The National Audit Office has found signs of improvement in financial management within government, but concluded that the scale of the challenge for financial managers in government is stark.

The Government’s fiscal consolidation programme is now expected to last longer than originally planned, and wide-ranging service reforms are being implemented. The role of financial managers is therefore critical to ensuring that opportunities to improve value for money are realized.

Today’s report acknowledges that the finance profession now has a greater presence in the upper levels of Whitehall. The Finance Transformation Programme has been set up to develop the skills and capabilities of finance professionals, and qualified professionals are better represented at senior levels. The publication of two sets of Whole of Government Accounts by the Treasury has also offered an opportunity to hold government to account more effectively for the money it spends and the activities it undertakes.

However, given the importance and urgency of the challenges presented by fiscal consolidation and public service reform, the report cautions that further improvements will be needed to support sustainable public service delivery with fewer resources in the longer term. Government is a long way from ensuring that decision-making is routinely based on robust information. Departments often do not integrate financial management with their strategic and operational planning. An absence of planning prevents departments from achieving the best results by linking resources and outcomes.

Departments and other public bodies have generally managed within reduced spending limits up to now, but some of the savings they have made are more sustainable than others. Some initiatives are primarily geared towards controlling spending. Of these, reforms such as changes to pensions and higher education funding can be expected to lead to long-term savings. However, others are less sustainable, such as pay freezes and moratoria on the use of consultants and temporary staff. In order to respond to financial and demand challenges, government needs to go further than controlling spending, by redesigning public services so that they operate permanently at lower cost.

The NAO recommends that the Treasury ensure a more effective leadership to better enable and incentivise the finance profession to confront the challenges it faces. The Government’s Finance Leadership Group should take responsibility for diagnosing the key current financial management challenges facing the finance profession and the wider civil service, and for addressing them quickly.