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HM Treasury consults on changes to simplify and streamline central government accounts

  • Public Sector Accounting Image

18 Jul 2014

HM Treasury has launched a consultation setting out proposals to restructure the format of the Annual Report and Accounts (ARA) produced by central government entities (“the consultation”).

An initial consultation was launched by HM Treasury in April 2013 (link to HM Treasury website) on the need to simplify and streamline the presentation of all central government annual report and accounts so that they better meet the needs of users.  The consultation sought to understand:

  • who currently uses public sector accounts;
  • the purpose for which the information in the accounts is put;
  • what information users and potential users would get most value from but is not currently reported; and
  • what current requirements were most burdensome.

Findings indicated that “user needs are not being met by the current reporting arrangements” particularly that it was “hard to link the performance narrative to the figures in the accounts”.

Following the initial consultation, HM Treasury has proposed a new format for the ARA that it hopes will “meet the accountability and decision making needs of users”.  The consultation proposes to restructure the traditional ‘front-half’ annual report and ‘back-half’ financial statements into three integrated sections:

Performance – “telling the story”

This section will “tell the story” of the reporting entity and will include information on the entity, its main objectives and strategies and the principal risks it faces.  HM Treasury comment that “it will compliment, supplement and provide context for the financial statements, with the intention that the information in the overall ARA be integrated to provide a cohesive document”.  HM Treasury propose that this section will require reporting entities to produce two sections:

An “Overview” which will give the user a short summary that provides them with sufficient information to understand the organisation, its purpose, the key risks to the achievement of its objectives and how it has performed during the year; and

A “Performance analysis” which will be a more detailed performance summary providing a clear indication of how the entity measures its performance, allowing for the presentation of a more detailed integrated performance analysis. 

Accountability

It is proposed that this section contains the following information:

The Governance Statement and information on strategic risks to the entity;

The remuneration report; and

Information on Parliamentary accountability – including the Statement of Parliamentary Supply. 

Financial statements

It is proposed that this section will contain the audited financial statements.  HM Treasury indicate that the notes to the accounts will only be required for material balances which will “significantly streamline and simplify the accounts ensuring that the user is only presented with and can focus on relevant and material information”.

The consultation contains an example of an ARA under the proposed structure.

Comments are requested by 3 October 2014.  HM Treasury expect the changes to apply for the 2015-16 financial year.

The press release and consultation are available on the HM Treasury website. 

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