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Comments from ACCA
30 September 2005

ACCA is pleased to comment on the draft discussion paper, World Class Financial Management prior to its release for public comment. At this stage, we would like to make one substantive point and three points lesser.

Our substantive point is on the comment in the sixth paragraph of the executive summary that the “principles of good financial management are universal, and apply equally across the private, voluntary and public sectors”. ACCA believes that the similarities between the public and private sectors have been exaggerated, especially in recent years.

Differences between the two sectors include, for example, the significantly higher importance for the public sector of issues of probity and equity, especially in terms of accountability to stakeholders. Paragraph 1.4 of the draft paper recognises the “special accountabilities attached to the stewardship and use of public money” without indicating what these may be. In the public sector, the budget is much more than an annual financial plan (fourth paragraph on page 4) and provides the fundamental authority to incur expenditure or to levy taxation. This is particularly relevant for local authorities.

In addition, we consider that the financial imperative is much less important in the public sector. To a greater extent than is the case for private sector entities, in the public sector the financial implications of decisions have to be balanced with the political demands and undertakings which have been publicly provided, as well as the organisation’s non-financial priorities. This should, for example, be reflected in paragraph 3.15 – 3.17 and other areas of the draft discussion paper to ensure that the distinctive imperatives of the public sector are fully recognised.

Finally, with financial reporting, the emphasis in the public sector is on providing confidence that public money is being soundly managed. In contrast, in the private sector the provision of information for decision taking by stakeholders is more important.

Our second comment is that we believe that the draft paper over-emphasises the speed with which the lack of sound financial management would become noticeable (second paragraph of the executive summary on page 3 and the end of paragraph 1.2 on page 7). Apart from other considerations, this could have the result of underplaying the role of the Audit Commission and the auditors it appoints. If poor financial management is so clear, so rapidly, why is the role of public audit so important?

Our third comment is that we believe that the draft discussion paper may be made clearer if the section on financial reporting was restricted in scope to the production of audited general purpose financial statements. The issue of the provision of timely performance information to top management appears to fit more logically in the section of the document dealing with finance for decision making.

Our final comment is that the draft paper could usefully include a number of ACCA publications, for example:

• Paul Gosling, Accountability in Public Services, ACCA 2003
• Seamus Ward, Comprehensive Performance Assessment, ACCA 2003
• Martin Fahy and Pat Ibbotston, Financial Shared Service Centres: Public Sector Settings, ACCA 2002
• Tom Jones, E-health investment decisions in the NHS, ACCA 2002
• ACCA, PFI: practical perspectives, April 2002.

We hope that you find these comments useful in finalising the draft discussion paper. We look forward to providing further comments when the paper is formally issued for public comment. Please do not hesitate to contact me if you require further explanation on our comments or if you have any queries about this response.

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