Public Accounts Committees 24 October 2013
Governance and control in managing and accounting for public money:
principles and process
Sylvia Thomson
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Public Accounts Committees 24 October 2013
This Presentation:
1. Setting budgets and allocating public funds
2. Accounting for and Reporting public spending
– Internal and external audit– Quality audit and scrutinising performance– Parliament ‘s role
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Public Accounts Committees 19th February 2013
Part 1: Setting budgets and allocating public funds
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Public Accounts Committees 22 October 2013
Setting budgets and allocating public funds
Principle 1: Only Parliament supplies money for public bodies to spend
• Supply Procedure: The Crown (the Government) demands, the House of Commons grants, the House of Lords assents
• Departments need statutory authority for both the use of resources and for funds to be drawn from the Consolidated Fund by Acts of Parliament known as Consolidated Fund Acts and Appropriation Acts, which only apply to the specific financial year
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Public Accounts Committees 24 October 2013
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Chancellor BUDGET JUDGMENT CABINET
FINANCE ACT
REVENUE
SPENDING REVIEW
SUPPLY ESTIMATES
ANNUAL REPORTS AND ACCOUNTS
OBR
NAO
PAC
Setting budgets and allocating public funds: THE SUPPLY CALENDAR
Public Accounts Committees
24 October 2013
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2012-13 FY -1 2011-12 FY 2012-13 FY +1 2013-14
April - June Forecast outturn
Departmental reports
Vote on AccountMain EstimatesRevised EstimatesEYF take up
July - September
PESA Spending Review outcome
October - December
Autumn Statement Vote on Account
January - March
Final accounts Spring SupplementariesEstimated Outturn
Departmental Reports Budget
Public Accounts Committees 22 October 2013
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Setting budgets and allocating public funds
Principle 2: The Treasury controls what is spent and how it is spent
Even when Parliament has voted money, Departments also need Treasury consent to spend the money and must do it in accordance with any conditions laid down by the Treasury:
There are particular rules about types of spending, in year controls, and a general worry about spending which is ‘novel’ or ‘contentious’: limits on overheads and capital spending, special rules for eg finance leases.
There is a general overriding rule that the expenditure must be efficient, economic and effective
Setting budgets and allocating public funds
Principles of Fiscal Control
Macro economic stability• Fiscal honesty
• Cabinet responsibility
• Decisive decisions
Economic disposition of resources• Value for money
• Incentives to manage public services well
Public Accounts Committees 24th October 2013
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What do you want to control? • £696bn : Total Managed Expenditure–
TME -key ratio to GDP
• £637bn; Departmental Current spending – hardest to cut in year, and nearly half is Annual Managed Expenditure (AME)
• £343bn: Resource Departmental Expenditure Limits – how much is ring-fenced?
• £43.5bn: Departmental Capital spending – easiest to cut but not necessarily good vfm
• £16bn Administration Budgets – the cost of government - 2 per cent of TME
• Total DELs– consumption measure
• Total AME – cyclical and demand led,
• Public Sector net investment – link to ‘The golden rule’ that government borrows only to invest’
Public Accounts Committees 24 October 2012
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Setting budgets and allocating public funds
• Treasury expenditure teams typically have fewer than 15 people • Details vary, but many teams control more than £50bn of
expenditure • During a spending review they are understaffed and under pressure
compared with departmental finance staff
Public Accounts Committees
24 October 2013
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Chancellor
PE control Capital investmentPublic sector services
Pay and pensionsFinancial management
and reporting
Chief Secretary
Procurement
Office for Budget Responsibility
Setting budgets and allocating public funds
Public Accounts Committees 24 October 2013
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Spending Review Process • Preliminary Skirmishes• Budget judgment (HMT –March)• Public Expenditure Cabinet • Spending Review Guidelines • Department Response • Negotiations (multiple)• Star Chamber (Ministers) • Settlement Letter (officials)• Announcement (summer/autumn)
Public accounts committees 24 October 2013
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Public Accounts Committees 24 October 2013
Part 2: Accounting, Audit and Reporting
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Accounting, Audit and Reporting: AccountingEach Vote has an Accounting Officer who is personally responsible to
Parliament for the honesty of the Vote
1. AO must sign the Estimate and the Departmental Financial Statements and Accounts
2. The AO appears, often along with the Minister, before the Public Accounts Committee
3. The AO will often also appear before the PAC with Additional Accounting Officers, and before the Departmental Select Committee with other staff
4. The AO’s relationship with the Secretary of State is crucial
Public Accounts Committees 24 October 2013
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Public Accounts Committees 24 October 2013
Accounting, Audit and Reporting: AccountingAccounting Officer required to ensure
• funds authorised by Parliament are used for the purposes intended by Parliament and that these funds and any receipts are properly accounted for
• safeguarding the public funds; for ensuring propriety and regularity in the handling of public funds;
• and for the day-to-day operations and management of the department• promoting and safeguarding regularity, propriety, affordability, sustainability,
risk, and value for money across the public sector; and accounting accurately, and transparently, for the department’s financial position and transactions.
• ensure the department as a whole is run on the basis of the standards, in terms of governance, decision-making and financial management that are set out in Box 3.1 of Managing Public Money.
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Setting budgets and allocating public funds: THE SUPPLY CALENDAR
Public Accounts Committees
24 October 2013
THIRD SECTOR PARTNER
www.3spartner.co.uk
2012-13 FY -1 2011-12 FY 2012-13 FY +1 2013-14
April - June Forecast outturn
Departmental reports
Vote on AccountMain EstimatesRevised EstimatesEYF take up
July - September
PESA Spending Review outcome (2010, 2013)
October - December
Autumn Statement Vote on Account
January - March
Final accounts Spring SupplementariesEstimated Outturn
Departmental Reports Budget
Public Accounts Committees 24 October 2013
Accounting, Audit and Reporting: AuditThe National Audit Office and the Comptroller and
Auditor General • C&AG is appointed by Parliament• NAO conducts audits of Appropriation Accounts, particular
projects or policy programmes as requested by the Public Accounts Committee, and ‘value for money’ audits. All reports are laid before the house.
• Not all reports result in a PAC hearing• The Treasury attends all PAC hearings and advises
Accounting Officers before the hearing
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Public Accounts Committees 24 October 2013
Internal Audit• Assurance for Accounting Officer• Audit Committee agrees programme• Feeds into governance statement
External Audit• Assurance for Parliament• Department and HMT consulted over programme
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Accounting, Audit and Reporting: Audit
Public Accounts Committees 24 October 2013
Accounting, Audit and Reporting: Reporting
Principles of reporting
Tell Parliament (the public):
What you intend to do and what it will cost (always)
What you have done and what it did cost (always)
What you think you might do (sometimes)
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Public Accounts Committees 22 October 2013
Accounting, Audit and Reporting: Reporting
Internal: Treasury, Cabinet Office, Colleagues
External: Parliament, Public,
Freedom of information, transparency agenda
Press Releases
Social Media
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Public Accounts Committees 24 October 2013
Accounting, Audit and Reporting: Reporting
Departmental Select Committees
Wider focus than PAC
Agenda usually more political and policy based but not slow to point out perceived shortcomings
Regular hearings on Estimates and Annual Reports
Also receive business plans and performance reports
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Public Accounts Committees 22 October 2013
Accounting, Auditing, Reporting: Reporting
Defence Select Committee: Current inquiries• Work of the Chief of the Defence Staff• MoD Annual Report and Accounts 2012-13• Deterrence in the 21st Century• Intervention: Why, When and How?• Remote Control: Remotely Piloted Air Systems - current and future UK use• UK Armed Forces Personnel and the Legal Framework for Future Operations• MoD Main Estimates 2013-14• Future Army 2020• Towards the Next Defence and Security Review• MoD Supplementary Estimates 2012-13• Defence Implications of Possible Scottish Independence
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Public Accounts Committees 24 October 2013
Conclusions/Questions
What next?
• IT and Social media now driving agenda, can Parliament keep up?
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Public Accounts Committees 22 October 2013
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