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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.

Amyas Morse, head of the National Audit Office, said today:

“Finance teams in departments and other public bodies have a vital role to play if the government is to deliver the planned public service reform. Finance managers are now being taken more seriously and playing a more central role in the efforts to provide sustainable services at lower cost.

“However, the pace of change must be accelerated. Savings are being made but progress in restructuring how services are being delivered is lagging. If the challenge of reforming the delivery of public services is to be met, then the Treasury and Finance Leadership group need to provide more effective impetus to strengthen financial management capability across government.”

Notes for Editors

£720 billion: total Government spending in 2013-14

15.4 per cent: planned real terms cuts to departmental spending between 2009-10 and 2015-16

3.8 per cent: annual departmental spending cuts needed in 2016-17 and 2017-18 implied by government forecasts

£428.8 billion: departmental spending in 2009-10 (2013-14 prices)

£381.0 billion: planned departmental spending in 2013-14 (2013-14 prices)

£335.3 billion: forecast departmental spending in 2017-18 (2013-14 prices)

1. Fiscal consolidation is the Government's policy to reduce public sector borrowing, incorporating both spending reductions and tax increases.
2. The Finance Leadership Group, originally formed in early 2005 and established in its current form since May 2012, leads the Government Finance Profession and works to promote and strengthen financial management. The Group is chaired by the Head of the Government Finance Profession and its membership includes finance directors from the 10 largest spending departments, and representation from the smaller departments.
3. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
4. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 867 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of almost £1.2 billion in 2012.

Find out more about the impact the NAO has made in the past year.

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