Archives For Public Sector

NHS finance staff must work closely with clinicians following NHS reforms

accapr —  3 April 2013 — 1 Comment

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By Huw Edwards, ACCA member, NHS Graduate Management Scheme – Finance

Clinicians are, quite rightly, at the heart of the new structure of the NHS. This means that now more than ever before, the relationship between finance professionals and clinicians is crucial to its success.

Clinical leaders are likely to need our help if they are to maintain financial grip whilst delivering radical change. Learning how to work with clinical staff is therefore an important part of the development of student accountants such as me. But this relationship is a two-way street. Clinicians need to work well with accountants if they want to lead the change we need to deliver a high quality, sustainable health service. The temptation from both sides is to wait until we’re in more senior positions before really getting to know each other. But if we can build relationships at the start of our careers, we should reap the rewards for many years to come.

In any industry or sector, student accountants need to get to know their business. We need to do this so we can translate the knowledge gained from studying into something usable in the real world. After all, in order to be applicable across the whole spectrum of business in the UK and abroad, the ACCA syllabus will always be somewhat abstracted from the day-to-day work we do. Part of the challenge of qualifying is balancing the demands of passing the exams with learning our business in order to make our studies relevant.

Getting to grips with the technical aspects of healthcare finance, from the internal market and payment by results to service line reporting and management, is hard enough. Then there is the shifting landscape of organisations as a result of the reforms. Accounting for the closedown of PCTs and SHAs is sure to be a testing experience for our colleagues in commissioning this year-end.

Financial implications of clinical decisions

In healthcare if we want to really know our business, we need to know our clinicians. The decisions clinicians make have far reaching financial implications. Whether it’s in treating an individual patient or (following the Health and Social Care Act) planning services at population level, clinicians are the major driver of cost in the health service. Finance teams are going to have to help them understand the financial consequences of these decisions, whether that’s by modelling what may happen, or monitoring what has happened, as a result.

Looking ahead, our ability to assist and influence clinical staff will be a key skill for accountants and is something we must develop.

Some hard decisions

It would be difficult to exaggerate the challenge facing the NHS over the coming years. The expected rise in demand as a result of demographic changes and the increasing complexity of healthcare, combined with a prolonged economic winter, mean we are going to have to radically change how we deliver services.

But neither the public nor those of us working in health will accept radical change if it is at the expense of quality. If we are going to protect, and indeed improve, the quality of our health services in this hostile economic climate it is clear that we need to make some tough decisions.

Clinicians are now the main group responsible for rationing care. Clinical Commissioning Groups (CCGs) put clinicians at the heart of planning health services for their local population, and clinicians already ration care in a less transparent way, through the decisions they make with individual patients – so called ‘Bedside rationing’ – such as deciding which type of drug to prescribe or what diagnostic tests to undertake. So an awareness of the financial result of their decisions is more important for clinicians than ever before. They are being tasked with taking costs out without diluting the quality of services.

Working closer together, sooner

Working together should be seen as a key part of the development of both student accountants and junior doctors. But just as student accountants don’t see much of our clinical colleagues at present, junior doctors are unlikely to have regular (or indeed any) contact with their finance department. I expect there is little knowledge among them about how their service is funded, beyond the odd telling off from their consultant for not coding all the multi-morbidities on discharge summaries. There are a number of possible reasons for this, but perhaps it’s just part of learning a profession; the world tends to be quite insular for trainees of any profession as we balance studying with the day job.

The sooner we start talking and finding out what each other does the easier it will be to get the tough decisions right.

In ACCA, Guest, Public Sector , , , , , ,
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‘Bland Budget’ will not kick-start the British economy

accapr —  20 March 2013 — Leave a comment

Chas Roy-Chowdhury-14

 

By Chas Roy-Chowdhury, head of taxation, ACCA

Well that’s it for the fourth Budget of the Coalition Government, and what a bore it was.

There wasn’t really any surprises, partly down to the leak from the Evening Standard less than one hour before George Osborne began his Budget speech.

I can’t help but feel that this Budget was very bland and that more could have been done to boost the economy.

The Chancellor of the Exchequer should have considered a temporary cut to the basic rate of income tax to 15 per cent for one year, instead of leaving it at 20 per cent, as people would have more money to spend and it would help revive the economy.

At a time when the economy is stalling, it needs a genuine boost. Cutting the basic rate to 15 per cent until 5 April 2014 would have been a brave move, but would help working families across the UK. Under today’s proposals they, and many others, will not notice any difference. A temporary tax cut seems drastic but these are exceptional circumstances.

The other “highlights” of the Budget was the personal allowance increase. On the face of it, looks good, but it will only benefit the population who are currently 20 per cent taxpayers, of which there are fewer and fewer. By dropping the threshold for the 40 per cent income tax bracket, many hardworking people who will begin paying 40 per cent for the first time will not just lose the benefits of the increased personal allowance they will actually need to pay additional tax on such things as savings and dividends because of the way the UK system taxes the top slice of income.

On the issue of tax avoidance – while it is no surprise the Chancellor went after it, he will always be treading a fine line between collecting tax and denting the UK’s appeal as a business-friendly economy – an essential requirement for our recovery.

A tougher looking tax avoidance regime might look good to the public, but while the Chancellor has been making noises about a global effort to crackdown on tax avoidance, unilateral measures such as GAAR, risk diverting businesses currently in or looking to move to the UK into the arms of other markets. The question will be whether other business-friendly tax initiatives, such as the patent box and the lower corporation tax rate will help the UK remain appealing. Some evidence would suggest the rot is already setting in.

The Chancellor mentioned that those who actively promote tax avoidance will be named and shamed. ACCA has always said that a ‘loose’ name and shame approach to tax avoidance is counterproductive. Tax avoidance is not illegal. Naming and shaming can penalise individuals and business reputations when they have not broken the law. There is also an issue over where you draw the line There isn’t a clear cliff edge between what you could say is acceptable tax planning and what is unacceptable tax avoidance. There is difficulty in terms of when name and shame becomes appropriate. Is it something that is linked to the amount of tax that isn’t paid, or the way tax is avoided?

There is always the risk with any name and shame approach that it becomes disproportionate and that companies promoting perfectly acceptable financial planning initiatives are severely punished when they have operated within the mainstream rules.

We hope that the Government has looked in more detail at the PAC’s proposals and will consider naming and shaming only when there is repeated, heavy use by individuals of tax avoidance initiatives. A quicker and wider review of the tax system needs to be considered, than what the Office of Tax Simplification (OTS) is currently resourced to implement, with a view to radical simplification.

On families and tax credit – the downside of this initiative is that it is a 20 per cent tax credit, when a full payment subsidy of £1,200 would be a much more beneficial vehicle for many young families struggling to meet childcare costs, which are notoriously expensive. The nature of a tax credit means that where a family is forking out thousands of pounds a year, it is the “carer” that will receive the complicated tax credit. If the Government is prepared to pay up to £2,400 for two children there is no reason why they cannot give it to families as a subsidy, irrespective of the amount they actually pay for the care. A one-child family with two working parents would hugely benefit from the extra funds.

Should one parent lose their job or decide for the benefit of their child or children that they wish to stay at home, the loss of this credit will be felt.

And then we turn to fuel duty – ACCA predicted the rise in fuel duty would be scrapped. That will be welcomed by households as well as businesses in the UK. ACCA’s Drivers for Change survey report showed that UK businesses identified fuel costs as a major short term challenge, so this may give them respite.

So is this a Budget for an “aspiration nation”, and for hardworking families? Time will tell…

Don’t forget to have a look at our coverage of the Budget as it happened here

In ACCA, Budget, Chas Roy-Chowdhury, Economy, Public Sector, Small business, Tax , , , , , , ,
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The scrutiny of finance professionals

accapr —  27 February 2013 — Leave a comment

Ian Welch

By Ian Welch, head of policy, ACCA

With pressure on public finances being at an all-time high on most countries – and public trust in both business and governmental institutions seemingly being at the other end of the scale – the role of finance professionals will come under increasing scrutiny.

Our new report, Setting high professional standards for public services around the world, analyses all aspects of public sector accountants’ roles and makes the crucial – and topical – observation that finance professionals must promote whistleblowing laws and policies to ensure that communities can have confidence in how their taxes are being spent.

Accountants have a critical role to play in rebuilding waning public trust by championing the cause of developing anti-corruption procedures and cultures. To do this, they will have to work with other stakeholders to help eradicate fraud and corruption, through a combination of education, fraud-awareness programmes and training in forensic accounting.

This is no easy task, but it can be done. In the UK, the newspapers are currently full of stories of scandals in the healthcare, social care and police sectors – all of which came to light through whistleblowing by public sector staff. The fear of retribution and repercussions are always there. But it is even more vital than ever, at a time of unprecedented constraints on public spending, that finance professionals feel able to highlight issues where public money raised through taxation is misspent or misused – and that those responsible can be held to account.

ACCA also calls for proper separation between the accounting and auditing functions within all governments. In some countries that does not exist, which impairs accountability and transparency. The report accepts there is a challenge in educating the populace about the audit process – and in making it more transparent – to ensure public confidence.

Yet it could be argued that the public sector is, in many ways, ahead of the private sector in this respect. The ongoing regulatory and political inquiries into the role of audit – highlighted in this space last month – reflect a wider public sense of dissatisfaction with the auditors of banks and other major institutions. ACCA has consistently argued that the role of audit itself needs to be extended to take in issues such as risk management, internal controls and corporate governance. And yet the public sector is already there – in most developed countries ‘value for money’ audits are the norm. These are notably wider in scope than their private sector equivalents.

Under VFM audits, not only do the financial statements receive a true and fair opinion, but the auditors also have to comment on aspects of corporate governance and the effectiveness of the organisation’s arrangements to secure value for public money. There is also a wider variety of reporting in the public sector, driven by its multiple stakeholders (politicians, citizens, investors, pressure groups etc) which require reporting innovations such as scorecards. Audits have to satisfy all these requirements and audiences, which can be challenging.

Yet many of these audits are done by the same firms who seemingly find innovation much harder to bring into their private sector work. In the UK, the long-awaited report by the Competition Commission on audit competition has just been published and among its findings, the Commission concludes that there is considerable ‘unmet shareholder demand with regard to information supplied by auditors’ and that by putting the demands of management ahead of investors, auditors ‘competed on the wrong parameters’. Overall, the Commission’s report is a fairly bleak assessment of the current situation.

It is however, weaker on practical remedies to improve the situation. Amazingly it doesn’t mention liability once – yet concerns over liability have been shown, via outreach carried out by ACCA and others since 2009, to be a serious deadweight on innovation. This issue simply has to be addressed.

But firms – and the wider profession – also need to reflect on whether there is more they can do to bring some of the more interesting aspects of public sector audits to bear on their private sector work. This really might start to bridge that intractable expectations gap.

This post first appeared in The Accountant in February 2013

In ACCA, Audit, Ian Welch, Public Sector , , , ,
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Review: ACCA’s fourth International Public Sector Conference

aksaroya —  9 January 2013 — Leave a comment

By Gillian Fawcett, head of public sector, ACCA

Gillian Fawcett-8525ACCA’s fourth International Public Sector Conference ‘Rebalancing the economy – boosting growth’ held on 13 December 2012 focused on what the future holds for the public sector and how to account for it.

In a time when sovereign debt issues are prominent around the world and the measures taken to resolve the crisis have been described as no more than dispensing a ‘financial aspirin’, the conference provided a timely opportunity to consider how the economy can be rebalanced and how public services can help boost growth. You can view webcasts of the conference to find out more about what a range of high profile speakers had to say on the state of the economy, sustainable public finances and financial reporting.

 

Speakers included:

  • Carl Emmerson, deputy director, Institute of Fiscal Studies
  • Gary Gillespie, director and chief economist for Scotland’s government
  • Mario Marcel, deputy director of the Public Governance and Territorial Development Directorate, OECD
  • Fabian Zuleeg, chief economist, European Policy Centre
  • Brian Quinn, director, Loan Department, World Bank
  • Richard Hughes, economist, IMF
  • Alexandre Makaronidis, head of unit – GFS quality management and government accounting at DG Eurostat.

The first half of the conference focused on the economic outlook and trends. We heard from Emmerson that we are in for eight more years of financial pain. Quinn stated that liquidity drying up and the on-going lack of confidence is having a lasting knock on effect. He went on to highlight that inadequate government financial reporting practices have contributed to the depth and longevity of the current downturn. However, he pointed to a ray of hope as governments are beginning to re-examine their financial reporting practices.

The second part of the day focused on how to re-build an effective economy, introduce greater transparency of public spending and explore how public services can contribute to boosting economic growth, both internationally and at local levels. Hughes set the scene by highlighting the importance of fiscal transparency providing clarity and reliability to the public of the government’s fiscal policy-making process. All expectations are that the crisis will be lasting, so we need the best possible information about the state of government finances. 

Overall, it was positive to see finance professionals, economists and statisticians sharing views on and thoughts on how best to deal with the economic crisis and put public services on a sure footing!

In ACCA, Gillian Fawcett, Public Sector, Uncategorized
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On the right track?

aksaroya —  26 November 2012 — Leave a comment

By Peter Williams, Accounting and Business journalist and accountant

As well as highlighting the DfT’s poor record on bidding processes, the West Coast Main Line franchise debacle poses deep questions about the accounting profession’s ability to model risk. 

In May 2011, the Department for Transport (DfT) published a mercifully short document, A Guide to the Railway Franchise Procurement Process, which I read, prompted by the debacle over the West Coast franchise. When all hell broke loose over the flaws in the model, a team of consultants from PwC – previously let go to save money – found the errors in the spreadsheet within half an hour.

The DfT admitted that significant flaws had been discovered in the way the bidding process had been conducted. The risk assessment was messed up as a result of mistakes in the way inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result.

The track record on these processes is not good. The Transport Select Committee heard from Virgin boss, Richard Branson, at the beginning of September, weeks before the DfT ditched the franchise process. According to Branson’s evidence, on four recent occasions companies which won bids subsequently admitted to several financial difficulties or went bust.

You may think that the Department may be scarred by those experiences by now. We all need to be sceptical of forecasts that predict high growth right at the end of the period. And to be fair to the civil servants, that May 2011 guide is clear the biggest money bid won’t win unless everything else appears in order. The Department promises it will assess the cost and revenues set out in bids. If this assessment indicates a significant risk that costs of revenues will not be delivered or identifies other reasons why the franchise is likely to be financially unstable, the Department can rule out those bids from the competition on the grounds that they are financially high risk.

Aside from all the clever technical and academic input to investment appraisal, it boils down to one technical question: would I rather receive some money from that person now or much more in five years time? If you cannot see from a common-sense perspective where those big numbers are coming from, then perhaps it is time to say thanks, but no thanks.

The West Coast example should raise some awkward questions for how good accountants are at creating and understanding these models. They are in a good position to do the number crunching, but in building models what are their drivers? What pressures do they face in stressful commercial situations? They need to take a more independent, strategic position on the risk and reward that governments should ask for and private companies should be prepared to shoulder.

Maybe competent and honest professional accountants have become too wedded to the all-pervading efficacy of spreadsheets. As well as quantifiable risk which can be modelled, the accountancy profession needs to start looking at the impact of human psychology and behaviour in difficult and complex accounting and business contexts. We need to ask ourselves questions which we have barely started to think about: if we want to achieve a certain commercial result, how does that impact on the way we behave?

This post first appeared in Accounting and Business UK November 2012.

In Accountants for Business, Current Affairs, Guest, Public Sector, Uncategorized , , , , , , ,
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