Public Accounts Committees 24 October 2013 Governance and control in managing and accounting for public money: principles and process Sylvia Thomson THIRD

Public Accounts Committees 24 October 2013

Governance and control in managing and accounting for public money:

principles and process

Sylvia Thomson

THIRD SECTOR PARTNERwww.3spartner.co.uk


This Presentation:

1. Setting budgets and allocating public funds

2. Accounting for and Reporting public spending

– Internal and external audit– Quality audit and scrutinising performance– Parliament ‘s role


Public Accounts Committees 19th February 2013

Part 1: Setting budgets and allocating public funds



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




Chancellor BUDGET JUDGMENT CABINET

FINANCE ACT

REVENUE

SPENDING REVIEW

SUPPLY ESTIMATES

ANNUAL REPORTS AND ACCOUNTS

OBR

NAO

PAC

Setting budgets and allocating public funds: THE SUPPLY CALENDAR

Public Accounts Committees

24 October 2013

THIRD SECTOR PARTNER

www.3spartner.co.uk

2012-13 FY -1 2011-12 FY 2012-13 FY +1 2013-14

April - June Forecast outturn

Departmental reports

Vote on AccountMain EstimatesRevised EstimatesEYF take up

July - September

PESA Spending Review outcome

October - December

Autumn Statement Vote on Account

January - March

Final accounts Spring SupplementariesEstimated Outturn

Departmental Reports Budget




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 eg finance leases.

There is a general overriding rule that the expenditure must be efficient, economic and effective


Principles 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

Public Accounts Committees 24th October 2013


What do you want to control? • £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’




• 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


24 October 2013


Chancellor

PE control Capital investmentPublic sector services

Pay and pensionsFinancial management

and reporting

Chief Secretary

Procurement

Office for Budget Responsibility




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)

Public accounts committees 24 October 2013



Part 2: Accounting, Audit and Reporting


Accounting, Audit and Reporting: AccountingEach Vote has an Accounting Officer who is personally responsible to

Parliament for the honesty of the Vote

1. AO must sign the Estimate and the Departmental Financial Statements and Accounts

2. The AO appears, often along with the Minister, before the Public Accounts Committee

3. The AO will often also appear before the PAC with Additional Accounting Officers, and before the Departmental Select Committee with other staff

4. The AO’s relationship with the Secretary of State is crucial




Accounting, Audit and Reporting: AccountingAccounting 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.


Setting budgets and allocating public funds: THE SUPPLY CALENDAR


24 October 2013


www.3spartner.co.uk

2012-13 FY -1 2011-12 FY 2012-13 FY +1 2013-14

April - June Forecast outturn

Departmental reports

Vote on AccountMain EstimatesRevised EstimatesEYF take up

July - September

PESA Spending Review outcome (2010, 2013)

October - December

Autumn Statement Vote on Account

January - March

Final accounts Spring SupplementariesEstimated Outturn

Departmental Reports Budget


Accounting, Audit and Reporting: AuditThe 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



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


Accounting, Audit and Reporting: Audit


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)


www.3spartner.co.uk



Internal: Treasury, Cabinet Office, Colleagues

External: Parliament, Public,

Freedom of information, transparency agenda

Press Releases

Social Media




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



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


http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/work-of-the-chief-of-the-defence-staff/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/mod-annual-report-2012-13/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/deterrence/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/intervention1/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/remote-control-remotely-piloted-air-systems---current-and-future-uk-use/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/legal-framework-for-future-army-operations/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/mod-main-estimates-2013-141/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/future-army-2020/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/towards-the-next-defence-and-security-review1/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/mod-supp-ests-2012-13/

http://www.parliament.uk/business/committees/committees-a-z/commons-select/defence-committee/inquiries/parliament-2010/defence-implications-of-possible-scottish-independence-/


Conclusions/Questions

What next?

• IT and Social media now driving agenda, can Parliament keep up?



Template


Documents

Public Accounts Committees 24 October 2013 Governance and control in managing and accounting for public money: principles and process Sylvia Thomson THIRD