Drive for robust financial management is vital to improve public services

The Audit Commission's annual review of audit work, released today, reveals that public sector bodies still need to improve markedly their financial performance, financial reporting and corporate governance arrangements. The report compares the performance in 2004/05 of the health and local government sectors, which includes police and fire authorities and other related bodies, and also identifies where improvements can be made.

In local government, Stewardship and Governance 2005 found that in 2004/05 156 local authorities (33 per cent of the total) overspent their budgets, compared with 77 authorities (20 per cent) in 2003/04. Of these, 14 authorities (3 per cent) overspent by more than 10 per cent of their revenue budget, compared with 7 (2 per cent) in 2003/04. The Commission and its auditors will work with local authorities to improve their financial management and financial performance.

Stewardship and Governance 2005 reaffirms that the financial management and performance of the National Health Service (NHS) remains a significant cause for concern. The Commission’s joint report with the National Audit Office, Financial Management in the NHS, published in June 2006, looked in detail at the issues faced by NHS bodies.

The report also found that, while positive moves have been taken by local government and health bodies to improve the timeliness of their accounts, their quality has in some cases deteriorated. A third of local authorities had to submit their accounts for re-approval because of significant errors identified in the audit process, and a fifth of primary care trust and NHS trust accounts were amended.

Steve Bundred, Chief Executive of the Audit Commission, said: 'Improving financial management and reporting is a key strategic priority for the Audit Commission. We believe that sound financial management is essential, and that the principles of financial management apply equally across the private, voluntary and public sectors.

‘This report identifies problems in the public sector's financial reporting, financial performance and corporate governance which need to be addressed urgently. We are working with partners and stakeholders to define best practice and drive up standards of financial management across the public sector.

‘The Audit Commission’s forthcoming work will include a series of practical studies and guidance on particular aspects of financial management in local government and the NHS.'

The review looks at five areas:

• financial performance;
• financial reporting;
• audit opinions and public reporting;
• corporate governance arrangements; and
• certification of claims and returns.

The Commission's appointed auditors play an important role in assuring taxpayers that local public bodies have safeguarded and accounted properly for public money, and put in place arrangements to secure value for money and ensure the proper conduct of public business.

END

Press Release Issued July 25th 2006