Financial reporting to Parliament and financial scrutiny
34.5In addition to the formal proceedings for the authorisation of Estimates described in this chapter, Parliament receives a range of additional financial information which can be the subject of scrutiny. Each government department publishes, usually before the summer recess (July), an Annual Report and Accounts.1 The document is divided into three main parts: a performance report; an accountability report; and the financial statements.
The performance report sets out the department's objectives and priorities and gives information on past performance, including selected metrics, sometimes known as key performance indicators (consistent with the planned objectives and measures previously published in Single Departmental Plans). The accountability report includes information on corporate governance, risk management, and accounting officer responsibilities, and includes an audited Statement of Parliamentary Supply—comparing actual outturn against the budgets approved in Supply and Appropriation Acts. The financial statements comprise the audited accounts, prepared in accordance with International Financial Reporting Standards (IFRS), as modified for the public sector.
The Annual Reports and Accounts are `consolidated’—meaning that they also incorporate the financial activities of designated arm's length bodies funded by the department. Each Annual Report and Accounts also includes a set of `core tables'. These set out past and projected future spending by activity against the same subhead categories as Estimates. The Treasury also publishes an annual summary document entitled ‘Public Expenditure: Statistical Analyses’. This replicates, in a single publication, the core tables from each of the Annual Reports and Accounts and also provides tables on central government and local authority expenditure, and analyses of Total Managed Expenditure by country and region. Technical appendices explain measurement conventions and economic assumptions, and provide detailed breakdowns of the component elements of Total Managed Expenditure.
Each government department for which an Estimate is approved by the House of Commons is required under the Government Resources and Accounts Act 2000 to prepare accounts for each financial year and to send those Departmental Resource Accounts to the Comptroller and Auditor General by the end of November in the following financial year. The Accounts compare outturn with the approved Estimate for both the use of resources and the expenditure of cash. The Accounts must be laid before Parliament, together with a report on the Comptroller and Auditor General's audit, no later than the end of the following January, although most departments have in recent years laid their audited accounts before the House before the summer recess. The Committee of Public Accounts may examine such Accounts. It always does so where expenditure (of cash or resources) exceeds, or falls outside the ambit of, the Supply granted by Parliament, as part of the procedures relating to Excess Votes (see paras 34.20 –34.21 ). The Committee may also carry out other examinations of the Accounts. Such examinations generally occur when the audit opinion and report of the Comptroller and Auditor General indicate shortcomings or other notable features relating to financial control or accountability or to the regularity or propriety of expenditure.
Scrutiny of departmental expenditure is one of the core tasks of departmental select committees established by the Liaison Committee at the invitation of the House.2 Departmental select committees hold regular evidence sessions on departmental reports and other aspect of expenditure, and the Treasury Committee examines arrangements for financial accountability of departments.
Notwithstanding the continuing development of opportunities for scrutiny of public expenditure by the House and its committees, the formal role of the House in relation to individual spending proposals continues to be based on its consideration of the Supply Estimates.
- 1. Since financial year 2001–02, public expenditure has been planned and subject to parliamentary control primarily on an accruals basis. A department's annual accounts or financial statements consolidate the expenditure of a department and its arm's length bodies. They form part of the Annual Report and Accounts. Resource Accounts are prepared on the basis of International Financial Reporting Standards as modified for the public sector and the Government Financial Reporting Manual. They are audited, usually by the National Audit Office.
- 2. First Report from the Select Committee on Modernisation of the House of Commons, HC 224 (2001–02) paras 31–35; CJ (2001–02) 552–53; First Report from the Liaison Committee, HC 558 (2002–03) paras 12–14, 21. See also para 38.64.