Select committee inquiry
Whole of Government Accounts 2020-21
Closed
What the inquiry looked at
“The Whole of Government Accounts (WGA) consolidates the accounts of over 10,000 public organisations, including central government departments, local authorities, devolved administrations, the NHS, academy schools and public corporations, to provide the most complete and accurate picture of the UK’s public finances. The 2020-21 WGA provides the most comprehensive view of the public finances after the first year of the pandemic response. The WGA is independently audited by the National Audit Office and scrutinised by the Public Accounts Committee. Based on the NAO’s findings, the Committee will question senior Treasury officials on subjects relating to the 2020-21 WGA including: the impact to the public finances from the COVID-19 pandemic the impact of any delays to and missing data from the WGA progress on implementing recommendations from the Committee’s 2019-20 WGA report If you have evidence on these issues please submit it here by 23:59 on Friday 27 October 2023. Please look at the requirements for written evidence submissions and note that the Committee cannot accept material as evidence that is published elsewhere.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of Ninth Report - Whole of Government Accounts 2020–21 ↗
The 2020–21 Whole of Government Accounts (WGA) provides the most comprehensive view of how government uses taxpayer’s money and of the state of public finances in the first year of the COVID pandemic. This document is unique in bringing together information on the financial performance and position of organisations across the UK and making it available to the public. It should provide a timely window onto the national balance sheet but significant delays to its publication continue to limit its usefulness, and missing data is reducing its reliability.
The WGA was introduced in 2010. Since then, we have regularly examined the WGA and suggested improvements to their quality and functionality so that they can achieve their full potential for enabling effective, transparent, and accountable decision making about our public finances. We have raised repeated concerns about the delays in publishing the WGAs, which limit their usefulness to Parliament, local authorities, and the public. Yet the situation is getting worse. The 2020–21 WGA was published in July 2023, 27 months after the year-end, and took longer to produce than any previous WGA. Some of the delays are the result of the continuing of impacts from COVID-19, as government departments continue to work to catch up. However, there were also significant impacts from the continuing delays in the production of local government accounts, compounded by the local audit crisis. The situation in the English local audit market is bleak, with just five of 467 local government entities meeting the statutory deadline for publication of their 2022–23 audit opinions. HM Treasury must grasp the scale and import of this crisis and come up with a credible plan to address it, limiting accountability losses and preventing its spread to other sectors.
Despite delays to the WGA timetable, the number of entities which failed to provide data has increased substantially. The extent of this missing data has resulted in the Comptroller & Auditor General raising an additional qualification of his audit opinion on the WGA. To ensure that the WGA provides the timely accountability and insights on public spending that it is intended to provide, it essential that HM Treasury addresses the issues identified with the production timescales and the quality of data included in this year’s accounts.
What the government said
The government responded on 2 April 2024. The deadline was 26 March 2024.
Summary written by Accountability Index from the government's response.
HM Treasury states that it "agrees with the Committee's recommendation" on each of the recommendations in the response, setting target implementation dates between Spring and Autumn 2024.
- On timeliness, HM Treasury "plans to publish" the 2022-23 WGA in November 2024 and the 2023-24 WGA in July 2025, and will write to the Committee by the end of March 2024. It describes the recovery plan as "ambitious".
- On missing data, it states that it requires bodies to submit draft data even if audited data is not available, that timely returns are an explicit measure in Accounting Officer end-of-year finance assessments, and that the governance statement discusses missing data.
- On COVID, it will set out further details on tracking costs after the Cost Tracker publishes in summer 2024, and is "content to provide a list of relevant evaluations in July 2024" rather than a full compendium.
- On thematic reporting, it commits to continuous improvement but says it will consider additional disclosures "where useful to the reader", mindful that too many might make reporting "complex and unwieldy".
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 12 September 2023 to its close on 3 April 2024. The dashed mark is the deadline Parliament records for the government's response.
- Oral evidence 9 Nov 2023
- Report 26 Jan 2024
- Government response 2 Apr 2024
- Correspondence 11 Dec 2023
What it recommended 4 recommendations · 28 conclusions
2Mandate HM Treasury to proactively collect WGA data and address missing submissions.
Concluded (the committee's words)
It is unacceptable that the increase in missing data is reducing the utility and reliability of the Whole of Government Accounts. A total of 155 public bodies did not submit data this year, including two pension schemes with liabilities of £86.9 billion and £48.2 billion respectively. As we found in our examination of the 2019– 20 WGA, gaps in the data reduces the completeness of the information available in the WGA, and reduces the certainty of any consequent insights, conclusions or decisions. When combined with the delays to the accounts, it makes it a less useful source to base decision making on. Stakeholders have suggested that using unaudited numbers for local authorities would be better than omitting them, as the omission renders the data definitely inaccurate, whereas including unaudited data is only potentially incorrect. Trend analysis will also be negatively impacted by missing data. We are particularly concerned that unless the trend towards incomplete data can be rapidly reversed, it could take several cycles for any trend analysis from the WGA to be of usable quality. As we say throughout this report this delay is highly undesirable and HM Treasury must prioritise ways of improving on this prediction. Recommendation 2a: HM Treasury must be more proactive in collecting the data required to complete the WGA, including: • Engaging with bodies to better understand why they have not submitted data. • Requiring bodies to submit draft data even if audited data is not available. • Identifying appropriate consequences/sanctions for bodies that don’t submit required data. b) HM Treasury should, as part of the 2021–22 WGA, include within the governance statement details of how it is addressing the issue of missing data. 6 Whole of Government Accounts 2020–21
3Require HM Treasury to explain its credible plan for resolving the local audit crisis.
Concluded (the committee's words)
We remain concerned that failures in the English local audit market are resulting in poorer quality data for Central Government, and are at risk of spreading to other sectors. The system of local government audit is close to breaking point, with over 630 accounts, some of which date as far back to 2015–16, yet to be signed off by auditors by the end of November 2022. Delays to local audit reduces transparency over approximately £100 billion of local government spending, and also impacts other areas of government spending, such as the NHS. We have previously found that the delays to assurance on the accounts of the Local Government Penson Scheme contributed to delays of four to five months on certifying the accounts of Ministry of Justice and the Department for Digital, Culture, Media & Sport. As part of the 2021 Spending Review, HM Treasury has allocated an additional £40 million to support local government bodies in responding to new auditing requirements and implementing the recommendation of the Redmond review. Despite this, performance continues to deteriorate, with just five of 467 local government entities meeting the statutory deadline for publication of their 2022–23 audit opinions. Recommendation 3: HM Treasury should write to the Committee by the end of February 2024 to explain how it is engaging at a senior level with the Department for Levelling Up, Housing and Communities, and the Financial Reporting Council, to ensure that they have a credible plan to resolve the local audit crisis.
4Establish a long-term plan for tracking COVID-related costs and evaluating support schemes.
Concluded (the committee's words)
HM Treasury does not have a clear plan for tracking ongoing COVID costs or evaluating COVID schemes in the longer term. It is essential that government learns from its response to the pandemic to ensure that lessons are applied and improve both future responses and business-as-usual service delivery. Yet HM Treasury has no existing plans to track COVID spending beyond next year. There is clear value in tracking some specific data for longer, such as the 20-year culture loans and 10-year business loans, and in learning lessons to understand if these initiatives just propped up struggling institutions or allowed them to invest and expand. There is also a risk that Machinery of Government changes can obfuscate attempts to follow the performance of, and return on, these investments. Evaluation of COVID support schemes is beginning to be reported, but on a scheme-by-scheme basis. Recommendation 4a: HM Treasury should, within six months, set out a long-term plan for tracking COVID-related costs, such as requiring accounts disclosures for annual accounts of significant schemes beyond the cost-tracker. b) HM Treasury should, by July 2024, provide a compendium of evaluation of COVID schemes from across Government, and cross cutting lessons to learn.
5Mandate consistent departmental data collection for improved Whole of Government Accounts reporting on key themes.
Concluded (the committee's words)
HM Treasury is not sufficiently proactive in identifying the data it requires for reporting thematic spend in the WGA, or communicating this with Departments. HM Treasury does not actively pursue the data it needs for the WGA beyond providing initial guidance on the format data should be provided in. The performance report in the most recent WGA provides a comprehensive explanation of the contents of the financial statements but does not yet meet best practice in terms of providing a comprehensive strategic, operational and financial review of the financial year. The WGA also includes limited or no commentary on non-financial key performance indicators used by the government to measure its progress on its policy objectives, Whole of Government Accounts 2020–21 7 for example national wellbeing, educational achievement, levelling up, tackling poverty, crime levels, progress on major strategic infrastructure projects, or illegal immigration. Recommendation 5: HM Treasury should, within its Treasury Minute response, explain how it will use guidance to departments or accounts directions to ensure there is more consistent data available from departmental accounts for use in improving reporting within future WGAs on key strategic themes such as climate change and the impact of inflation.
6Improve accessibility of Whole of Government Accounts information for Parliament, including localised spending data.
Concluded (the committee's words)
HM Treasury is not making the most of the information available within the WGA. As the balance sheet of the nation and an economic snapshot of the economy, the WGA has the potential to be an important and useful document in explaining where taxpayers’ money is spent and where are the government’s financial liabilities. Given this, there is more that HM Treasury could do to help Parliament read the accounts, and understand what the implications are of the information presented. This could, for example, take the form of an annual financial presentation, using the data and information included in the most recent audited WGA. There are also international examples of transparency over public spending that HM Treasury could learn from, such the regional spending analysis available within the US. Regional analysis of spending in the UK is now available through OSCAR II. Recommendation 6: HM Treasury should, within its Treasury Minute response, explain how it intends to improve the accessibility of the information within the Whole of Government Accounts, for example through seminars with MPs, and providing access to the localised spending data now available through OSCAR II. 8 Whole of Government Accounts 2020–21 1 Timeliness of the WGA
1Committee took evidence from HM Treasury on the 2020-21 Whole of Government Accounts.
Concluded (the committee's words)
Based on the Whole of Government Accounts (WGA) for the year ended 31 March 2021, we took evidence from HM Treasury (the Treasury) on 9th November 2023.1
7Significant delays occurred in the publication of the 2020-21 Whole of Government Accounts.
Concluded (the committee's words)
The Treasury published the 2020–21 WGA on 20 July 2023, 27 months after the end of the financial year. The Treasury did not provide the first complete draft of the accounts to the NAO until April 2023, nearly 14 months after the statutory deadline. The delay meant that the accounts were not laid until 20 July 2023, more than six months after the statutory deadline. In comparison, HM Treasury provided the complete first draft of the 2019–20 Whole of Government Accounts to the NAO in March 2022 and the 2019–20 accounts were published just over 26 months after year-end. Compared to the 2019–20 accounts, even though the account production time has decreased, the timeline for publication has nonetheless lengthened further.7
8Treasury failed to meet revised WGA publication timetables despite previous commitments.
Recommended (the committee's words)
As part of our inquiry into the 2019–20 Whole of Government Accounts, we concluded that the Treasury had taken too long to deliver the accounts, having been unrealistic with its timetable. We recommended that the Department reviewed the causes of its optimism bis, and revisited future timetables to ensure that they were realistic. The Treasury accepted our recommendation, and committed to revising the timetable for the 2020–21 account and future cycles. It also committed to setting out a long term recovery strategy that was realistic.8 In our previous evidence session on the 2019–20 WGA, HM Treasury said that it aimed to deliver the 2020–21 and 2021–22 accounts for publication of March 2023 and November 2023 respectively. However, in October 2022, the Treasury wrote to tell us that a March 2023 publication now looked unlikely.9 The Treasury wrote to us again in December 2022 to provide a further update on the timetable for the delivery of future WGAs, which it expected to published in quarter three of 2023.10 5 Public Accounts Committee, Whole of Government Accounts 2019–20, Twentieth Report of Session 2022–23, HC 31, 14 October 2022 6 HM Treasury, The Whole of Government Accounts (Specified Dates) Order 2010, 2010 No. 570, 31 March 2010 7 Q 1; WGA 2020–21, para 11, p 264; and HM Treasury, Whole of Government Accounts: year ended 31 March 2020, HC 246, June 2022 8 Committee of Public Accounts, Whole of Government Accounts 2019–20, Twentieth Report of Session 2022–23, HC 31, 14 October 2022; and HM Treasury, Government Response to the Committee of Public Accounts on the Eighteenth to the Twenty-Second Reports from Session 2022–23, CP 774, 12 December 2022 9 Correspondence from Catherine Little, Director General, Public Spending HM Treasury, re Whole of Government Accounts (WGA), dated 4 October 2022, published 17 October 2022 10 Correspondence from Catherine Little, Second Permanent Secretary Head of Government Finance Function, HM Treasury, re Whole of Government Ac
9WGA publication delays attributed to data collection and feeder accounts, despite HMT assertions.
Concluded (the committee's words)
We therefore asked the Treasury why publication of the 2020–21 WGA was so delayed. The Treasury told us that it had assumed that collecting the data needed for the WGA would take two to three months, that preparing the accounts would take five to six months, and that the C&AG’s audit would take three to four months. It explained that the process was prolonged by delays to the accounts that feed into the WGA and delays to receiving the data needed for the WGA, which resulted in it having to extend the data collection window. Under the system in use at the time, the data collection phase must end before the accounts preparation phase could begin. HM Treasury extended this deadline three times until December 2022. The Treasury recognised that it had taken longer to produce the 2020–21 WGA after the end of the financial year that it related to compared to previous WGAs. But it asserted that given the delays to being able to start preparing the account, this was “probably one of the fastest production timetables that we have ever followed” and that, at 14 months from start to completion, this was the fastest that it had ever produced.11
10Timeliness of Whole of Government Accounts is essential for transparency and governance.
Concluded (the committee's words)
The WGA offers an important tool not only for managing public finances but for ensuring transparency and accountability.12 We received written evidence from the Institute of Chartered Accountants in England and Wales (ICAEW), which told us that the WGA is uniquely positioned to provide an overview of public sector spending, and how the public sector’s financial landscape is evolving. We also received written evidence from the University of Glasgow, which told us that timeliness is essential when gathering high-quality data needed to produce useful information, and that delays reduce the credibility and transparency of information in the WGA and diminish its potential to generate valuable insights. ICAEW similarly explained that there are also implications for governance, as if the publication of audit findings is delayed, so is the opportunity for resolving them.13
11Treasury confident in new 15-month WGA publication timetable using parallel processing system.
Concluded (the committee's words)
The Treasury included its recovery plan for the WGA as part of its update in December 2022, which included returning to the pre-Covid timetables of produce the WGA no more than 15-months after the end of the relevant financial year. We asked the Treasury whether it was confident that future WGAs would be completed within this timetable. HM Treasury told us that it was confident in its revised timetable for the recovery of the 15 months publication schedule. It explained that it was working on preparing the draft accounts for WGA 2021–22, which it told us that it expected to provide to the NAO in November 2023 and to publish in April 2024, nine months after the 2020–21 WGA.14 The Treasury subsequently wrote to us after our evidence session to confirm that it expected to provide the draft accounts to the NAO in December 2023.15 The Treasury told us, however, that it would take it three or four further WGA cycles to fully catch-up. HM Treasury told us that it planned to achieve this by relying on the new functionality of the OSCAR II 11 Qq 1–3 12 WGA 2020–21, para 1, p 261 13 WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales; and WGA0001 Written evidence from Professor David Heald (Emeritus Professor at Adam Smith Business School, University of Glasgow) 14 Qq 1, 18 15 Correspondence from Conrad Smewing, Director General Public Spending, re Follow up to the Whole of Government Accounts (WGA) 2020–21 PAC Hearing, dated 3 December 2023, 11 December 2023 Whole of Government Accounts 2020–21 11 system, which enables it to capture the data for the WGA for one year while the previous year is still being worked on. In comparison, for previous WGAs, the accounts could only be worked on in strict sequence.16 16 Qq 1, 18; Correspondence from Catherine Little, Second Permanent Secretary Head of Government Finance Function, HM Treasury, re Whole of Government Accounts (WGA), dated 20 December 2022, published 12 January 2023 12 Whole of
12Significant volume of public expenditure data missing from 2020-21 Whole of Government Accounts
Concluded (the committee's words)
Despite the multiple extensions to the data collection window, a large volume of data was nonetheless missing from the 2020–21 WGA when it was published. A total of 155 entities did not submit the data requested, including 137 entities which were included in the 2019–20 WGA. In total, data on £55.3 billion (4.9%) of public expenditure was missing from the 2020–21 accounts. A large subsection of this figure relates to local government bodies, with 128 (just over 25%) of a total 510 local government bodies failing to provide data.17
13Extensive missing WGA data for 2020-21 impairs reliability, comparability, and expenditure reconciliation
Concluded (the committee's words)
When we examined the 2019–20 WGA, only 23 local bodies had failed to submit data. We found that this nonetheless impaired the reliability and quality of the data underlying the accounts, and consequently the validity of this data as a basis for insights, conclusion, and subsequent decisions.18 We received written evidence from the Association of Chartered Certified Accountants (ACCA), which suggested that the extent of the data that was missing from the 2020–21 WGA meant that not only was comparison between the 2020–21 WGA with figures for the previous year now compromised, but the reader’s ability to reconcile actual and budgeted expenditure was also impaired.19 We were concerned that this problem may be exacerbated further in the 2021–22 WGA, which will cover a period of high inflation.20
14Missing and untimely WGA data limits its utility for government decision-making
Concluded (the committee's words)
We asked the Treasury about the extent of missing data and the impact of this on the ability of government to make decisions about public spending. HM Treasury recognised that any gap in data meant that there was uncertainty about the completeness of the information that it was using. It also recognised that, combined with the timeliness of the accounts, this made the WGA a “less timely, less complete set of data for us to base decision making on”.21 It told us that it did not think that this fundamentally changed the way that it made decisions, or the quality of those decisions, as it did not make decisions about public spending in isolation. But it accepted that it needed to think carefully about what it should do next year if there was more missing data, which it expected to be the case, in order to allow people to draw trends as reliably as possible from the data in the WGA.22
15Increased use of unaudited data in 2020-21 WGA raises audit opinion concerns
Concluded (the committee's words)
HM Treasury also increased the use of unaudited data—data which has been audited only for presentation in the individual entity’s own accounts, rather than in OSCAR II format—in the 2020–21 WGA. We received written evidence from the ICAEW, which told us that the use of incompletely audited draft account data would almost certainly have led to the C&AG further qualifying his opinion on the 2020–21 WGA for a lack of assurance over the local authorities and other public bodies concerned. The ICAEW 17 WGA 2020–21, para 5, p 262, para 1.7, p 16, para 1.56, p 30 18 Committee of Public Accounts, Report of session: Whole of Government Accounts 2019–20, Twentieth Report of Session 2022–23, HC 31, 14 October 2022 19 WGA0003 Written evidence submitted by the Association of Chartered Certified Accountants, 10 November 2023 20 Qq 27–28, 47 21 Q 27 22 Q 27–28, 48 Whole of Government Accounts 2020–21 13 contended that the exclusion of these numbers harmed the WGA to a much greater extent than the inclusion of unaudited balances would do. It noted that excluding the figures would guarantee the materially incorrect nature of the final WGA balances on the basis that a nil value was certainly incorrect, whereas including draft data would mean only a potential inaccuracy.23 We asked the Treasury about the balance between using unaudited yet complete figures but producing the WGA in a more timely manner. The Treasury said that it was trying to get a “balance between timeliness, quality and the level of assurance we get as part of the Whole of Government Accounts”.24
16Treasury acts as passive receiver of WGA data, lacking proactive entity engagement
Recommended (the committee's words)
We asked the Treasury about the relationship it had with the public bodies which are required to submit data to the WGA, noting that the Treasury appeared to have operated largely as a passive receiver of data rather than actively seeking it out. The Treasury told us that while it may not be proactively contacting local authorities, it was regularly contacted by them with reasons why they cannot submit the required data, so it felt that it knew the underlying issues. It also told us that one area of engagement that it had focused on for 2021–22 was engagement with Scotland, where it was working to increase the number of entities that submitted data.25 Local audit crisis
17Local audit failures and backlogs severely impair 2020-21 WGA data quality
Concluded (the committee's words)
When examining the 2019–20 WGA, we concluded that failures in the local audit market in England were resulting in poorer quality data for preparing the Whole of Government Accounts.26 We subsequently examined the timeliness of local auditor reporting in June 2023, and found that the backlog of audit opinions for local government bodies remained unacceptably high, and delays to their publication hindered accountability for public spending. We found that over 630 accounts, some of which date as far back to 2015–16, were yet to be signed off by auditors by the end of November 2022.27 We also noted the pattern of deterioration in the number of local government audits completed by statutory deadlines. This issue has once again led to a qualification of the 2020–21 WGA, with the C&AG having identified 120 bodies where unaudited draft data was consolidated into the 2020–21 WGA following delays in the audit of the underlying accounts, a fourfold increase on the previous year. The C&AG noted that HM Treasury did not obtain information, or undertake analysis, to understand the risk of misstatements within the unaudited draft accounts, and that his own analysis, completed substantially using publicly available data, identified assurance gaps over £51.6 billion worth of Property, Plant and Equipment.28
18Treasury failed to assess risks and capacity issues within the local audit crisis
Concluded (the committee's words)
We received written evidence from the University of Glasgow, which suggested two main points of failure in HM Treasury’s approach to the local audit crisis. Firstly, that the emerging problems in local audit were not identified or considered in terms of risk. It explained that this meant that a gap in oversight was allowed to grow when the Department for Levelling Up, Housing & Communities did not step into the oversight role previously occupied by the now defunct Audit Commission. Secondly, it suggested that HM Treasury had failed to appreciate the prime importance of reductions in local 23 WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales 24 Q 8 25 Q 22 26 Committee of Public Accounts, Report of session: Whole of Government Accounts 2019–20, Twentieth Report of Session 2022–23, HC 31, 14 October 2022 27 Committee of Public Accounts, Timeliness of local auditor reporting, Sixtieth Report of Session 2022–23, HC 995, 23 June 2023 28 WGA 2020–21, para 6, p 262 14 Whole of Government Accounts 2020–21 authority capacity and the malfunctioning of the English local audit market. It noted that the local audit crisis had not manifested outside England, where responsibility for local audit is devolved to the Accounts Commission in Scotland and to Northern Ireland Audit Office (NIAO) in Northern Ireland.29 We asked the Treasury about the evidence we had received. The Treasury told us that it thought that these were very fair assessments and that it talked regularly to the Charted Institute of Public Finance and Accountancy (CIPFA) about the financial management of local authorities. It recognised that it needed to focus on this, as well as the quality of local authority audit committee, and financial capacity and leadership in local government.30
19Treasury developing multi-faceted plan to eliminate backlogs in local government audit
Concluded (the committee's words)
The Treasury told us that was putting in place a plan to try to eliminate the backlogs in local audit. It explained that this included: • establishing a final deadline for the production of the audited accounts for local government bodies, accepting that this may necessitate qualifications or even disclaimers on those accounts; • looking at the audit approach, in collaboration with the Financial Reporting Council, with the intention of providing guidance to auditors that underlines the importance of timeliness, and establishing a proportionate approach to historic audits in looking at audit quality reviews; • reviewing the workforce strategies that underly the production of these audits to close the resourcing gaps across the system; and • identifying what can be flexed in the accounting standards and the financial reporting framework to help to streamline the production of the accounts.31 In our report on the 2019–20 WGA, we noted the shortage of auditors with the knowledge and experience to deliver, within the expected timeframes, the high-quality audits required for the increasingly complex structures and transactions within Local Government accounts. The Treasury acknowledged that its primary contribution may be ensuring that funding is available to make engagement with public sector audit commercially viable for audit firms. As part of the 2021 spending review, the Treasury provided £40 million to the local authority sector to carry out audits and encourage more audit firms to enter the sector.32
20Local audit failures risk spreading to health sector, already causing account delays
Concluded (the committee's words)
We were concerned that the problems we see now in the local audit sector could spread and contaminate the health sector. We asked what more it could do to help to address the issues with the audit of local government. The Treasury recognised the importance of both auditor incentives and sanctions. It told us that its work so far had tended to focus on incentives, through providing more funding and the proportionality of the regulatory framework, so it thought that it now needed to turn to look at what the sanctions were. It similarly recognised the importance of fixing the issues within local government audit in order to stem the contagion of audit failures from spread to other sectors such as health. 29 WGA0001 Written evidence from Professor David Heald (Emeritus Professor at Adam Smith Business School, University of Glasgow) 30 Q 17 31 Q 3 32 Q 10; Public Accounts Committee, Report of session: Whole of Government Accounts 2019–20, 14 October 2022 Whole of Government Accounts 2020–21 15 The C&AG noted that this risk was already crystallising, and that he expected that the Department of Health’s accounts for 2022–23 will be delayed by two months because of a failure of a local audit supplier to complete the necessary work.33
21Quickly clearing local audit backlog risks qualified opinions and lost public assurance
Concluded (the committee's words)
We asked the Treasury what it could do to address the audit backlog in the local government sector more quickly. The Treasury stated that it expected the clearance of the local audit backlog to take several years. The C&AG noted that the work that the Treasury and the NAO were doing could clear the backlog much faster, but that this would be at the expense of a large number of qualified and disclaimed audit opinions, the price of which would be lost assurance over public spending. He explained that returning to unqualified audit opinions within local government would take longer owing to the need to close the gap between “accepted accounting and audit practice in that sector and what is now required by auditing standards and accounting standards”. The Treasury recognised that it needed to strike a balance between the risks posed by getting the timeliness of accounts back on track.34
22Increased audit threshold for Whole of Government Accounts was temporary and did not impact opinion.
Concluded (the committee's words)
Prior to the 2020–21 WGA, public bodies with a budget in excess of £0.5 billion were required to undergo an NAO audit of the data they submitted for the WGA, in addition to the existing statutory audit of the annual report and accounts. In order to reduce the pressure on finance teams, the Treasury increased the threshold for the 2020–21 WGA from £0.5 billion to £2 billion. This did not lead to the C&AG qualifying his audit opinion in relation to this issue. HM Treasury explained that it viewed the lowering of the audit threshold as a temporary measure rather than an approach they would want to see persistently pursued.35 33 Qq 4–6 34 Qq 7–8 35 Qq 5, 7–8; Public Accounts Committee, Oral evidence: Whole of Government Accounts 2020–21, HC 65, 9 November 2023; and WGA0001 Written evidence from Professor David Heald (Emeritus Professor at Adam Smith Business School, University of Glasgow), 10 November 2023 16 Whole of Government Accounts 2020–21 3 Future of the WGA Long term tracking of COVID spending
23Unprecedented COVID-19 spending scale provides essential, long-term lessons for future government responses.
Concluded (the committee's words)
The scale and nature of the COVID-19 pandemic and the government’s response are unprecedented in recent history, the full cost of which will not be known for many years. By the end of March 2021, the estimated lifetime cost of measures announced as part of the government’s response was £372 billion. The exceptional nature of some of this spending offers unique lessons which it will be essential for government to learn. Some of these lessons can be considered in the near future, others will need to be tracked over ten to twenty years.36
24Full impact of pandemic spending measures will remain unknown for many years.
Concluded (the committee's words)
The final cost and impact of some of the measures introduced in response to the pandemic will not be known for many years. We examined the Bounce Back Loans Scheme in December 2020 and April 2022, where we found that the Scheme’s impact could only be judged when borrowers reached the end of their six- or ten- year loan period and their loans were either repaid or written off if the business has not survived.37 In June 2021, we also examined the Culture Recovery Fund, a £1.57 billion fund which aimed to save up to 75% of organisations in the arts, culture and heritage sectors at risks of financial ruin following the national lockdown. The loans had a 20 year term, with a low interest rate and no repayments for two to four years.38 We noted that the recipients of these unexpected injections of funding will have absorbed that money into their forward funding plans and will have reconfigured how they will fund future activities. We asked the Treasury whether the taxpayer was subsidising an organisation unnecessarily, or was stimulating growth, innovation, and employment opportunities. Given the length over which spending measures such as the Culture Recovery Fund and Bounce Back Loan Scheme funding will be repaid, we also asked how the Treasury would ensure that this spending could be evaluated by the next generation of elected and permanent officials without having to go through every individual Department’s accounts. HM Treasury told us that it had recently written to all Departments to remind them of the expectation that material policies are evaluated. It confirmed that it would be checking that major policies are evaluated in the way intended.39
25HM Treasury not committed to continuing COVID-19 cost tracker beyond 2021-22 financial year.
Concluded (the committee's words)
The NAO collated and published information on the government’s response to the pandemic in its COVID-19 cost tracker, the first iteration of which was published in September 2020.40 The cost tracker is now maintained by HM Treasury, and this expenditure was included in the 2020–21 WGA. The Treasury told us that it thought that it would want to carry on including the cost tracker in the 2021–22, but it did not commit to producing the cost tracker or incorporating it into the WGA beyond the 2021–22 WGA.41 The Treasury explained that in future it would need to consider how much to keep revising the cost tracker when changes would start to become quite small, “but not for the next 36 Committee of Public Accounts, Initial lessons from the government’s response to the COVID-19 pandemic, Thirteenth Report of Session 2021–22, HC 175, 25 July 2021 37 Committee of Public Accounts, Bounce Back Loans Scheme: Follow-up, Fiftieth Report of Session 2021–22, HC 951, 27 April 2022 38 Q 30–31; Committee of Public Accounts, COVID-19: Culture Recovery Fund, Eighth Report of Session 2021–22, HC 340, 23 June 2021 39 Qq 40–42 40 Committee of Public Accounts, Covid-19: Cost tracker update, Thirty-Eighth Report of Session 2021–22, HC 640, 23 February 2022 41 Q 31, 41 Whole of Government Accounts 2020–21 17 year or two”.42 It told us that, if it reached the point at which it thought that maintaining or updating the cost tracker was not necessary, it would think about what approach will be needed to ensure the long-term traceability of costs for future generations of officials and elected representatives. Such an approach must survive even changes in the machinery of government and the departure of staff with the required current and historical knowledge of the relevant balances.43
26Pandemic response exposed taxpayers to substantial fraud and error risks, some still undetected.
Concluded (the committee's words)
Government’s response to the pandemic has exposed the taxpayer to substantial financial risks from fraud and error. Government is likely to better understand the incidence of fraudulent receipt of COVID-19 funds over the medium-term as fraud estimates crystallise.44 The Committee has discussed the issue in some detail in its examination of the Bounce Back Loans Scheme which was deemed to be at particularly high risk of fraud. HM Treasury acknowledged that some elements presently in the Cost Tracker represent undetected fraud. It confirmed that the BEIS accounts will be the primary tracker for this particular scheme.45 To preserve the learning from cases of fraud across government, both related to COVID spending and elsewhere, HM Treasury created the Public Sector Fraud Authority in 2022.46
27Treasury expects departments to evaluate material policies, supported by Evaluation Taskforce for quality assurance.
Recommended (the committee's words)
We have repeatedly raised the need and importance of evaluating the impact of funding provided as part of the measures introduced by government during the COVID-19 pandemic. The Treasury told us that it had undertaken interim evaluations of the schemes that it was responsible for, and that its expectation was that all Accounting Officers undertake evaluations of “material policy”.47 It explained that the Treasury and the Cabinet Office had written to all Departmental accounting officers to make clear that they are expected to undertake evaluations and that they will be checking that Departments have undertaken the evaluation of major policies in the way that is intended. We asked the Treasury how it would ensure and monitor that the standard of evaluations. Our attention was drawn both to the Evaluation Task Force, which was established to set the standard for evaluation and provide support Departments. It explained that the intention was for the Evaluation Taskforce to make sure that “we are driving better lessons learned about how we do good evaluation across Government, as we all as providing some resources”. It further explained that the Evaluation Taskforce would hold Departments to account for the quality of their evaluations. The Treasury emphasised that evaluations will be published.48 Thematic Data Collection
28Public spending data lacks sufficient explanation of policy impact and non-financial key performance indicators.
Concluded (the committee's words)
Both of the professional bodies that responded to the Committee’s request for evidence addressed the collection and use of data. The ICAEW told us that a lot more could be done to explain how public spending has been used to meet policy objectives and the needs of the population, and noted a lack of commentary on the non-financial KPIs used as metrics for policy progress on matters including education, levelling up, tackling poverty, crime 42 Q 37 43 Q 41 44 Q 38; Committee of Public Accounts, Covid-19: Cost tracker update, Thirty-Eighth Report of Session 2021–22, HC 640, 23 February 2022 45 Qq 28, 40; Public Accounts Committee, Bounce Back Loans Scheme: Follow-up – Report, HC 961, 27 April 2022 46 Q 38; Public Sector Fraud Authority Website 47 Q 42 48 Qq 42–43 18 Whole of Government Accounts 2020–21 levels, progress on major strategic infrastructure projects, or illegal immigration.49 This echoes our own concerns raised in the report on the 2019–20 WGA, where we stated that current Government policies and economic context were not reflected in WGA reporting, and we recommended changes to the Performance Report.50 The ACCA made particular note of the scope for expanding and enhancing the reporting of data relating to the Net Zero and wider sustainability targets, and commented on the need for this data to be subject to external audit.51
29Whole of Government Accounts currently list Net Zero spending commitments, not actual audited expenditure data.
Concluded (the committee's words)
We asked the Treasury how it was reflecting the issue of Net Zero spending in the WGA, given its importance across government and therefore every public body that is included in the WGA. At present, the WGA deals primarily with listing spending commitments relating to Net Zero. HM Treasury committed to making this information more prominent as the money begins to be spent and it has data on what has been spent against those commitments.52 We observed that, as with COVID spending, some of this spending will become business as usual, so it will be important to balance this with the ability to track funding. There is also a risk that both the funding and the activity become so entrenched as business as usual that the impact can no longer reliably be tied to the intervention. HM Treasury maintained that for the moment, it was sufficient to know where spending is planned – in the 2021 Spending Review, and in the performance reports of individual components. The NAO noted that the data that HM Treasury plans to collect now will only be published in two to three years, given the accounts’ productions schedule. The public bodies that are incorporated into the WGA and their auditors will need time to produce audited sustainability data.53 Optimal use of WGA data
30Delays in accounts production prevent Whole of Government Accounts from reaching full potential as a tool.
Concluded (the committee's words)
In its written evidence to us, the ICAEW told us that the WGA was not yet filling its full potential as it was not being used as the multi-purpose tool that it should be. The Institute maintained that annual financial reporting is a multi-purpose tool that underpins effective financial management, strategic decision-making, risk management, governance processes, and regulatory and legal compliance. It told us that the WGA had enabled progress to be made in many of the above areas. However, it also told us that the continuing pattern of delays in accounts production we have explored earlier in this report prevent the WGA from being sufficiently relevant to take their proper place as a pillar of governmental decision-making. They also limit the opportunity for the WGA to act as a means to share policy successes and good practice, and as a tool for accountability.54
31HM Treasury is open to providing seminars to improve public understanding of Whole of Government Accounts.
Recommended (the committee's words)
Given the potential for the WGA to be an important and really useful document about public spending, we asked the Treasury how it could help Parliamentarians and members of the public to understand the WGA and its implications. The ICAEW suggested that that it would be beneficial to hold events additional to our annual evidence session, to 49 WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales, 10 November 2023 50 Committee of Public Accounts, Whole of Government Accounts 2019–20, Twentieth Report of Session 2022–23, HC 31, 14 December 2022. Para 18 51 WGA0003 Written evidence submitted by the Association of Chartered Certified Accountants, 10 November 2023 52 Q 50 53 Qq 1–2, 50–51, 53 54 WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales, 10 November 2023 Whole of Government Accounts 2020–21 19 enable Parliament to hold government to account for its stewardship of public money. It suggested that annual financial presentations, using the numbers in the WGA, could be beneficial to Parliament – similar to how listed companies present their annual financial resutls to shareholders and other stakehodlers. We therefore also asked it whether it would consider giving seminars introducing and explaining the document to be made available to Parliamentarians and the wider public. The Treasury told us that it had worked hard to make the WGA more understandable and use much more plain English, and that it would continue to do so. It recognised that importance of people being able to understand where taxpayers’ money is spent and said that it was open to doing seminars and teachings wherever there is demand.55
32Transparency and definitive fraud estimates in Whole of Government Accounts reporting remain inadequate
Concluded (the committee's words)
We have previously expressed concern about the level of transparency in WGA reporting.56 The ICAEW suggested that it would have been helpful to have a more definitive estimate of fraud and waste incurred during 2020–21 financial year. The ICAEW would also have liked to see a corresponding summary of the estimates of COVID-19 fraud and waste from across government to present an overall picture of the potential exposure to fraud and waste in 2020/21 before and after recovery actions.57 As part of our inquiry into the 2019–20 WGA, we raised concerned about the design and testing of OSCAR II, the Treasury’s system for collating and consolidating data into the WGA. This was expected to bring significant benefits, including improved data quality and analysis, and advancements in the quality of the informaiton in the WGA.58 We therefore asked the Treasury about the capabilities of OSCAR II and how it was being used. The Treasury told us that that the system was fully live, with WGA, forecasting and estimates teams working with data from across Whitehall. We noted that the Government Accountability Office in the USA had produced interactive fund tracking mapping produced by the Government Accountability Office., The Treasury told us that it was working with the Department for Levelling-Up, Housing and Communities on a project that showed spending by region, which had been enabled by OSCAR II. It also said that “there is a lot more we can do on that” and that its next stage would be to think about what else it could enhance or make better use of, particularly around data quality.59 55 Q 16; WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales, 10 November 2023 56 Committee of Public Accounts, Whole of Government Accounts 2019–20, Twentieth Report of Session 2022–23, HC 31, 14 December 2022. Para 19–22 57 WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales, 10 November 2023 58 Committee o
Evidence
Oral evidence sessions 1
- 9 Nov 2023Whole of Government Accounts 2020-213 witnesses, listed belowparliament.uk ↗
Who gave evidence 3 witnesses
- Andrew CartnerDeputy Head of the Government Finance Function, HM Treasury
- Cat LittlePermanent Secretary, Cabinet Office
- Conrad SmewingDirector General Public Spending and Head of the Government Finance Function, HM Treasury