Press Release - Financial Auditing and Reporting: 2000-2001
General Report of the Comptroller and Auditor General
27 March 2002
Sir John Bourn, head of the National Audit Office (NAO), has
reported to Parliament on the outcome of financial audit work
undertaken by the NAO in central government over the past year.
Today’s report examines the progress made by government
departments in a number of important areas - most notably the
development of corporate governance and the introduction of
resource accounting and budgeting. It also welcomes the
Government’s recently published response to the Sharman Report.
2000/01 saw the final year of cash based accounts, first
introduced by Gladstone 135 years ago as a means of recording
public expenditure and reporting it to Parliament. For the last two
years, accrual based commercial style accounts have been prepared
by government departments in parallel with cash accounts. From
2001/02 resource accounts become the sole reporting mechanism to
Parliament.
Sir John adds that there is still progress to be made both in
terms of the timeliness and quality of resource accounts produced
by government departments. And some departments are too reliant on
a few key players and lack technically competent support staff.
Sir John recognises that government departments face a major
challenge in responding to the application of the principles of the
Turnbull Committee, and he notes that many have made good progress.
In particular, some have included in their Accounts for 2000/01,
statements on the systems of internal control to cover operational
as well as financial controls, two years ahead of the Treasury
deadline for this. However, many other departments have some way to
go, particularly in ensuring that control systems are embedded into
their management and operations. The NAO will continue to work
closely with these bodies to advise on the development of corporate
governance and risk management processes.
Sir John welcomes the recent Government response to Lord
Sharman's report on audit and accountability arrangements in
central government. In particular, he welcomes the Government's
acceptance of Lord Sharman's recommendation that the C&AG
should be the auditor, on behalf of Parliament, of all
non-departmental public bodies. He also notes the Government's
commitment to ensure that he has statutory access to the growing
number of bodies outside the public sector which help to deliver
public services. The Government also invites the C&AG to
validate the information systems underlying departmental Public
Service Agreement targets. Taken together, these developments
strengthen the Executive's accountability to Parliament.
Other matters highlighted in the report include:
- the role of performance measurement and the validation of
performance information in achieving better accountability; and the
work of the NAO in developing a strategy to assist in improving the
public sector’s management and use of performance information and
in reviewing the ways by which government departments measure their
performance; and
- the NAO’s continuing work in the wider auditing and accounting
profession, including its contribution to the work of the Auditing
Practices Board and the Public Audit Forum.
Notes for Editors
- The Comptroller and Auditor General’s General Report is
published annually with the Appropriation Accounts, which show
expenditure by government departments and agencies from funds voted
by Parliament. The 2000/01 report draws the attention of Parliament
and others concerned to the outcome of the Comptroller and Auditor
General’s audit of accounts for that year, and to current financial
audit and accounting issues in the central government sector.
- A resource account is designed to show the true cost of a
department's activities, in the style of a commercial account. It
thus takes account of a department's assets and liabilities, as
well as cash spent and received.
- Corporate governance refers to the way in which an
organisation’s board (or equivalent) sets strategic aims, provides
the leadership to put them into effect, supervises the management
of the business and reports to stakeholders on its stewardship. In
the public sector, this has particular reference to the propriety
demonstrated by organisations over the funds that they control. The
Cadbury Committee (1992) made recommendations regarding the role of
board members and the establishment of audit committees. The
Rutteman Working Group (1994) subsequently introduced disclosures
in financial statements regarding systems of internal financial
control, and the Turnbull Committee (1999) recommended extending
this to all systems of internal control. The Treasury issued
guidelines at the end of 2000 on implementing the Turnbull
Committee recommendations in central government.
- Lord Sharman’s report on audit and accountability arrangements
in central government, Holding to Account, was published on 13
February 2001. It put forward a range of recommendations to improve
the ability of Parliament to hold the executive to account, in part
through updating the Comptroller and Auditor General’s powers to
audit or providing him with formal access to a range of public
bodies outside of his current remit. The Government’s response was
published on 13 March accepted many of the recommendations to
extend the power of the Comptroller and Auditor General.
- Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard copies can
be obtained from The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office employing some 750 staff. He and
the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 27/02
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