The Reluctant Armchair Auditor

Sorting spending fact from fiction

Garbage in, garbage out?

with 7 comments

We are in the first week of this brave New World of government transparency about its spending.

I have downloaded the spreadsheet, almost giving my steam-powered PC a heart attack, and played around with it. I’m not happy at all.

I kept asking myself whether all these lines of data were proof once again of the old adage: ‘grabage in, garbage out.’ The first question any auditor needs to ask themself is this: ‘Is this data from a reliable source?’ How do we know? How can we find out?

The National Audit Office (NAO) is responsible for auditing the accounts of central government departments. The NAO audit opinions will tell us something about the quality of the financial systems that produce the raw spending data we’ve been given.

What’s the score then for 2009/10 accounts? It’s difficult to tell. The NAO website may make sense to someone in the system but from the outside it’s incredibly hard to get anything about audit opinions out without a trawl through the news release archive.

Maybe I’ve missed something but perhaps the powers that be might consider a table somewhere prominent on the site that shows each department and gives their audit opinion status. Just a thought. The Comptroller and Auditor General (CAG) does produce an annual general report but you’ll see the latest one was published in February 2009 and covers the 2007/08 year.

Reassuringly 50 of the 56 sets of accounts audited by the NAO got unqualified audit opinions. Two of the six malefactors (DWP and MoD) feature on the bad-boy list again in 2009/10 along with Defra for the following reasons:

Hardly inspiring is it?

More important from a value for money perspective is what the NAO has to say about the effectiveness of financial management in government departments. Have a look at the NAO  financial management in CLG report to get a flavour and remember this was the position over a year ago. Goodness knows what is happening now as budgets are cut and staff numbers reduced.

So what are the issues from all of this discussion for the armchair auditor?

Firstly, we have no easy way of knowing whether the underlying financial systems used to generate all this information are actually any good. We can infer from the NAO that they are for most departments but that’s not quite the same. There’s a further question too that even for the best systems the quality of the output is largely determined by the quality of the input.

The weaknesses in financial management reported by the NAO may explain why we are all struggling to make anything at all out of the data that has been released.

The second, and final point, I’d make is this. Everything I know from all the change programmes I have ever seen is that they generate financial management and governance headaches of huge dimensions. These need skilled and knowledgeable people to sort out. Just have a think about what the staffing cuts being put on the table mean for promoting sound financial management and through it VFM for us taxpayers.

Not a comforting thought is it?

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Written by reluctantarmchairauditor

November 24, 2010 at 7:45 am

7 Responses

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  1. […] rule over government data and “sort the spending fact from fiction”. The first post, Garbage in, garbage out, can be found here. RAA will also be guesting soon on Patrick Butler’s cuts […]

  2. I share your analysis about the current problems of being an armchair auditor.

    By coincidence, I wrote a post of my own this morning about why ‘armchair auditing’ as a policy may not deliver everything that ministers want it to.

    I’m looking forward to seeing how far you can get with it though!

    Richard

    November 24, 2010 at 6:56 pm

  3. Having been put up in the mid-90s by Accountemps for a £16/hr part-qualy job at the Prison Service – which I did not pursue, when it emerged at interview that it was devising the entire MIS which in their case they had not got – I’m even more worried about ‘are the accounting systems any good’ than you are. Given the scale of the problem it takes to get a bad report and any continuing supervision from the NAO:
    http://www.nao.org.uk/publications/0809/financial_management_in_the_ho.aspx
    whether even the approved public accounts can tell us *anything* useful is a matter for serious doubt.

    If you failed to produce auditable financial records as CEO of a public company, you would likely be heading for goal; it would be a miracle if it were all tidied up by the next year’s accounts. (The Permanent Secretary at the Home Office in the relevant period found himself moved, at the beginning of 2006, to Deputy Governor of the Bank of England with special responsibility for financial stability. So that worked out well, then.)

    guy

    November 25, 2010 at 6:26 am

    • You make some excellent points here. The dearth of finance professionals in key parts of the machine is not a recipe for success.

      reluctantarmchairauditor

      November 25, 2010 at 7:23 am

      • And what finance professionals they have are often CIPFA-trained. They may be perfectly good people, but the promotion of British public-sector accounting as a peculiar mystery, with its own priesthood, its own standards and approaches, minimally polluted by outside perspectives, is a not a recipe for accountability or auditability.

        guy

        December 5, 2010 at 6:02 pm

      • I agree a wider perspective is a thoroughly good thing but I’m not sure being a CPFA should prevent that. Mind you … thinking back to CIPFA conferences perhaps there is something in what you say.

        reluctantarmchairauditor

        December 5, 2010 at 7:03 pm


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