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National Audit Office report: Report of the Comptroller and Auditor General: Whole of Government Accounts 2014-15

Report of the Comptroller and Auditor General: Whole of Government Accounts 2014-15

The Whole of Government Accounts provide a unique perspective owing to their reach and approach to measuring the government's financial performance and position.

“The Treasury’s Whole of Government Accounts (WGA) are a key mechanism for improving the understanding of its management of the public sector, and there is no more complete record of what the government spends, receives, owns and owes. The Treasury is improving the quality of the WGA, the completeness of information within it and its accuracy. As a result, I have been able to reduce the scale of my qualifications of the accounts this year. The WGA could, however, be a more powerful tool for understanding the public finances. It provides a unique perspective because of its reach and approach to measuring the government’s financial performance and position. Better analysis by the Treasury of the nature of the assets across the government’s portfolio, the extent and sources of liabilities and the financial risks it is exposed to, will help Parliament and the public to understand better the full range of the government’s financial commitments and its approach to managing them.”

Amyas Morse, head of the National Audit Office, 27 May 2016

 

The National Audit Office has today published its report on the Treasury’s sixth set of Whole of Government Accounts (WGA). The 2014-15 version of the WGA is the most complete picture of the public finances that is available and the quality of the document and its accuracy is continuing to improve. The accounts now include Network Rail and the Pension Protection Fund, and so show a broader range of the public sectors activities than they have ever before.

The Comptroller and Auditor General, Sir Amyas Morse, has however continued to qualify his opinion on the accounts owing to the scope of the WGA. Significant bodies such as the Royal Bank of Scotland are not included in the accounts, and the valuation of infrastructure assets such as the local authority road network and the rail network is yet to be aligned with the rest of the government’s assets. Since the last time the Treasury published the accounts, however, the Comptroller and Auditor General has removed two qualifications from his opinion. These relate to third and fourth generation mobile phone licensing income and the accuracy of the reflection of schools assets. The NAO also points out that the remaining qualifications are being addressed by the Treasury and that there is a path to the removal of most of these qualifications in the coming years.

The Treasury’s process for producing the 2014-15 accounts was affected by delays to the Department for Education’s financial statements this year. While improvements in the timeliness of the accounts will be crucial to the WGA’s development as a management tool, the Treasury is managing and controlling the process better.

This set of accounts shows that in 2014-15, the WGA net expenditure (the shortfall between income and expenditure) increased by £6.3 billion, to £152.0 billion. This is owing to an £8.4 billion increase in the estimated costs of provisions, which mainly relates to an increase in the liabilities for nuclear and oil and gas field decommissioning; a £7.5 billion increase in net interest on pension scheme liabilities; and the impact of the triple lock policy on state pensions of £3.6 billion. These costs are offset by an increase in overall revenues from £652.9 billion to £659.3 billion, which is largely due to an increase in Value Added Tax. Within net expenditure, wages and salaries are broadly stable at £148.3 billion compared to £148.2 billion, in the light of staff numbers falling by 20,346.

The government’s net liabilities (the shortfall between assets and liabilities) increased to £2,103.2 billion from £1,840.6 billion, which is mainly due to increases in pension liabilities of £190.2 billion and government borrowing of £78.4 billion.

The WGA helps to manage the longer-term risks to the government’s assets and liabilities that do not feature as prominently in the other management frameworks that instead focus on government spending, cash requirements or an individual, rather than portfolio level view of financial assets and liabilities. While the information in the WGA is incomplete in this regard, as demonstrated by the qualifications of the Comptroller and Auditor General’s audit opinion; the WGA is the most comprehensive record of what the government spends, receives, owns, owes and is committed to spending.

 

Publication details:

HC: 28, 2016-17

Published date: May 27, 2016