporting in this way may help identify who can be held accountable for spending public money, it often does little to explain how and why money has been allocated and what the spending is designed to achieve. Departments will often have a variety of differing types of spending with different sorts of objectives and different lifespans. For instance, Departments, directly or indirectly, often run or fund big public services like schools and hospitals. Departments may also run programmes with a finite lifespan and specific objectives or projects–perhaps involving the construction of assets over a series of years–like HS2 or Trident. In each case, witnesses to our inquiry called for more disclosures to be made (as outlined in the following paragraphs).
37.There was a consensus to our inquiry that Annual Reports and Accounts should enable people to understand the Department’s objectives. As David Gauke MP, the Chief Secretary to the Treasury argued, helpful Annual Reports and Accounts ensure Departments can “be assessed against… [their] objectives”.56
38.Consequently the Taxpayer’s Alliance told us that “the Performance section of the proposed new A[nnual] R[eport and] A[ccounts] should be structured around the services delivered to taxpayers [for example, primary or secondary education] rather than around Departmental organisation”.57 This, in their view, would help the Government “demonstrate its services deliver value for money”.58 Professor Ellwood agreed, saying that “getting some meaningful information by programme and service would be very useful, and would fit parliamentary accountability”.59 Ed Poole from the Welsh Governance Centre at Cardiff University thought that it would be useful for the public to have “more programme–or policy-related expenditure data”.60 The Institute for Government have recently called for just this information to be published: for the Government to prepare what it called a Performance Tracker, “matching spending in public services to an assessment of demand, scope and quality”.61
39.Currently it is often difficult to scrutinise government performance through the accounts, because the accounts do not report spending information for services. For example, Child and Adult Mental Health Services (CAMHS) are not separately identified in the Department of Health’s Accounts. Consequently when the think tank Centre Forum examined the policy area, they found it difficult to piece together information about expenditure. They relied upon a Parliamentary answer from 2013, a freedom of information request to all Clinical Commissioning Groups from the charity Mind and an NHS announcement about local plans for CAMHS. These data sources may, as they suggest, be incompatible. They said that “it is very difficult to analyse trends in funding of CAMHS because there is no transparency in the way that data is collected”.62
40.The C&AG said he was ‘sympathetic’ to splitting Accounts by service objective rather than organisational unit, however he thought “it would be quite difficult to accomplish by, so to speak, restructuring the whole of the Accounts”. He proposed that this reporting happen within the business commentary in the Annual Report.63 David Gauke MP said that he believed Accounts should report about accountability; he was concerned that “if one moved away from a Departmental basis to a policy objective basis … ; how do you fit that into an accountability framework?”64
41.Currently Departments report spending in their Annual Report and Accounts a number of ways, but none necessarily provides information broken down in a way that is of wide use.
a)The Statement of Parliamentary Supply shows spending against voted limits and against Estimates subheads, often reflecting organisational structures or high level priorities.65 The Estimates subheads are determined by the relevant Department in consultation with Departmental select committees, and while they are sometimes helpful to the reader there is much inconsistency of approach in determining how expenditure is structured
b)The Statement of Operating Costs by Operating Segment shows spending by main areas of business activity–generally reflecting management or organisation structure. This is a requirement of IFRS.66
c)Other notes. Other notes to the Accounts break down spending into costs types (eg staff, rental costs); or programme costs. These can be variable in usefulness, sometimes reflecting spending programmes (eg tax credits) and sometimes expenditure types (eg consultancy costs)
42.This means that Departments often do not report the information that our witnesses called for. Instead, Departments report their spending split by Departmental segments. For example in the Department of Health’s Accounts for 2015/16, the Department’s segments are its affiliated bodies such as NHS England, Public Health England, NHS Charities and NHS companies.67 In some cases the information tells the reader something about the different policy priorities of the Department. In the Home Office, for example, spend is split between the Crime and Policing Group, the Office for Security and Counter Terrorism, Counter Extremism, Immigration Enforcement, UK Visas and Immigration, International and Immigration Policy, Border Force, HM Passport Office and Enablers. However, 70% of the Department’s spend comes under one heading: Crime and Policing Group. The Accounts do not break down the services provided by these groups into categories the public would recognise, for example types of crime investigated by the police.68
43.The National Audit Office is alert to this issue. They commented in a study they performed on the enforcement of confiscation orders within the criminal justice system that the relevant Accounts should include “information on confiscation order cost and performance, which could further help transparency and therefore accountability”.69
44.Witnesses to our inquiry said that the public need information about spending on individual services from the Accounts. However, Departments’ current reporting is primarily based around their organisational structure. While this enables Parliament to hold senior officials to account for their budgets, in many cases, such as the Department of Health (see paragraph 39), these breakdowns do not clearly reflect the services offered to the public. For an area such as Child and Adult Mental Health Services, for instance, it is almost impossible for the public to find out from the Department of Health’s Annual Report and Accounts how much is being spent on this, or other types of service, and therefore to assess the value for money of that spending.
45.We recommend that the Treasury explore how Annual Reports and Accounts can be made more useful by requiring Departments to report not just by organisational unit but also by policy area. This could be achieved by, for instance, restructuring the Estimates subheads or providing additional spending breakdowns of spending within the notes to the Accounts. Senior officials would remain accountable for the money they have spent through reporting by organisational unit. Audited statements for policy area should include both performance and financial data so that citizens can evaluate how effectively Departments are spending money.
Projects and Programmes
46.The Government runs specific projects and programmes designed to achieve its outcomes. Programmes are discrete initiatives with separate governance and budgeting structures and a timetable. Current examples would include the Troubled Families Programme, Universal Credit or the Work Programme. Projects are similar to programmes but involve specific deliverables and outcomes as well as having a limited lifespan. Current Government–funded projects include HS2, Crossrail and Trident replacement.
47.Currently there is very little information about individual projects and programmes within the Government’s Accounts. For example, in the Home Office Annual Report and Accounts for 2015–16, there is no separate disclosure for the amount of money spent on the Prevent counter-terrorism programme.70 There is a disclosure for the Office of Security and Counter-Terrorism.71 Prevent is mentioned in the Annual Report and Accounts but there is no way to separate its costs from the costs of other programmes in that directorate, despite the fact that the programme has different objectives to the other programmes in the directorate, and uses different methods than them.72
48.Professor Prowle told us that what Parliament needed for effective scrutiny was “an analysis about programme[s], how much was planned to be spent, how much was spent, how well it has been spent”.73 The C&AG told us that “if you [a Department] are running a very major programme, it is quite material to understanding what is happening in the Department, to have a narrative about it”.74
49.Professor John McEldowney, Professor of Law at the University of Warwick, suggested that there should be extra scrutiny of particular projects.75 David Gauke MP, the Minister, agreed that “projects clearly need to be included” in the process of holding Government to account.76 Julian Kelly, Director General, Public Spending and Finance, noted that “the Government publishes each year a report on how, what we call the Government’s major programmes—in which HS2 would be included—are doing”.77 This report - the Annual Report on Major Projects - provides summary data for all major projects across Government. This report provides cross-Government information, including a summary of spend by Department, projects which have concluded in-year, confidence rating in how successful the project will be, case studies and a list of projects with their aims.78
50.Departments should disclose both financial and performance information about significant programmes in their Annual Reports and Accounts and clearly relate spending to outputs, outcomes and performance. Annual Reports and Accounts should disclose useful information about each programme, such as its planned duration, its current and forecasted cost and its current performance. This information, which should be audited, should be disclosed for all financially material or politically significant programmes within the Departmental boundary.
51.Departments should also report data about significant projects, such as Trident and HS2 (which is the largest infrastructure project in Europe), in their Annual Reports and Accounts. This data, which should also be audited, should include spend to date for each project, spend in the year for each project, milestones met or not met and forecasted end date for the project. It should be provided for all projects that are significant in terms of the delivery of the Government’s priorities or that have a lifetime budget that is above materiality. Some of this data may be similar to the data held in the Annual Report on Major Projects, in which case the Department should clearly identify links to the Major Projects report within individual Departmental Annual Reports and Accounts so that the reader can swiftly access the data concerned.
Cost Analysis
52.In order to fully understand the value for money and efficiency of services, the public need to understand the unit cost of each particular output. For example the public should be able to compare the costs in one year of a primary school place with the costs of the same place a year later. As the Taxpayer’s Alliance argued, “to properly scrutinise value for money, we need quantified information on both service costs and service outputs, and we need to be able to link the two”.79
53.The National Audit Office have also called for more published cost information. In their report on accountability to Parliament for taxpayers’ money they said that “robust cost and performance data” was amongst the “accountability essentials”. As they argued,
Accurate, comparable and up-to-date data enable Parliament to hold to account those responsible for performance, provide the basis for good management, and allow service users to make informed choices among providers or services.80
The Taxpayer’s Alliance echo the National Audit Office’s call for comparability: they suggest that Departments publish, where possible, ‘benchmark comparisons’.81 They suggest Departments might consider historical comparisons and international comparisons where appropriate.
54.There are a number of different ways of classifying costs. In Government, there have been recent attempts to separate administrative from service delivery costs. In the opinion of Professor Hood and Dr Ruth Dixon from Oxford University these definitions often change. Furthermore Professor Hood and Dr Dixon argue that the division between administrative and other expenditure has often been opaque to outsiders.82
55.Alongside information on the effectiveness of its services, Departments should publish the costs of basic elements of those services. We recommend that Departments in future publish the full public sector unit costs (on a consistent basis) for key services (including those mentioned in their Single Departmental Plan and Annual Report) - for example the cost of a prison place, a court hearing, a school place or a hospital stay - on a consistent basis over time. Collecting and publishing comparative unit cost data across regions, and over time, and perhaps also against international comparators, would enable Government and public alike to assess how cost effective Government policies and programmes are, to understand how cost effective service delivery is, and identify where action is needed to address poor value for money.
Trend analysis
56.Currently, most parts of the Annual Reports and Accounts cover spending only for a single year, with a prior year for comparison. The exceptions are the “core tables”, which provide summary spending and spending plans for several years past, current and future, although these do not form part of the formal financial statements subject to full audit; instead they are audited only for “consistency” with the financial statements. Balance sheets and other financial information with the audited Accounts are rarely shown for more than the year being reported on, and a past year comparator.
57.It is clear that one off events, occurring in a single year, can distort a reader’s impression of spending if looked at in isolation. For example, if an organisation incurs a liability in-year through losing a legal case, then its expenditure in that year will appear high compared to the following year. Greater use of longer time series within the Annual Reports and Accounts would enable such events and patterns of spending to be better understood. Ideally this should be accompanied by helpful narrative, explaining where major changes in spending, or in the balance sheet, have occurred, and what the causes and effects of those changes are.
58.The NAO have called for Annual Reports and Accounts to contain “greater use of trend analyses”.83 They suggest that the Accounts should show “how different types of income, expenditure, assets or liabilities change over a longer period enabling more effective scrutiny instead of comparing performance only to the previous year”.84
59.Dr Dixon and Professor Hood argue that for trend analysis to work, reporting must be consistent. For example, when there are changes in accounting policy between years, similar patterns of underlying spending could end up looking very different. Departments frequently change boundaries as well. Recently the Government reallocated responsibility for the Charities sector from the Cabinet Office to the Department of Culture Media and Sport. Consequently in the latest supplementary estimate, the Cabinet Office now has a budget which is £273.5 million less than it was.85 Although Departments are usually required to provide comparable figures for a prior year’s spending alongside the year being reporting on within their Accounts, this usually makes comparisons over longer than two years very difficult to make.86 Professor Hood and Dr Dixon argue that in these cases, Departments should report overlapping figures (ie on both new and old bases) for a number of years so analysts can understand what has happened.87
60.In addition to the “core tables” which are already published, Annual Reports and Accounts should expand reporting of other information, wherever possible to show longer time series of other data. In each case this should be accompanied with narrative, to explain to the reader information, such as explanations for spending variations over time, which might not be evident from the figures alone. Time series and accompanying trend analysis should cover a rolling period of five years past: for income, assets, liabilities and expenditure. Where possible, projections of future spending should also be extended forward into the remainder of the Spending Review period. Expenditure and balance sheet trends should be shown broken down between different policy areas and programmes and accompanied by helpful narrative explaining the main causes of changes and impacts on service activity. Information should be adjusted for any changes in the responsibilities of Departments (such as the movement of the Office for Civil Society from the Cabinet Office to the Department of Culture, Media and Sport) or accounting policies, so that it is comparable across a number of years.
Open Data
61.Open Data is defined by the Open Data Institute in the following ways:
- can be linked to, so that it can be easily shared and talked about;
- is available in a standard, structured format, so that it can be easily processed;
- has guaranteed availability and consistency over time, so that others can rely on it; and
- is traceable, through any processing, right back to where it originates, so others can work out whether to trust it.88
Lord Maude, when Minister for International Trade said that “the UK led the Industrial Revolution of the 19th century, we’re leading the world on the open data revolution”.89 The Right Honourable Ben Gummer, Minister for the Cabinet Office and Paymaster General, reaffirmed the Government’s commitment to open data in 2017.90 Departments such as DEFRA are increasingly making non-financial information available in this way and we see no reason why accounting data should be different.91
62.In 2014, our predecessor committee, the Public Administration Select Committee (PASC) published a report on Open Data.92 PASC received evidence from Full Fact which laid out a five star system of evaluating “the usability of Government statistics”.93 PASC recommended that this scheme should be adopted by the Cabinet Office.94 Full Fact’s written evidence to that inquiry lays out that scheme in detail: the lowest rating (0 stars) presumes that the data is presented in pdf format whereas higher stars are achieved by publications which present data with ONS metadata attached, in machine readable and open formats.95 The same basic principles should apply to Accounts and statistical data.
63.The Annual Reports and Accounts are currently published as pdf documents. Spend Network told us that “since they [Annual Reports and Accounts] are published in pdf form, [they are] inaccessible”.96 As the King’s Fund argued
none of the tables are provided in Excel or other easily useable formats. Instead they are incorporated into longer documents and published as PDFs, which does not lend itself to secondary analysis or use as a database. This format and presentation may also send a signal to outsiders that the Government is not encouraging or perhaps even expecting anyone to use this data.97
In the Institute for Government’s opinion, “all Departments should publish the basic tables in excel, and not just in pdf format, to allow easy analysis of the numbers”.98
64.Annual Reports and Accounts should routinely be published in Excel or another similar usable format, so that analysts (whether inside Parliament, for which see below in Chapter 4, or outside in civil society) can swiftly extract the data and make use of it. The Treasury, working with Departments, should strive to improve Annual Reports and Accounts against the open data ranking system devised by Full Fact and endorsed by the Public Administration Select Committee in 2014.
Electronic Publication
65.Government Accounts and annual reports by their nature are long documents. The C&AG told us that they should be shortened and he advocated “replacing lengthy narrative with insightful graphics and summary data and better use of accompanying narrative, in concise, plain English”.99 David Kilpin suggested “if Government made best use of technology, Accounts could be presented in dashboards that are touch screen friendly”, enabling users of the Accounts to choose how to stratify and compare data.100 The National Audit Office also suggested Accounts should be “tablet-friendly” and Ed Poole from the Wales Governance Centre at Cardiff University suggested “an online dashboard tool”.101 The Taxpayer’s Alliance suggested that the Annual Reports and Accounts should link to other documents (for example statistical releases, Parliamentary reports or Government announcements) so that a reader can further investigate issues.102
66.The Government should use modern technology to make the Accounts useful to outsiders, for example making them touchscreen friendly so that the data can be organised in different ways. The accompanying narrative should be shorter, written in plain English and accompanied by summary data and insightful graphics.
The Financial Reporting Advisory Board
67.The Government Resource and Accounts Act 2000 says that “Accounts shall be prepared in accordance with directions issued by the Treasury”.103 The Act says that the Treasury’s standards should allow Departments to “present a true and fair view” of their finances in the Accounts and “conform to generally accepted accounting practice”.104
68.The Financial Reporting Advisory Board (FRAB) was established in 1996 after the publication of a White Paper, Better Accounting for Taxpayer’s Money, in 1995.105 Since the Government Resource and Accounts Act 2000 came into force, FRAB has advised the Treasury on how to apply and, where necessary, adapt international accounting standards (used in the corporate sector) into use within Government.106 Currently FRAB includes representatives from the accountancy profession, accountancy standards setters, academia, the National Audit Office, Government Departments, the devolved Governments, the Office for National Statistics and the Treasury. Craig Mackinlay MP serves as a Parliamentary observer on FRAB.107
69.Mr Mackinlay told us that he felt “if there is a deficiency on FRAB it may be that we are light on people who are there to understand the Accounts rather than those who are charged with putting the Accounts together”.108 A number of our other witnesses agreed with him. Professor Prowle told us that there is “very little representation from potential users of Accounts”.109 David Kilpin said that FRAB’s “impact may benefit from more members who are consumers of financial information”.110 Mr Kilpin suggested all MPs with an accounting qualification should be encouraged to join FRAB.111 In recognition of the need to consider users, some Departments have taken the initiative; for instance, the King’s Fund told us that they were consulted by the Department of Health about changes to their annual report.112
70.The Organisation for Economic Cooperation and Development told us that a “quarter of countries have taken a step further and set up national standard setting boards independent from the Government”.113
71.Parliament currently has no formal role in setting accounting standards. Professor Ellwood suggested that FRAB and the Treasury should operate within “some sort of framework for how new standards were supposed to conform to the needs of Parliament”.114 Will Moy from Full Fact told us that “Parliament has a very important role in setting a direction for what it thinks is the future of information about Government spending”.115 He further suggested that select committees might wish to hold annual investigations into the presentation of information by each Department.116 Julian Kelly from the Treasury signalled that the Treasury would welcome this kind of involvement by committees: he said
I think the area where we just need to keep on improving, and we will improve faster is—much like this process in the Committee—as people start to use them and if they use them to question what is in the Accounts and ask questions and even start to ask for certain bits of information to be included on a regular basis.117
72.The Financial Reporting Advisory Board mainly includes representatives of those who prepare Accounts, and the accountancy profession. They advise the Treasury largely from a technical perspective on the application (and possible adaptation) of international reporting standards to the core financial statements. Their work is not focused on the coherence of the Annual Reports and Accounts document as a whole and its usefulness to users. Apart from the parliamentary observer, there are no consumers of Accounts represented on the Board. At present, Parliament itself has no formal role in setting accounting standards.
73.We recommend that the Treasury make FRAB more representative of the consumers of Accounts and more attuned to users’ requirements, by increasing representation on the Board of users or user groups. We further recommend that Treasury and FRAB should consider how, within the framework of recognised accounting standards, Accounts could be made more useful and responsive to the needs of users, providing the sort of information we have proposed within this report.
74.Select Committees should consider the suggestion made by the Director of Full Fact that they should have an annual hearing not simply on the Annual Report and Accounts, but on the information published by Government Departments (including Accounts) more generally. Departments should take note of what select committees have to say on how Annual Reports and Accounts of individual Departments could be made more useful to their readership, within the general requirements of accounting standards, audit and consistency. The Treasury should also influence Departments to follow the example of the Department of Health in consulting specialist think tanks and researchers about what information they would like the Department’s Annual Reports and Accounts to disclose (in addition to the information the Treasury mandates to maintain consistency between Departments).
16 International Public Sector Accounting Standards Board, Conceptual Framework, 2014, pp.13–14.
21 PWC, Towards a new era in government accounting and reporting, April 2013, p.20.
22 National Audit Office, Accountability to Parliament for Taxpayer’s Money, Session 2015–16, HC 849, February 2016, p.40.
25 The Financial Reporting Advisory Board advises the Treasury on the implementation of accounting standards in the UK Government. We discuss its role in paragraph 102–109; Q262.
27 IGA07 (National Audit Office)
33 N. Hyndman, ‘Accrual accounting, politicians and the UK—with the benefit of hindsight’, Public Money and Management, Vol.36, Issue 7, September 2016.
40 N. Hyndman, ‘Accrual accounting, politicians and the UK—with the benefit of hindsight’, Public Money and Management, Vol.36, Issue 7, September 2016.
46 The last awards given were for Accounts for the year 2014–15. These were presented in March 2016. National Audit Office, Building Public Trust Awards, March 2016.
61 Institute for Government, Performance Tracker A data-driven analysis of the performance of government, February 2017, p.5.
62 Emily Frith, Centre Forum Commission on Child and Adolescent Mental Health: State of the Nation, April 2016.
65 Estimates are the proposed budget for the financial year. We cover their relationship to the Accounts in paragraphs 74–9. Also further detail about the estimates (both the main estimate and the supplementary estimate) is included in the glossary.
67 Department of Health, Annual Report and Accounts 2015–16, p.140.
68 Home Office, Annual Report and Accounts 2015–16, p.128.
69 National Audit Office, Confiscation orders: progress review, Session 2015–16, HC 886, March 2016, p.9.
70 The Home Office website says that: “The Prevent Programme Responds to the ideological challenge we face from terrorism and aspects of extremism, and the threat we face from those who promote these views, provides practical help to prevent people from being drawn into terrorism and ensure they are given appropriate advice and support; and works with a wide range of sectors (including education, criminal justice, faith, charities, online and health) where there are risks of radicalisation that we need to deal with.” Home Office, What is Prevent.
71 Home Office, Annual Report and Accounts 2015–16, p.128.
72 Home Office, Annual Report and Accounts 2015–16, p.10.
78 Cabinet Office, Annual Report on Major Projects 2015–16, July 2016.
80 National Audit Office, Accountability to Parliament for Taxpayer’s Money, Session 2015–16, HC 849, February 2016, p.51, a point the NAO reiterated in National Audit Office Confiscation Orders Progress Report , March 2016, p.34.
82 Christopher Hood and Ruth Dixon, UK Government running costs: high claims, big stakes, low transparency, November 2016.
85 HM Treasury, Supplementary Estimates and new Estimates 2016–17, February 2017, pp.462–63.
86 For example, if a Department has new responsibilities it will display comparable figures which include the new responsibilities in the Department’s spend for the previous year.
87 Christopher Hood and Ruth Dixon, UK Government running costs: high claims, big stakes, low transparency, November 2016.
88 Open Data Institute, What makes data open.
89 Lord Maude, Open data and government transparency, November 2015.
90 Rt Hon Ben Gummer MP, Government at your service, February 2017.
91 For DEFRA see https://defradigital.blog.gov.uk/category/open-data/
9292 Tenth Report from the Public Administration Select Committee, Session 2013–14, Statistics and Open Data: Harvesting unused knowledge, empowering citizens and improving public services, HC 564, March 2014.
94 Tenth Report from the Public Administration Select Committee, Session 2013–14, Statistics and Open Data: Harvesting unused knowledge, empowering citizens and improving public services, HC 564, March 2014, p.33.
103 Government resource and Accounts act 2000, Section 5(2).
104 Government resource and Accounts act 2000, Section 5(3).
105 Financial Reporting Advisory Board, The role of FRAB.
107 Financial Reporting Advisory Board, Membership.
26 April 2017