The government needs to significantly improve its financial management capability if it wants to deliver “real efficiency improvements”, National Audit Office boss Gareth Davies will say in a speech today.
Davies will argue that good quality financial management is key to government achieving its savings targets and better services to citizens, but too often the basic requirements are not being met.
Giving his annual speech, the comptroller and auditor general will set out the four fundamentals of financial management that can unlock the necessary improvements in value for money for the government.
These are: timely and accurate financial reporting; fit-for-purpose financial management information; the skills and capability to inform decision-making; and the leadership and culture that supports innovation and continuous improvement.
On skills and capability, Davies will argue that there is “significant scope for better integrating expert financial advice into the decision-making process”, according to a press release from the NAO.
“The challenge of transforming services and business processes and delivering real efficiency improvements requires more rather than less of these high-level financial management skills,” he will say.
“It’s not a question of headcount, but of expertise.
“There are great examples of departments getting this right. The result is better planning and forecasting and better operational decisions.”
On fit-for-purpose financial management information, Davies will say managers “often do not have access to the activity cost information they need to drive efficiency and performance”.
“Government systems are set up to control spending within budgets, not to help managers manage,” he will argue. “If the unit cost of delivery, and the components making it up, are not well understood, it’s difficult to make sound operational decisions. How do you know where the biggest ‘bang for the buck’ is?”
Davies will also call for leadership that supports continuous improvement.
“This is the hearts and minds part of any change, with a clear tone from the top and a credible narrative on the achievements made possible by a better grip on the money,” Davies will say. “Financial management is not just about compliance; it’s how better results are delivered.”
He will urge departmental boards and management teams to use the NAO’s five financial management Good Practice Guides to “build or tune up your financial management capability”.
On the importance of timely and accurate financial reporting, he will warn that “the situation in English local government remains a cautionary tale, where backlogs of unaudited accounts...mean that a material part of the whole of government accounts is not assured, but also that local taxpayers are not getting the most basic form of financial accountability”.
Calling for a more proportionate reporting regime for small public bodies, he will say: “We should also ensure that reporting requirements are serving their purpose of clear accountability and not becoming an end in their own right.”