Public-spending watchdog the National Audit Office has warned that the UK’s pioneering Whole of Government Accounts snapshot of public spending is being devalued by delays, missing data and unreliable information.
NAO head Gareth Davies makes the criticisms in his report to MPs on the 2020-21 WGA, which he noted was published seven months later than originally intended and had come more than two years after the end of the financial year it covers.
Covid-19 and problems with HM Treasury’s new OSCAR II IT system were blamed for delays with the 2019-20 WGA, which was not published until last year. The NAO said knock-on effects from those problems combined with a “significant delay” in the completion of returns by some public-sector bodies “largely explain” the delays with the 2020-21 WGA.
The latest report – which brings together data from around 10,000 organisations, including central government departments, NHS bodies, councils and schools – shows the UK spent £1,063bn on public services and collected revenue of £731.5bn in 2020-21. The figures represent a 15% increase in spending on the previous year but a 10% decrease in income.
A breakdown of the total expenditure figure for 2020-21 gave “social security” as the biggest area, at £258.4bn, with the state pension accounting for 40% of that figure. The next largest item is staff costs, which were given as £253.5bn. Meanwhile, £238.7bn was spent on purchasing goods and services. Interest on government debts was £21.2bn.
Davies commended the Treasury for its work with central government bodies to speed their data-submissions. But he painted a worsening picture of data-submissions on the part of local government organisations.
“Increasing delays, significant data gaps, and less reliable data are reducing the quality of the WGA,” he said.
“A good quality WGA provides a timely and comprehensive view of the public finances, and is particularly important given the impact of Covid-19, and the policy responses, on public finances.”
Davies said the WGA was “increasingly reliant” on unaudited data and affected by bodies failing to submit their figures to the Treasury.
“While the WGA still contains plenty of useful information, the falling data quality reduces the reliability of trend data and comparisons with prior periods,” he said.
Davies added that a continuation of current trends coupled with the planned shortening of the WGA production timetable “could result in the use of increasingly unreliable data”.
The first WGA to be published covered the 2009-10 financial year. The NAO qualified those accounts and has qualified each subsequent publication. However, 2020-21’s WGA contains one area of qualification that is new: missing data.
Missing data and unaudited accounts
Davies said a total of 155 entities did not submit data for the 2020-21 WGA, including 137 that contributed to the 2019-20 WGA. He said the “majority” of missing entities were English local government bodies, although two Scottish central government pension schemes also failed submit data, despite having audited accounts available. He added that the impact of the missing pension scheme figures on the WGA was “particularly significant”.
The NAO head said HM Treasury reported that “resourcing complaints and an organisational restructure” were the reasons the pension-scheme figures were not provided.
“All bodies should have had draft accounts which they could have used to submit data, as other bodies have,” Davies said.
The estimated impact of the missing data was stated as £74.3bn on net liabilities and £26.1bn on net expenditure.
Audit delays in the local-government sector are an acknowledged problem stemming back to the coalition government’s abolition of the Audit Commission. Davies said the Treasury had used consolidated data from the draft accounts of 120 bodies for the 2020-21 WGA, up from 29 the previous year, and that the organisations involved were “largely” within the local government sector.
Davies said he had assessed the risk of misstatements in the unaudited accounts and found that there was some £51.6bn worth of property, plant and equipment for which proper assurance had not been demonstrated.
“I have qualified my opinion for the second year in 2020-21 in relation to the use of unaudited accounts data,” he said.
“There is a risk of this qualification worsening in future years, with performance in delivering local government accounts continuing to deteriorate in 2021-22.”
Elsewhere, Davies said his qualifications of the Environment Agency’s infrastructure assets and property, plant and equipment reflected underlying issues that would require “significant work” to resolve. Another qualified area for 2020-21 relates to the Department of Health and Social Care’s stockpile of personal protective equipment, some of which is stored in sealed containers that cannot be accessed by auditors.
Treasury needs to understand local pressures
In his closing recommendations, the NAO head urged HM Treasury to replicate its success in improving the performance of central-government bodies’ WGA work with English local authorities and Scottish organisations.
Davies said the department currently had “limited engagement” with most organisations who contribute to the WGA and does not know why they have not been providing data on time.
“As a result it cannot be confident that it will be able to produce a good quality WGA in line with its planned timetable improvements,” he said.
Davies called on HM Treasury to do more to “better understand” why some organisations are not providing data for the WGA and work out how to improve future performance.
He also said the Treasury should design and implement a process to assess the risk of material misstatement in draft accounts that are used as the basis for WGA submissions.
Additionally, the Treasury was urged to work with the Department for Education to agree mechanisms to better align figures from further education institutions and academies with the reporting period for the WGA.
Civil Service World sought a Treasury response to Davies’ recommendations. It had not provided one at the time of publication.