We’ve developed a set of principles and examples outlining good practice in Annual Reporting
Posted on May 20, 2021 by Chris Coyne
Good reporting in the public sector should allow the public and Parliament to understand to easily understand an organisation’s strategy and the risks it faces, how much taxpayers’ money has been spent and on what, and what has been achieved as a result. Following the challenges of the last year, most notably COVID-19, clear and transparent reporting is hugely important.
Transparency and accountability in central to strong financial and risk management in government, and how this is supported by clear and understandable reporting. With that in mind, we’re delighted to share a recent National Audit Office report which cuts to the heart of this: the Good Practice in Annual Reporting Guide. Our guide sets out good-practice principles around a number of key areas to help public sector organisations to compile their Annual Reports. Those principles are:
Building on these principles, our guide provides some excellent examples from public sector organisations that we think are leading the way. Below we have picked out a few key takeaways for organisations to consider as part of their preparations for 2020-21 Annual Reports.
Risk and Governance: There should be an increased focus on the risks and challenges of recent events and how these are managed, including:
- Frank and honest analysis of how COVID-19 (and other risks) have impacted operations and how the taxpayer’s money has been spent and managed.
- Clear depiction of the governance and risk management framework to demonstrate an organisation’s processes to identify, monitor and mitigate risk.
- Transparent reporting of complex technical judgements and decisions. We anticipate, given the challenges brought about by the pandemic, spending reviews and EU Exit, that organisations may enter complex transactions or arrangements. These transactions should be disclosed transparently and in a way that is understandable to the users.
Strategy and Operations: There should be a clear articulation of purpose and objectives, and how an organisation’s operations support their objectives. In particular:
- Clarity around an organisation’s purpose, strategic objectives and values and how these feed into the performance of the organisation and any related risks, with reference to its external environment.
- Celebration of Diversity and Inclusion within annual reports. Employee costs make up most of the central government expenditure and people are undoubtedly an organisation’s most precious asset. Organisations should consider what their employee data says about them and whether reporting could be improved in this area.
Measures of Success and Financial Performance: There should be a balanced assessment of goals achieved and performance against targets, and financial performance should be understandable and consistent with the underlying financial statements. For instance:
- Better trend reporting. Trend analysis over time is a strong indicator of performance and achievements and a good way for the reader to hold organisations to account. Organisations should consider what trend data is being published and what story they are trying to tell.
- Better, more accessible information on non-financial metrics affecting organisations, such as sustainability reporting. Organisations should seek to portray non-financial data in simple terms to help tell a story and show clearly how it is linked to their operations.
Lastly, the NAO co-sponsor the annual Building Public Trust Awards, Public Sector reporting category with PwC, to give credit to organisations who are demonstrating excellence in government financial reporting. If you believe your organisation’s 2020-21 annual report and accounts is an example of excellent reporting, you can nominate it for the Building Public Trust Awards – Public Sector Reporting Award by emailing Building.Public.Trust@nao.org.uk by 30 June 2021.
Authors: Chris Coyne, Rachel Nugent, Catriona Sheil and Courtnay Ip Tat Kuen.
Chris manages our work on financial and risk management. He has been with the NAO since he joined as a graduate trainee in 2008, and has significant experience managing financial audits across a variety of government organisations.
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