Whole of Government Accounts Ian Bulmer Head of WGA, Government Financial Reporting

Coverage What is WGA? Why are we doing it? The what and the how Key numbers How are we using WGA? Issues and challenges Conclusions

WGA – What is it? Account for the UK public sector (central government, devolved administrations, NHS, local authorities, public corporations). It includes circa 3,000 bodies but growing Set of consolidated financial statements Based on EU adopted International Financial Reporting Standards as adapted and interpreted for the public sector (as set out in the Public Sector Financial Reporting Manuals) Has the look and feel of a private sector set of accounts and includes management commentary, primary statements and full disclosure notes

Why are we doing it? Statutory requirement Aid to fiscal planning and control Transparency and Accountability. Brings the public sector together in one place – puts numbers into context Accounting approach to public sector numbers Externally audited Completeness Comparability across different parts of the public sector, and with the private sector, as financials produced on a consistent basis

How is WGA Created Overview of different entities that make up WGA Local Authorities Public Corporations Academies Whole of Government Account Central Government Departments HM Treasury consolidation 22 sub-consolidations (c.300 bodies) 4 sub-consolidations (c.600 bodies) 1 sub-consolidations (c.2,800 bodies) 1 sub-consolidation (c.45 bodies) UNCLASSIFIED

WGA – the what and how Boundary for WGA is based on classification by the Office of National Statistics which use European National Accounts rules. WGA only includes bodies classified to the public sector There are a number of different accounting frameworks in operation, which need to be harmonised Local accounts are mapped to a common format, and provided to Treasury alongside additional data about transactions and balances with other parts of the public sector For the most part individual entities are sub-consolidated into families, and Treasury consolidates these sub-consolidations Treasury does not have direct levers over many of the bodies in WGA, which have their own legislative status UNCLASSIFIED

Whole of Government Accounts Published the latest account 17 th July It had 6 qualifications: Boundary of WGA Inconsistent accounting policy on Highways infrastructure assets Counterparty eliminations School’s assets Qualifications in the underlying accounts Treatment of 3G

Whole of Government Accounts

How we are using WGA Balance sheet management (e.g. Provisions, Pension liabilities, Bad debts/impairments) Provisions Key drivers Contingent liabilities Future risks Debtors and bad debts Efficacy of cash collection PFI Contingent rental costs

How we are using WGA Used in SR2013 as part of the challenge process Long term fiscal forecasting and decision making –used by the Office of Budget Responsibility when producing its long-term fiscal sustainability report Gives Parliament a line of sight across the whole public sector – brings things together all in one place Gives Parliament and the public additional information to help it assess Treasury’s delivery of public sector’s financial position, public spending and financial reporting.

Issues going forward – Faster closing Medium term objective of publishing WGA within 9 months of the year end. The implications are: Similar timetable for – main challenge implementing new system and data collection tools will look to publish by March 2014 Relies on good quality draft data Improving counterparty data Timely completion of statutory accounts and beyond make up the gap through: Earlier provision of draft data (implies earlier close) Improved counterparty data Examining audit process

Issues going forward - Eliminations Greatest area of misbalance between central and local government Why does it matter? Accounts are qualified Income and expenditure are overstated Makes producing trend data difficult Comparability across local authorities

Issues going forward - Highways infrastructure assets Local authorities in England, Scotland and Wales value these assets at historic cost Highways agency, and authorities in Northern Ireland value these assets at depreciated replacement costs Why does it matter? The Treasury believes that depreciated replacement cost is a better basis for valuing assets because it reflects the current cost of replacing these assets in their current condition. This is more realistic than historic cost which could be extremely dated

Issues going forward – Schools assets Not all schools are included in WGA – inconsistencies around Voluntary aided schools Voluntary funded schools Foundation schools Working group currently considering application of new accounting standards on consolidation Assets may be missing Grant expenditure is more than likely overstated and staff costs and goods and services understated Consistency around the transition to academies

Issues going forward – additional analysis Recommendations from the Comptroller and Auditor General include: Improved segmental reporting (functional analysis) Reporting by nation Greater granularity on expenditure Comparison to budget

Conclusion Lots more to do Faster Better quality Demand for more analysis WGA is being valued at the centre Being put to increasingly more uses, and expect this to grow over time At the forefront as an aid to fiscal transparency

Conclusion Any questions?