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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.

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In 2001/02 resource accounts became the sole mechanism for reporting the financial performance of government departments to Parliament. Sir John welcomes the substantial progress which many government departments have made in preparing their accounts, both in terms of the quality and timeliness of the accounts presented for audit. The report also notes, however, that for a significant minority of departments there remains more to be done in this area. Departments need to develop accruals-based management information systems to embed both resource budgeting and resource accounting into routine financial management.

The report welcomes the progress which audited bodies are making in developing their arrangements for corporate governance and the management of risk, whilst acknowledging, again, that for some departments there remains more to be done. More broadly, Sir John signals his support for the recently published reports in this area (the Higgs report on non-executive directors and the Smith report on Audit Committees), noting that whilst the reports were principally aimed at the listed company sector, they have great relevance for similar developments in the central government sector.

Other matters highlighted in the report include:

  • The Treasury’s plans for accelerating the timetable for completion and audit of departmental resource accounts. The National Audit Office welcomes this move, whilst noting that advances in the timetable must not be at the expense of the underlying quality of the accounts;
  • The complexities associated with accounting for certain types of initiative such as Private Finance Initiative projects. The National Audit Office works closely with audited bodies to ensure that the accounting treatment adopted for such projects is appropriate. The Comptroller and Auditor General has not, to date, had the need to qualify his opinion on any audited body’s accounts in respect of the accounting treatment of this type of transaction;
  • Progress made to date by central government bodies in their preparations for the consolidation of their accounts in to a single central government account;
  • The work undertaken by the NAO in the audit of the main revenue collection departments; and
  • The work undertaken by the NAO in auditing public sector debt and liabilities.

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