INFORMATION FOR USE BY EU CANDIDATE COUNTRIES ON THE UK SYSTEM OF PUBLIC EXPENDITURE CONTROL

Treasury Officer of Accounts

The Treasury’s responsibility for maintaining an effective accounting and budgeting framework and promoting high standards of regularity, propriety and accountability are the responsibility of the Treasury Officer of Accounts (TOA). In particular, the TOA has responsibility for:

Laying down the Accounting Framework to be used by Government Departments

Setting out a framework for financial control for Government Departments

Appointing Accounting Officers.

Liasing with Parliament via the Public Accounts Committee and the NAO.

Providing guidance on financial control and conduct

In maintaining these responsibilities, the TOA provides guidance and advice to Departments through processes such as:

Maintaining an accounting manual, Government Accounting and encouraging the production of timely and accurate accounts by Departments.

Offering advice in the form of guidance documents on contentious issues. Such guidance covers issues such as accountability, propriety and value for money.;

Advising Accounting Officers on their roles and responsibilities

Attending all hearings of the PAC to represent the executive and to support Accounting Officers who are asked to attend.

Promoting value for money in Departments, for instance through the “Green Book: Appraisal and Evaluation in Central Government”

Treasury Approval

No expenditure can be properly incurred without the approval of Treasury. In practice the Treasury delegates to Departments authority to enter into commitments and to spend within defined limits. In deciding the level of Delegation, the Treasury must ensure it has sufficient controls in place to fulfil its responsibilities to Parliament, while giving the Department sufficient freedom to manage its expenditure efficiently.

The Treasury will give each Department a document setting out its delegated authority to spend. The document will set out:

A clear description of each type of expenditure

The financial level of delegation for each type of expenditure

Reference to the overall total of expenditure as agreed in the estimates submitted to Parliament, with any relevant sub-headings

The date when the delegations will be reviewed.

The Treasury will also agree with the Department how it will take expenditure decisions, for instance by setting out guidelines for expenditure appraisal techniques (see the Green Book) It will establish a mechanism for checking the quality of the Department’s decision making, for example, by seeing cases over a specified limit, or by requiring a schedule of completed cases of which a sample may be examined subsequently.

In addition to this, the Treasury must always be consulted about proposals which:

May increase pressure on the overall expenditure limits of the Department

Could set a potentially expensive precedent

Could cause repercussions for other Departments

Could exceed the general threshold for major capital projects currently in force

Are novel and contentious

Accounting Officers The UK ensures accountability for public expenditure through a system of Accounting Officers within civil service departments and their associated agencies and Non-Departmental Public Bodies (NDPBs).

Accounting Officer (AO) responsibilities are set out in detail in an Accounting Officer Memorandum produced by the Treasury and include personal responsibility for the overall organisation, management and staffing of the department and for department-wide procedures in financial and other matters. In addition, the Permanent Head of a department must ensure that there is a high standard of financial management in the department as a whole; that financial systems and procedures promote the efficient and economical conduct of business and safeguard financial propriety and regularity through the department; and that financial considerations are fully taken into account in decisions on policy proposals. The Treasury also provides guidance for NDPB Accounting Officers which set out their responsibilities and duties and the standards and procedures that they are expected to follow in respect of the public finances for which they are accountable.

Agencies (Sometimes referred to as Next Steps Agencies or Executive Agencies) are clearly designated units within departments which are responsible for undertaking the executive functions of that department, as distinct from giving policy advice. By distinguishing between executive and policy functions, management within Government can be improved and more efficient and effective delivery of services achieved. Each agency has its own Chief Executive who is responsible for meeting a number of performance targets, both financial and non-financial (such as quality of service) and is accountable for the performance and management of the agency.

Non Departmental Public Bodies (NDPBs) are bodies which have a role in the processes of national government, but which are not government departments or part of one, and which accordingly operate to a greater or lesser extent at arm’s length from Ministers. There are four types of NDPB:

executive NDPBs which carry out a wide range of administrative, regulatory, executive or commercial functions on behalf of Government;
advisory NDPBs which are set up to provide independent, expert advice to Ministers and officials;
tribunal NDPBs which have semi-judicial functions; and
boards of visitors to penal establishments.

Comptroller and Auditor General (C&AG) is appointed by the Crown and, by virtue of his office, is an Officer of the House of Commons. His main duties are carried out on behalf of Parliament and he works in close association with the Committee of Public Accounts. The C&AG decides on the extent and conduct of the audit and other examinations which he carries out in the discharge of his functions and the content of reports he makes to Parliament. The C&AG, is also head of the National Audit Office (NAO).

The National Audit Office was created by the National Audit Act 1983 and replaced the Exchequer and Audit Department. The C&AG is the head of the NAO. Funds to meet the expenses of the NAO are met out of monies provided by Parliament through an Estimate which is prepared by the C&AG and submitted to the Public Accounts Commission who examine it and present it to the House of Commons. The NAO carries out audit work and vfm studies and is independent from the Government.

Committee of Public Accounts (PAC) was set up in 1861 to give Parliament better control over the expenditure of public funds. The Committee examines and reports, as it sees fit, on accounts which have been laid before Parliament. Historically, the primary purpose of the PAC’s enquiries was to satisfy itself on the accounting for and the regularity and propriety of expenditure, to which the C&AG’s audit largely relates. Since 1983, however, the PAC also explores matters related to economy, efficiency and effectiveness raised in the C&AG’s value for money reports.

The PAC is nominated by the House of Commons for the duration of the Parliament. It consists of no more than 15 members drawn from all political parties. Traditionally, the Chairman is provided by the Opposition party.

The PAC adopts a non-party attitude in its work and seeks to reach dispassionate findings and recommendations whatever Government is in power. Although the PAC has no executive power, its opinions carry considerable weight and its recommendations are usually accepted by the Executive.

Most PAC meetings are held in public and the Accounting Officer of the department or body concerned is the chief witness. The C&AG and Treasury officials are also present and the Committee may direct questions to them. Proceedings are recorded verbatim and are later published as Minutes of Evidence together with relevant PAC reports.

Regularity and Propriety

Regularity is the requirement for all items of expenditure and receipts within the UK public sector to be dealt with in accordance with the legislation authorising them, authorities which have been delegated by Parliament and the rules laid down in Government Accounting.

Propriety is linked to regularity and is the further requirement that expenditure and receipts be dealt with in accordance with Parliament’s intentions and the principles of Parliamentary control, including the conventions agreed with Parliament (and in particular the Committee of Public Accounts (PAC)).

A booklet, Regularity and Propriety, is available from the Treasury and provides guidance on related issues for Accounting Officers in government departments, Next Steps Executive Agencies, NDPBs and others in the public service who exercise financial authority.

Government Accounting is a useful document available from the Stationery Office. The document sets out rules surrounding regularity and propriety and, in particular, requires that Government departments do not incur expenditure without Parliamentary and Treasury approval and only to the extent that has been authorised. The document generally provides advice on a wide variety of issues relating to financial management, control and reporting and has a particular emphasis on Parliamentary and Treasury requirements.

Value for Money (vfm)

The UK Government looks to ensure value for money for its expenditure of public money and, therefore, seeks to deliver economy, efficiency and effectiveness by incurring expenditure and utilising resources wisely and without waste. The National Audit Office carries out vfm studies across central Government.

Vfm studies

The Comptroller and Auditor General (C&AG) determines which vfm studies should take place and provides for about 50 reports a year on such studies to be submitted to Parliament.

Resource accounting and budgeting

(RAB) is a system of planning, controlling and reporting on public spending which is currently being introduced. RAB will be fully implemented for 2001-02 and the process of implementation is well underway within all departments. Essentially, RAB applies to central government the practices of much of the rest of the economy, expanding this to reflect the nature of Parliamentary control and the need to focus on departmental outputs. It involves producing the equivalent of the main financial statements from commercial accounts and using this as the basis for planning and controlling public spending. Moving to RAB is expected to change the way government departments plan and manage their resources internally. This will be linked to the way in which resources are allocated in the process for deciding the Government’s overall spending plans and to the way in which funds are sought from Parliament and their use is reported. It will not, however, change the underlying systems and processes that form the basis of accountability to Parliament. Further information about the RAB reforms are set out in a Treasury booklet “Resource Accounting and Budgeting: A short guide to the financial reforms”.

Cross Departmental working

Cross Departmental working and reviews have been established as a way to tackle many of the biggest challenges that the Government faces which do not fit neatly into traditional departmental structures. In order to tackle problems like drugs, crime and social exclusion the Government is encouraging better coordination and teamwork across a wide range of departments and agencies. “Wiring it up” [www.cabinet-office.gov.uk/ innovation] is a report on Whitehall’s management of cross-departmental policies and services which was published by the Government’s Performance and Innovation Unit in January 2000. The report made a number of recommendations designed to handle issues which straddle the responsibilities of more than one department.

The 2000 Spending Review recognised the importance of integrated development of government policy by incorporating 15 full cross‑departmental reviews. These ranged from the criminal justice system to nuclear safety, from crime reduction to conflict prevention in sub‑Saharan Africa. These reviews have resulted in a wide variety of new working arrangements, including the refocusing of departmental programmes and pooled budgets and management.

Review of Audit and Accountability

A Review of audit and accountability in central government has been announced and was undertaken by Lord Sharman . The review is designed to allow Parliament and Government to work together to promote transparency and accountability alongside the modernising Government agenda. The review looks at a wide range of aspects of accountability, access and audit. Lord Sharman’s review "Holding to Account" made recommendations on 13 February 2001.

Service Delivery Agreements

Public Service Agreements were an innovation of the 1998 Comprehensive Spending Review. But new targets have been agreed in this Spending Review which seek to focus on a smaller number of key objectives. The implementation detail of these objectives will now appear in new Service Delivery Agreements, to be published this autumn. SDAs will be working documents focused on delivery, and will cover both main and smaller departments. They will set out the more detailed outputs which departments will need to focus on to achieve their objectives, and the modernisation processes they will need to go through to improve the productivity of their operations.