Recommendation 2

A tailored financial reporting regime for small, low-risk bodies would allow for more meaningful reports and free up time for frontline delivery. Financial reporting requirements are disproportionately 2 onerous for smaller, low-risk bodies. The costs of producing and auditing lengthy, overly detailed annual reports and accounts often outweigh the associated accountability benefits. HM Treasury acknowledges that specific requirements, such as lease disclosures, could be simplified. However, it is underestimating the wider benefits that a more proportionate reporting regime for small bodies would deliver. These include improving transparency by making it easier to identify the most meaningful information in small bodies’ annual reports and accounts, and enabling public servants to devote more time to service delivery rather than compliance. Implementing a small body reporting regime will require a single, agreed definition of a small, low-risk body, as HM Treasury currently uses different thresholds for different purposes. recommendation HM Treasury should, by 30 June 2026, write to the Committee setting out its definition of a small body and its analysis of the costs and benefits of various options for streamlining the annual reporting requirements for small, low-risk central government bodies. This should include one or more ambitious options to significantly reduce small bodies’ reporting burden which must consider proportionality and a risk-based analysis. For these options, HM Treasury should: a. set out the accountability and transparency trade-offs of each option and potential mitigations; b. consider which options for simplifying and streamlining requirements might be applicable to larger organisations; and c. set out its proposed process for identifying which bodies are suitable for streamlined reporting requirements.