Whole of Government Accounting in the UK

Abstract

The UK government made a commitment to produce a consolidated set of public sector accruals-based accounts, known as Whole of Government Accounts (WGA), as a component of its accounting reforms, eg Resource Accounting and Budgeting (RAB). This requirement was mandated by the Government Resources and Accounts Act (2000). The government has claimed that WGA is needed for the following reasons: (1) to assist in macroeconomic and fiscal planning; (2) to achieve greater accountability and transparency of public finances; and (3) to provide widespread improvement in accounting information systems across the public sector. This report documents the history and development of WGA and considers the degree of progress to date in realising the claims made for such a consolidated public sector accounting system. In assessing the role of WGA in macroeconomic and fiscal planning, the report highlights a number of compatibility issues arising from the use of GAAP as the underlying accounting basis. It also examines the motives behind the tradition of using (consolidated) accounting in the private sector in order not only to assess the practical capacity of an accruals-based WGA but also to identify the likely users of WGA accounting information. Concerning the claim that WGA will improve accountability of public sector finances through greater accounting transparency, the report points to a number of unresolved problems, including inconsistencies in accounting for certain public sector assets and liabilities and debates over the limits of the WGA consolidation boundary. The report also shows that a number of these issues have also proved problematic in other countries more experienced in WGA, such as Australia and New Zealand, raising questions about how much has been learned at the international level in this area of development and reform. The report presents evidence of improvements in public sector accounting systems, with the consolidation process required by WGA acting as a catalyst, stimulating change at the departmental level - particularly in terms of the collection and recording of financial data. What impact this has had in terms of improved governmental decision making, however, is an open question, the answer to which depends upon the long-term practical operation of WGA systems. The research findings lead to the conclusion that WGA appears to have been a tool to instill the discipline of accounting across the public sector, rather than its supposed role of improving macroeconomic management and governmental accountability processes. The deadlines for the publication of WGA have been extended on a number of occasions (no full WGA accounts have yet been published by the UK government), thus there are limits to the assessment of the practical outcomes of WGA. Nevertheless, the planned scale of the project (it is said to be the biggest ever governmental accounting consolidation project), the major claims that have been (and continue to be) made for it and the continuing delay over full implementation certainly warrant the type of independent review and analysis provided here. Ten years after the initial official governmental study first advocated WGA, this report offers a thorough and timely insight into such a 'grand design' project. The findings are of both national and international relevance. Certainly it would be prudent for countries considering the implementation of similar consolidated public sector accounting systems to ensure that they have absorbed the lessons from the experiences of 'pioneer' countries, and given careful consideration to the relative costs, benefits and practical achievements of such reforms.