Whole of Government Accounts 2018–19 Contents

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2Usefulness and Quality of the WGA

Standardising financial reporting

19.We have previously recommended that financial reporting within the WGA should be improved by providing more detailed disclosures to ensure that users of the account have the comprehensive information needed to understand the public finances.39 WGA is increasingly important to ensuring accountability for public spending on key areas of public interest, for example, it has the potential to help the public and Parliament understand the current and likely future impact of EU Exit on the public finances overall.40 While the WGA 2018–19 did include an estimate of the future liability related to the financial settlement with the EU, it did not include granular information on cross-government spend on EU Exit. Instead the performance report section Spending on EU preparations was based on the high-level figures from a NAO report.41

20.For the WGA to record the impact of COVID-19, government bodies will need to record costs in a manner that allows the increase in spending due to COVID-19 to be identifiable from any other changes in spending.42 The Treasury outlined that it was asking Departments to track and record how they are using the ring-fenced money for COVID and EU spending, however this involved significant judgement and manual intervention. The Treasury also confirmed that it was in the early stages of considering how to identify and report non ring-fenced spend on COVID-19 and EU Exit , but were not actively looking at introducing time recording processes to enable staff costs to be recorded against COVID-19 or EU exit.43 This would be essential to capture both the true cost to the government of undertaking this work, and whether government has the capacity to deliver.

21.Previously the Treasury has expressed dissatisfaction at the level of expenditure across all types of government spending that is classified as miscellaneous or other by WGA bodies, as it prevents the WGA providing more granular information. The Treasury stated that the implementation of the new OSCAR II IT system should help improve the quality of the information disclosed.44 To further improve the quality of information about what costs Departments have incurred, the Treasury’s Government Finance Function is planning to bring in a standard chart of accounts which it believes will remove manual work in Departments and provide more granular data.45 However, the introduction of a standard chart of accounts is a time-intensive and costly task, which would need to be timed with when Departments were already changing systems and the Treasury also need to consider interactions with shared service centres. This aspiration aligns with other work already undertaken in the Government Finance Function around converging other processes, such as expense claims.46

Risks to quality

22.We see WGA as a valuable and important document for both providing transparency and holding the government to account. In recent years, the Treasury has improved the quality of the WGA and has taken steps to address our recommendations, such as working towards improving the breakdown of the purchase of goods and services note, and providing more useful disclosures in the performance report regarding important areas such as provisions, contingent liabilities, and public sector pensions.47

23.The NAO highlighted in the C&AG Report for the WGA for the year ended 31 March 2019that the failure to complete local government audits in a timely fashion led to both an increasing number of bodies whose financial information is not included in the WGA and an increase in the number of bodies whose financial information included in the WGA has not been audited. This resulted in a lower quality picture of the financial performance and position of the UK public sector and impacts on the ability to conduct trend analysis of the government’s financial performance and position over time .48 The NAO also warned that challenges to sustainability in the local government audit market, an issue also highlighted in the Redmond Review, may continue to affect the quality and timeliness of the WGA in the future.49

24.We expect the COVID-19 pandemic to exacerbate these challenges to the timely production of the WGA in future. The Treasury accepted that it can only start to produce the account once it receives a critical mass of audited returns from bodies and that COVID-19 and issues in the local audit market will present significant challenges in producing the WGA 2019–20. Returns for WGA are audited and based on bodies’ statutory accounts. At the date of our evidence session in November last year, there were still four major government departments which had not yet published their statutory accounts for 2019–20.50 The Treasury expected that OSCAR II will be able to produce the consolidation much more quickly once data returns have been received, however the OSCAR II consolidation module was not yet operational.51