Governance and control in managing and accounting for public money: principles and process

1. Public Accounts Committees 24 October 2013 Governance and control in managing and accounting for public money: principles and process Sylvia Thomson THIRD SECTOR PARTNER www.3spartner.co.uk

2. Public Accounts Committees 24 October 2013 This Presentation: • Setting budgets and allocating public funds • Accounting for and Reporting public spending • Internal and external audit • Quality audit and scrutinising performance • Parliament ‘s role THIRD SECTOR PARTNER www.3spartner.co.uk

3. Public Accounts Committees 19th February 2013 Part 1: Setting budgets and allocating public funds THIRD SECTOR PARTNER www.3spartner.co.uk

4. Public Accounts Committees 22 October 2013 Setting budgets and allocating public funds Principle 1: Only Parliament supplies money for public bodies to spend • Supply Procedure: The Crown (the Government) demands, the House of Commons grants, the House of Lords assents • Departments need statutory authority for both the use of resources and for funds to be drawn from the Consolidated Fund by Acts of Parliament known as Consolidated Fund Acts and Appropriation Acts, which only apply to the specific financial year THIRD SECTOR PARTNER www.3spartner.co.uk

5. Public Accounts Committees 24 October 2013 Chancellor BUDGET JUDGMENT CABINET OBR SPENDING REVIEW FINANCE ACT SUPPLY ESTIMATES NAO REVENUE ANNUAL REPORTS AND ACCOUNTS PAC THIRD SECTOR PARTNER www.3spartner.co.uk

6. Public Accounts Committees 24 October 2013 Setting budgets and allocating public funds: THE SUPPLY CALENDAR THIRD SECTOR PARTNER www.3spartner.co.uk

7. Public Accounts Committees 22 October 2013 • Setting budgets and allocating public funds Principle 2: The Treasury controls what is spent and how it is spent • Even when Parliament has voted money, Departments also need Treasury consent to spend the money and must do it in accordance with any conditions laid down by the Treasury: • There are particular rules about types of spending, in year controls, and a general worry about spending which is ‘novel’ or ‘contentious’: limits on overheads and capital spending, special rules for egfinance leases. • There is a general overriding rule that the expenditure must be efficient, economic and effective THIRD SECTOR PARTNER www.3spartner.co.uk

8. Public Accounts Committees 24th October 2013 Setting budgets and allocating public fundsPrinciples of Fiscal Control Macro economic stability • Fiscal honesty • Cabinet responsibility • Decisive decisions Economic disposition of resources • Value for money • Incentives to manage public services well THIRD SECTOR PARTNER www.3spartner.co.uk

9. £696bn : Total Managed Expenditure– TME -key ratio to GDP £637bn; Departmental Current spending – hardest to cut in year, and nearly half is Annual Managed Expenditure (AME) £343bn: Resource Departmental Expenditure Limits – how much is ring-fenced? £43.5bn: Departmental Capital spending – easiest to cut but not necessarily good vfm £16bn Administration Budgets – the cost of government - 2 per cent of TME Total DELs– consumption measure Total AME – cyclical and demand led, Public Sector net investment – link to ‘The golden rule’ that government borrows only to invest’ Public Accounts Committees 24 October 2012 What do you want to control? THIRD SECTOR PARTNER www.3spartner.co.uk

10. Chancellor Chief Secretary PE control Capital investment Public sector services Pay and pensions Procurement Financial management and reporting Public Accounts Committees 24 October 2013 Setting budgets and allocating public funds • Treasury expenditure teams typically have fewer than 15 people • Details vary, but many teams control more than £50bn of expenditure • During a spending review they are understaffed and under pressure compared with departmental finance staff Office for Budget Responsibility THIRD SECTOR PARTNER www.3spartner.co.uk

11. 24 October 2013 Setting budgets and allocating public funds Public Accounts Committees THIRD SECTOR PARTNER www.3spartner.co.uk

12. Public accounts committees 24 October 2013 Spending Review Process • Preliminary Skirmishes • Budget judgment (HMT –March) • Public Expenditure Cabinet • Spending Review Guidelines • Department Response • Negotiations (multiple) • Star Chamber (Ministers) • Settlement Letter (officials) • Announcement (summer/autumn) THIRD SECTOR PARTNER www.3spartner.co.uk

13. Public Accounts Committees 24 October 2013 Part 2: Accounting, Audit and Reporting THIRD SECTOR PARTNER www.3spartner.co.uk

14. Public Accounts Committees 24 October 2013 Accounting, Audit and Reporting: Accounting Each Vote has an Accounting Officer who is personally responsible to Parliament for the honesty of the Vote • AO must sign the Estimate and the Departmental Financial Statements and Accounts • The AO appears, often along with the Minister, before the Public Accounts Committee • The AO will often also appear before the PAC with Additional Accounting Officers, and before the Departmental Select Committee with other staff • The AO’s relationship with the Secretary of State is crucial THIRD SECTOR PARTNER www.3spartner.co.uk

15. Public Accounts Committees 24 October 2013 Accounting, Audit and Reporting: Accounting Accounting Officer required to ensure • funds authorised by Parliament are used for the purposes intended by Parliament and that these funds and any receipts are properly accounted for • safeguarding the public funds; for ensuring propriety and regularity in the handling of public funds; • and for the day-to-day operations and management of the department • promoting and safeguarding regularity, propriety, affordability, sustainability, risk, and value for money across the public sector; and accounting accurately, and transparently, for the department’s financial position and transactions. • ensure the department as a whole is run on the basis of the standards, in terms of governance, decision-making and financial management that are set out in Box 3.1 of Managing Public Money. THIRD SECTOR PARTNER www.3spartner.co.uk

16. Public Accounts Committees 24 October 2013 Setting budgets and allocating public funds: THE SUPPLY CALENDAR THIRD SECTOR PARTNER www.3spartner.co.uk

17. Public Accounts Committees 24 October 2013 Accounting, Audit and Reporting: Audit The National Audit Office and the Comptroller and Auditor General • C&AG is appointed by Parliament • NAO conducts audits of Appropriation Accounts, particular projects or policy programmes as requested by the Public Accounts Committee, and ‘value for money’ audits. All reports are laid before the house. • Not all reports result in a PAC hearing • The Treasury attends all PAC hearings and advises Accounting Officers before the hearing THIRD SECTOR PARTNER www.3spartner.co.uk

18. Public Accounts Committees 24 October 2013 Accounting, Audit and Reporting: Audit Internal Audit • Assurance for Accounting Officer • Audit Committee agrees programme • Feeds into governance statement External Audit • Assurance for Parliament • Department and HMT consulted over programme THIRD SECTOR PARTNER www.3spartner.co.uk

19. Public Accounts Committees24 October 2013 Accounting, Audit and Reporting: Reporting Principles of reporting Tell Parliament (the public): What you intend to do and what it will cost (always) What you have done and what it did cost (always) What you think you might do (sometimes) THIRD SECTOR PARTNER www.3spartner.co.uk

20. Public Accounts Committees 22 October 2013 Accounting, Audit and Reporting: Reporting Internal: Treasury, Cabinet Office, Colleagues External: Parliament, Public, Freedom of information, transparency agenda Press Releases Social Media THIRD SECTOR PARTNER www.3spartner.co.uk

21. Public Accounts Committees24 October 2013 Accounting, Audit and Reporting: Reporting Departmental Select Committees Wider focus than PAC Agenda usually more political and policy based but not slow to point out perceived shortcomings Regular hearings on Estimates and Annual Reports Also receive business plans and performance reports THIRD SECTOR PARTNER www.3spartner.co.uk

22. Public Accounts Committees 22 October 2013 Accounting, Auditing, Reporting: Reporting Defence Select Committee: Current inquiries • Work of the Chief of the Defence Staff • MoD Annual Report and Accounts 2012-13 • Deterrence in the 21st Century • Intervention: Why, When and How? • Remote Control: Remotely Piloted Air Systems - current and future UK use • UK Armed Forces Personnel and the Legal Framework for Future Operations • MoD Main Estimates 2013-14 • Future Army 2020 • Towards the Next Defence and Security Review • MoD Supplementary Estimates 2012-13 • Defence Implications of Possible Scottish Independence THIRD SECTOR PARTNER www.3spartner.co.uk

23. Public Accounts Committees 24 October 2013 Conclusions/Questions What next? • IT and Social media now driving agenda, can Parliament keep up? THIRD SECTOR PARTNER www.3spartner.co.uk

24. Public Accounts Committees 22 October 2013 Template THIRD SECTOR PARTNER www.3spartner.co.uk