UK public sector fiscal reporting: clear and contradictory

ABSTRACT

This paper explores the United Kingdom’s (UK) attempt to reconcile fiscal reporting logics through its Clear Line of Sight Alignment Project (CLOS). Drawing on archival data, together with semi-structured interviews with representatives involved in the implementation of CLOS, the findings indicate that what started as a means of resolving the tensions between logics, CLOS has exacerbated some existing ones and exposed others. This is largely due to the influence of the professional logic, primarily the UK’s adherence to International Financial Reporting Standards which prevents fiscal reporting being fully aligned. Furthermore, our research illustrates how the UK government has resisted elements of both the professional and national logics to create a system designed to rationalise the fiscal reporting maze. The findings also show that operationally CLOS has (to an extent) aligned the timing, coverage and classification of the fiscal reporting process to present the flow of expenditure from budgeted to approved, to outturn, thereby contributing to the wider agenda of improving the planning, management and control of public expenditure. Given continued calls to align global fiscal reporting practices, this paper informs public policy makers of the (potential) linkages between systems, the obstacles that can be encountered and the incentives for adopting it.

KEYWORDS:

• Clear Line of Sight Alignment Project (CLOS)
• fiscal reporting
• institutional logics
• New Public Management (NPM)

1. Introduction

Government fiscal reporting is a complex exercise. Fiscal reports, which include budget, statistical and financial data, form an important part of the information that government uses to discharge accountability to its stakeholders who often have diverse needs. As these reports, which are prepared using different accounting and finance conventions, serve multiple and sometimes conflicting purposes they may not meet each stakeholder’s demands (Moretti, 2017). For example, current reporting systems make it difficult to compare approved expenditure with actual outturn and assess compliance with fiscal rules (International Monetary Fund (IMF), 2012). Among the suggested solutions to these challenges is to align the reporting of budgets, accounts and statistics to make them more comparable and highlight where deviations exist. Such strategies seek to enhance transparency in public sector fiscal reporting and improve the planning, management and control of public expenditure (Heiling et al., 2013; IMF, 2012).

Despite being proposed in 2012 by the IMF, few European Union (EU) member states have implemented such alignment policies. From a research perspective, while previous studies on fiscal reporting have examined the proposed benefits of harmonising accounting systems (Dabbicco, 2018; Heiling et al., 2013; Rossi et al., 2016) and the effect of adopting international public sector accounting standards (IPSAS) on national accounting (Caruana & Grima, 2019), the effect of aligning national accounts, budgets and financial accounts has not been explored. Drawing on institutional logics to study the effects of the United Kingdom’s (UK) alignment of fiscal reporting via the Clear Line of Sight Alignment Project (CLOS), this research seeks to fill that gap.

This study is relevant to research and developments in practice for several reasons. First, as there continue to be calls to enhance public sector transparency by aligning financial reporting frameworks (Moretti, 2017), examining the UK case will be insightful as such changes have been embedded for a number of years. For example, this research raises awareness of the challenges associated with operationalising alignment in practice. Governments are under increasing pressure to better understand their current fiscal position and the longer-term implications of policy decisions. This is more difficult, and especially important, in periods of economic and political uncertainty. Therefore, understanding the potential impact of aligning fiscal reporting systems is important (Benito & Bastida, 2009; Dasí González et al., 2018; IMF, 2014). Second, whilst alignment is extremely difficult without implementing accrual budgeting alongside accrual accounting, unlike the UK, many countries have opted not to do this. Third, having an appreciation of the relationship (and tensions) between financial accounting standards (with the UK being committed to International Financial Reporting Standards (IFRS)) and national accounts standards (the international obligations) is valuable. Under CLOS, while budgets and Estimates are fully aligned, misalignments with resource accounts (i.e. the financial accounts) remain. These differences, whilst disclosed, influence policy decisions. Lastly, despite being fully implemented from 2013, little is known about the effectiveness of CLOS and its impact on UK public sector accounting. Our analysis addresses this by examining official archival data on CLOS and conducting semi-structured interviews with key actors involved pre- and post-CLOS implementation at a departmental, governmental, Parliamentary and advisory level.

Additionally, we add to the literature on the operationalisation, usefulness and challenges of public sector accounting reform. We contribute to the theory of institutional logics by illustrating how an accounting reform that is designed to streamline competing logics can resist elements of some logics while becoming complementary to others. This has implications for understanding how logics interact, and the longer-term use (and usefulness) of fiscal reporting. We find that while challenges remain the CLOS has relied heavily on the professional logic to facilitate the co-existence of multiple logics.

In terms of format, this paper is structured as follows. After discussing the theoretical framework and prior research, the research method is described. The research findings are then presented before concluding with implications for practitioners and policy makers.

2. Theoretical underpinning

Originating in the management field, institutional logics extends institutional theory by considering the extent to which legitimate behaviour is influenced solely by economic reasoning and rational choice. It offers a meta-level analysis of why institutions are the way they are, together with why many are contradictory, not only to practice but to the norms and beliefs with which they support (Battilana & Lee, 2014; Greenwood et al., 2011; Thornton et al., 2012; Thornton & Ocasio, 2008). Over the last 50 years, public sector practices have evolved substantially as a consequence of macro-level pressures driven by neo-liberal and New Public Management (NPM) ideals. Areas impacted include accounting, with many governments employing accounting as a calculative practice that can manage complex competing logics to help legitimise policy decisions (Ezzamel et al., 2012).

NPM principles continue to influence the norms of public sector practice. While theoretically beneficial, in practice this may lead to a decoupling of procedures. Governments often become outcome centric, shaping practices with managerial philosophies whilst trying to meet the demands of multiple stakeholders, regulations and legislation (Ferry & Eckersley, 2020). For example, elected representatives (Parliament) desire information to enable them to challenge government policy; economists seek data to understand the economic impact of fiscal policies; national and international organisations wish to compare country fiscal performance; while lobby groups appeal for statistics on the effect of policies on regions and households. Meeting these competing logics has intensified reporting tensions including balancing requests for information to be provided quickly and meeting demands for detailed data. This affects the legitimacy of consolidated reports whose publication is determined by the pace of the slowest entity, while the provision of technical information often takes longer, can result in the bigger picture being lost in the detail and may be difficult for non-specialists to understand. Hence, “reports are becoming more comprehensive, detailed, but citizens and parliamentarians feel governments are no more accountable” (Moretti, 2017, p. 4).

Research has explored the institutional logics that have pervaded many areas of public sector reform including health (Berg & Pinheiro, 2016; Vickers et al., 2017), labour and welfare (Fossestøl et al., 2015), motivation (Meyer et al., 2014) and universities (Berg & Pinheiro, 2016). With respect to public sector accounting, institutional logics has been employed to help explain how actors engage with institutional complexities. This includes public sector financial reporting in Portugal (Guerreiro et al., 2012); management accounting in healthcare (Järvinen, 2016); public value in English local government (Ferry et al., 2019); performance measurement and management accounting systems in the Finnish Defence Forces (Hyvönen et al., 2009; Rautianen & Järvenpää, 2012) and Spanish and Finnish police forces (Rautianen et al., 2017); budgeting practices in the UK education sector (Ezzamel et al., 2012); and the procedural complexities of the German hospital sector (Bode et al., 2017).

The pressure for public entities to reform their accounting and financial reporting procedures can challenge the traditional public administrative (PA) logic that has shaped fiscal reporting in governmental and Parliamentary institutions. Often, NPM-inspired reforms are pursued because of their perceived “superiority” over existing systems (Christensen, 2003; Guthrie, 1998; Likierman, 2000; Mellor, 1996; Van Peursam & Pratt, 1998). For example, Guerreiro et al. (2012) concluded that unlisted Portuguese companies voluntarily adopted IFRS rather than retain the [then existing] dominant logic of Portuguese Accounting Standards. They claim this was due to perceptions of prestige and legitimacy associated with aligning with “what’s expected” from other constituents, even at the expense of possible constraints in decision-making autonomy. However, this type of response is not always the case. Investigating the logics that prevailed in the Italian health service following the introduction of accrual accounting, Anessi-Pessina and Cantù (2017) found that the traditional PA logic remained dominant; although, it is important to note that this was the first major area of the Italian public sector to replace cash with accrual accounting. In contrast, Meyer and Hammerschmid (2006) found that a hybrid logic emerged in Austria when attempts were made to replace the traditional PA logic with a new NPM managerial logic.

Harmonising fiscal reporting information systems is a relatively new concept. In Australia, fiscal information is largely based upon common reporting standards, with the federal government presenting budget and associated appropriation account information (with differences disclosed) to Parliament (IMF, 2018). In New Zealand, budgets and forecasts are prepared on the same accounting basis (mainly IFRS) as accounts (Centre for Public Impact, 2019). In its audited annual report, New Zealand includes a comparison of budgeted amounts and outturns, an analysis of any variations and a description of the progress government has made in implementing its fiscal strategy. In Europe, harmonising fiscal documents is rare. This may be a consequence of differing political and cultural backgrounds across EU countries, together with the constitutional, regulatory and governance changes required (ACCA, 2017). Some EU countries have implemented accrual accounting and budgeting to varying degrees, while others (e.g. Norway and France) remain on a cash accounting and budgeting basis with some accrual-based notes being appended to the financial statements (Christiaens et al., 2015; Rossi et al., 2016). Variations are also found at different levels of government and the accounting standards applied (e.g. IFRS or IPSAS). The European Commission (2014, p. 1) is developing European Public Sector Accounting Standards (EPSAS), a harmonised set of accounting standards designed to improve “fiscal and budgetary integration in the EU”. However, implementing this initiative has not been straightforward as it requires all European countries to adopt accrual accounting and (forcing) convergence between government and national accounting where differences will inevitably remain (Caruana et al., 2019).

As indicated above, governments prepare fiscal reports to meet the needs of multiple stakeholders, with such reports being required within their own country and further afield (e.g. by the EU). With Lounsbury and Boxenbaum (2015, p. 4) affirming that institutional logics has evolved beyond exploring the shifts in dominant logics to “understanding how organisations respond to institutional complexity”, we employ this theory to explore the institutional complexity of fiscal reporting, and how the UK government has responded through the implementation of CLOS.

2.1. Competing logics in UK public sector fiscal reporting

Friedland and Alford (1991) emphasised the importance of recognising the difference between the institutional logic(s) and the institution(s) that the logic supports. Indeed, the long-standing institutions of UK government and Parliament have embarked on a series of accounting reforms, designed to improve the calculative practices used to allocate and report on the use of public funds. We suggest four key institutional logics within the field of UK accounting reform: (i) PA logic; (ii) managerial logic; (iii) professional logic; and (iv) national logic (see Table 1). Under the PA logic, politics and administration are clearly separated. Politicians are responsible for defining general policies and the administration is responsible for executing them. Here, the public sector is viewed as a uniform entity, with control being hierarchical and bureaucratic. Ruling is exerted through rules and formal procedures with minimal outside influences. With respect to accounting, the PA logic emphasises the role of cash accounting and budgeting to allocate resources among competing interests. The budget plays a central role, with financial reporting primarily intended to ensure compliance with authorised spending, rather than faithfully representing financial performance (Hood, 1991; ter Bogt, 2003).

Table 1. Institutional logics in the fiscal reporting field.

Characteristic	Public administrative logic	Managerial logic	Professional logic	National logic
Source of identity	Government is bureaucratic	Government is a business	Accounting profession	Statistical description of economies
Source of legitimacy	Serving the public interest via policy making and the democratic system	Legitimacy by results	Professional expertise	Basing policy decisions on financial/statistical information which informs the setting of the budget
Source of authority	Politicians, Parliament, legislation and government regulatory bodies	Government regulatory bodies	Financial Reporting Advisory Board, HM Treasury, National Audit Office, accounting profession and government regulation	International regulators (e.g. Eurostat, European Commission, United Nations Statistics Division)
Values/rationality	Democracy, legality, continuity and stability	Performance, efficiency, effectiveness, serving customers and growth	Transparency and faithful representation of financial position/performance	Detail, relevance, accuracy and frequency of results
Basis of attention	Rules, inputs, duties and internal orientation	External orientation, fixed single goals, outputs and outcomes	Providing legitimacy	Fiscal rule setting and monitoring of the deficit
Basis of strategy	Centralised, hierarchical system governed by law, politically driven and operates within tight public sector controls			Compliance to adhere to measures of European System of Accounts 2010

Source: Adapted from Ezzamel et al. (2012).

Since the 1980s NPM has challenged the PA logic, advocating a public sector that is run more “like a business” (Meyer et al., 2014, p. 865). This managerial logic promotes efficiency, effectiveness and value for money (VFM) rather than the PA logic of democracy and stability (Pollitt & Bouckaert, 2011; National Audit Office (NAO), 2019). The PA logic is internally orientated (i.e. focused on the budget) while the managerial logic is externally orientated, placing more emphasis on the outputs generated and the outcomes achieved.

The professional logic has arguably emerged from NPM’s managerial logic (Caron & Giauque, 2006; Meyer et al., 2014; Sjögren & Fernler, 2019). It seeks to improve professionalism by advocating international best practice using accounting methods originating from the private sector. A significant example of this is the transition from cash to accrual accounting which continues to be promoted on the basis that it provides a clearer picture of public sector finances (Connolly & Hyndman, 2006; Kober et al., 2010; Likierman, 1995; Paulsson, 2006). With better information, governments should be able to make better decisions and enhance Parliamentary accountability for how taxpayers’ money is being used (Kober et al., 2010; Nakmahachalasint & Narktabtee, 2019; Parker & Gould, 1999; Redmayne & Laswad, 2015). A consequence of the professional logic has been the growing number and influence of professional accountants within public sectors (Connolly & Hyndman, 2006).

The national logic emphasises economic efficiency through standardisation (Marquis & Lounsbury, 2007). Efforts to improve international comparability and consistency in financial reporting have led to the introduction of IFRS and IPSAS. Pressures to adopt are largely external, with international organisations (e.g. the Organisation for Economic Co-operation and Development, World Bank and the IMF) pushing for convergence towards accrual accounting and international accounting standards. It is argued that this will create high-quality comparable and audited data which will improve accountability and help fight corruption. However, Hepworth (2017, p. 141) warns that such policies can only be beneficial if governments move beyond promoting them as technical changes and there is a shift towards a more “financially-aware management culture”. Under the national logic, countries are required to prepare national accounts which adhere to EU and international accounting frameworks such as the 2008 System of National Accounts (Inter-Secretariat Working Group on National Accounts, 2008) and 2010 European System of Accounts (ESA) (European Commission, 2010). National accounts are prepared by economists and statisticians and have a vital role in the prescription of indicators that are central to EU economic governance. For example, public deficit and debt ratios are key indicators for fiscal surveillance under the Stability and Growth Pact. They are also used to calculate each country's gross national income and contributions to the EU budget. Interestingly, the UK’s concept of national accounting originated in the 1930s, being promoted by economists and accountants including Sir Richard Stone and Frank Sewell Bray to measure and manage the macro economy following the First World War (Tily, 2009). Stone argued that accounting is more than a calculative practice, sharing the same “epistemic consonance and rationale” as economics (Suzuki, 2003, p. 498). It was also viewed as a mechanism that discharged government accountability by presenting statistics on income and expenditure in an accounting format.

3. Research methods

This paper explores the effects of the UK’s voluntary alignment of fiscal reporting, known as CLOS, to better understand the logics underlying this decision and how the rivalry of competing logics co-exist. The sources of data used to achieve this objective were semi-structured interviews and archival data on CLOS. Interviewees were chosen using purposive sampling, allowing the researchers to select interviewees with specific characteristics and experiences that are of interest to the research area (Matthews & Ross, 2010). Four categories of interviewees were identified (Table 2).

Table 2. Analysis of interviewees.

Category	Number of interviews	Number of interviewees	Codes used for analysis
Government departments	11	13	D1-D11
Government oversight bodies	3	5	GOB1-GOB5
Parliamentary oversight bodies	4	5	POB1-POB5
Academic advisers	4	4	A1-A4
Total	22	27

The first category in Table 2 (D1–D11) is finance and accounting staff within government departments. Their primary role is to assist in, and oversee, the preparation of departmental resource accounts and contribute financial information for the purposes of preparing Whole of Government Accounts (WGA). Each held senior positions in their respective departments and had been employed in the public sector for a number of years. Within this category are statisticians who are responsible for preparing statistics that feed into the national accounting data. The second category in Table 2 (GOB1–GOB5) is representatives from government oversight bodies (e.g. HM Treasury (HMT) and Financial Reporting Advisory Board (FRAB)). Some of these interviewees had been involved with the earlier stages of CLOS while others were more familiar post-implementation. Five interviews were also conducted with representatives from Parliamentary oversight bodies (e.g. NAO) (Table 2: POB1-POB5). These interviewees were largely involved with the scrutiny of CLOS at a Parliamentary level. Finally, academics were chosen due to their contribution to public sector accounting by working on various committees and boards of oversight bodies (e.g. FRAB), together with their in-depth knowledge of the research area (Table 2: A1–A4). These interviewees were therefore able to provide an academic and non-academic perspective.

The interview checklist was derived from HMT’s (2009) White Paper which outlined the purported benefits of adopting CLOS. The interview approach was open-ended, allowing interviewees to elaborate on personal opinions. This is supported by Saunders et al. (2012, p. 378) who highlight that the use of semi-structured interviews can lead to “discussions not previously considered but are significant” in gathering a better understanding of the phenomenon under investigation. Each interview lasted between 45 and 90 minutes, was recorded with the interviewee’s approval and transcribed. Given the potential sensitivities of the matters being discussed, and the desire for participants to be as candid as possible, interviewees were informed that interviews would be reported in a manner where specific statements could not be attributed to particular individuals (the codes used to identify each category of interviewee is indicated in Table 2).

4. Research findings

4.1. Competing logics in UK fiscal reporting

Government must balance the requirements of the following logics when controlling public spending:

1. The PA logic which adheres to established accounting and budgeting conventions;

2. The managerial logic to achieve efficiency, effectiveness and VFM in public spending, and provide accountability for both the expenditure of public money and the resultant benefits; and

3. The national logic for managing the expenditure of public money effectively in a macroeconomic context.

Government and Parliament have developed several frameworks to authorise, measure and manage public expenditure. Firstly, the budget is prepared by government to plan and control spending for the following financial year. While specific elements of the budget are aligned to the national accounts, others comply with IFRS following the move to accrual accounting and budgeting in 2003–2004.¹ After the budget is released, the government seeks parliamentary authority for its spending arrangements via the Estimates, with amendments to the original Estimate managed through the Supplementary Estimate (Scrutiny Unit, 2017). Estimates are at the heart of controlling UK public spending and are how the government seeks authority from Parliament for its spending each year. The UK government presents its future spending and taxation plans in the budget. Since 2017, this is done twice a year, in spring and autumn, rather than once as was previously the case. The UK Parliament generally approves these plans in two phases: (i) at the beginning of each financial year, Parliament considers the government’s “Main Estimates” which detail planned departmental spending for the year; and (ii) before the end of each financial year, Parliament authorises any additional spending required in the current financial year (“Supplementary Estimates”) and approves spending for the first few months of the next financial year (usually 45% of the previous financial year’s total). Estimates however are presented on a different accruals basis to the budget, along with the amount of cash “needed to support that expenditure” (Liaison Committee, 2009, p. 10). While the government generally sets longer-term spending plans, typically in five-year spending reviews, Parliament does not formally authorise (or vote) on these until the annual approval process outlined above. Lastly, departments are required to prepare an Annual Report and Accounts (ARA), which present departmental (and arm’s length bodies) spend, the statement of parliamentary supply which compares spend with the Estimates along with the balance sheet position at the reporting date (Scrutiny Unit, 2017). The ARA must be sent to the Comptroller and Auditor General for audit by 30 November of the financial year following that to which the accounts relate, with the Comptroller and Auditor General being required to submit the audited ARA to HMT by 15 January of the financial year following that to which they relate who then must lay the audited accounts before the House of Commons by 31 January.²

Prior to CLOS, each framework measured public expenditure in different ways and with different boundaries, thus necessitating complicated reconciliations and making the system difficult to follow (HMT, 2009). For example, one-third of spending was included within departmental budgets but not in the Estimates presented to Parliament. Similarly, one-sixth of what was included in the Estimates wasn’t included within budgets and one-quarter of income and expenditure presented in ARA was not included within the Estimates (Liaison Committee, 2008a). In addition, approximately 20% of Non-Departmental Public Bodies (NDPBs) spend was included in the budget but grant-in-aid³ was included within the Estimates or ARA (HMT, 2008). Table 3 provides an overview of the main areas of misalignment, with such inconsistencies weakening “the incentives for good financial management” (Liaison Committee, 2008b, p. 15) and making it difficult for Parliament to effectively hold departments to account for how public money was being spent.

Table 3. Main areas of misalignment pre- and post-CLOS.

Area	Pre-CLOS	Approx. value of misalignment	Aligned	Post-CLOS
Non-voted expenditure (e.g. National Loans Fund and National Insurance Fund)	Shown in the budgets and accounts, but not the Estimates. The departments largely affected by this were the Department for Work and Pensions and HM Revenue and Customs.	£75bn	Yes	The coverage of the Estimates has been widened to include spending that was not previously voted through the Estimates. To protect the statutory position, the Estimates are now presented in two parts (i.e. voted and non-voted).
NDPB spending/Grant-in-aid to NDPB’s	Shown in the budgets but not the Estimates or accounts as NDPB spending fell outside the consolidation boundary.	£40bn	Yes	The expenditure of NDPBs and other central government bodies previously outside the boundary are now consolidated into Estimates and resource accounts.
Provisions^a	Shown in the budgets as part of a department’s DEL. Shown in the Estimates on the basis that the impact on public expenditure arose when the provision was paid. Shown in the resource accounts when the provision was paid.	£22bn	Yes	Provisions are now treated as Annually Managed Expenditure, and continue to be included in the Estimates; and scoring cash payments when they arise within DEL.
Grants to devolved administrations (DAs)	Shown within the Estimates. Shown in the resource accounts. Not shown in departmental budgets.	£47bn	No	Due to the DAs unique constitutional position, aligning grants to DAs would not meet the requirements of Parliament. Therefore, grant payments to the DAs are included as separate “non-budget” voted items within the Ministry of Justice and Northern Ireland Office Estimates and resource accounts. This results in a misalignment between budgets and Estimates/accounts.
Capital grants to the private sector, local authorities and Public Corporations	Treated as resource expenditure in the resource accounts and Estimates, reflecting UK GAAP/IFRS requirements. Considered to be capital in budgets, reflecting the treatment in the national accounts.	£19bn	No	The approach is that these grants should be treated as capital in budgets and in Estimates (included as part of a voted capital DEL total), but should continue to be treated as resource expenditure in resource accounts in line with IFRS.
Prior Period Adjustments^b (PPA)	Shown within the Estimates in the year in which they were identified to obtain the spending authority. This removed the need to re-open resource accounts that had been closed and allowed Parliamentary approval for any changes in resources financed by Estimates due to the adjustments. Not shown within the budget.	£35bn	No	PPAs are reviewed on a case-by-case basis. Any PPAs arising from a change of accounting policy or a new or modified accounting standard are no longer voted, but appear as a Note to the Estimate, reporting the reason for the change and the impact for up to the previous five years. PPAs arising from an error in a previous period, an accounting policy change that was initiated by the department or otherwise resulted from a departmental decision are required to seek Parliamentary authority for the provision.

^a Departments are required, under accounting rules, to make provisions for current obligations arising from past events, where it is probable that payment will need to be made in the future, and such payments are measurable (HMT, 2009).

^b Prior Period Adjustments are material adjustments applicable to past years and arise from changes to accounting policies or from the correction of fundamental errors (HMT, 2009).

Originally proposed in 2006 (Liaison Committee, 2008a), CLOS was viewed as a way to help mediate the tensions arising from the complexity of the government’s reporting system (HMT, 2009; Secretary of State for Justice and Lord Chancellor, 2007). Consistent with the managerial logic, its objective is to:

create a single, coherent financial regime that is effective, efficient and transparent, enhances accountability to Parliament and the public, and underpins the Government’s fiscal framework, incentivises good value for money and supports delivery of excellent public services by allowing managers to manage (HMT, 2009, p. 4).

4.2. How CLOS enables competing logics to co-exist

These findings are presented in line with the purported benefits of implementing CLOS outlined in HMT’s (2009) Command Paper to Parliament. In fiscal reporting, there is often tension between the logics of Parliament as guardians of accountability and initiators of change. This arises because, whilst Parliament has significant authority over the approval of government spending dating back to 1706, in practice it has minimal control and rarely exercises its powers over the Estimates (Muthumala, 2018). Furthermore, Parliamentarians are conditioned by the institution. They are often constrained by their limited understanding of the financial information and the time available to debate it due to the tight scheduling of the Estimates process (Procedure Committee, 2017). Although CLOS, an element of the managerial logic, was acknowledged by Parliamentarians as a part solution to this, the consequence was disruption to the prevailing national logic. While the structure and timing of government financial reports had become institutionalised in the fiscal reporting field, the growing influence of the professional logic following the introduction of RAB, IFRS and WGA was further legitimised and strengthened through legislative forces.⁴ Each reform added further layers of reporting and scrutiny at different times to satisfy different stakeholders. Therefore, as the reforms became embedded in financial reporting practices, continuing to apply archaic reporting requirements dating back to the 1866 Exchequer and Audit Departments Act increased tensions. The Act, which dictates the timing of the publications, their institutional coverage and different classification rules made it difficult to track spending from approval to outturn.

Hence, CLOS was perceived as a natural extension of RAB, with the proposed changes being broadly welcomed.

When RAB happened, they [HMT] realised that there were mismatches with the national accounting and reporting to Europe. Consequently, it was breaking down the communication process. But I don’t think that could have been known without first implementing RAB. (GOB7)

Traditionally there’s this concept that Parliament is difficult to work with when initiating change. So, when it came to proposing CLOS, everyone was surprised to find Parliament on board. That says a lot about the lack of transparency and understanding of the frameworks [in place beforehand]. (POB1)

The consensus was that Parliament stood to gain most from the introduction of CLOS.

It is a lot easier, when compared to before. You can see the numbers appearing in the spending review and then in the Estimates. And, with one or two exceptions, you see them in the accounts as outturn. (POB1)

One clear benefit is that it’s much easier for Parliament to look at spending across departments and their responsibilities, whereas before, arm’s length bodies were treated differently. (GOB3)

Departmental interviewees mentioned that CLOS had simplified accounting for NDPBs.⁵

From a departmental perspective there was real confusion around areas such as the treatment of NDPBs. Parliament essentially had completely different figures for NDPBs because our [departmental] accounts showed only the grant-in-aid paid out. NDPB accounts however showed actual expenditure. You would think that the figures would correspond, but they didn’t. So, CLOS definitely helped to make that area much easier. (D3)

4.2.1. Better government through improved democratic involvement for, and accountability to, parliament and the public

HMT (1994) initially proposed that the accounting boundary include the core department, its executive agencies⁶ and trading funds⁷ to reflect the responsibilities of the department’s Accounting Officer.⁸ NDPBs were to be excluded on the basis that, even though they may be “financially linked to the department”, their consolidation could potentially be misleading as “ownership of the assets and liabilities is not vested in the departments” (1994, p. 11). However, the NAO, whilst acknowledging that NDPBs were “constitutionally independent from their sponsoring department”, contended that they were linked to departmental aims as a substantial amount of money voted through the Supply Estimates is spent by NDPBs (1995, p. 7). It was concluded that departmental Estimates and accounts should only include the spending of the relevant government department, with budgets including the expenditure of any NDPB for which the department is responsible. Thus, departments had different controls against which to manage, making it difficult to track expenditure and limiting the scope for effective Parliamentary scrutiny (Hansard Society, 2010).

This contradicted the managerial logic of transparency and the professional logic of providing information regarding the public sector’s state of affairs and use of public money in accordance with extant accounting standards. CLOS resulted in amendments to the Constitutional Reform and Governance Act (2010) and Government Resources and Accounts Act (2000). These restored the supremacy of the managerial logic by extending the accounting and Estimates boundary to include NDPB expenditure and aligning it with the budgetary treatment. This facilitated better accountability over public money, something that is difficult when “controls applied by government are different from those exercised by Parliament” (HMT, 2009, p. 30).

Acknowledging that CLOS is not the sole panacea for accountability-related issues referred to above, interviewees opined that accountability to Parliament and the public had been improved through CLOS because previously, departments were not required to consolidate their arm’s length bodies. This limited the extent to which accountability could be monitored.

CLOS ensures that the budgetary outturn is now subject to an audit. From a Treasury and Parliamentary perspective, that is immensely important. (D5)

One of the things preventing better accountability to Parliament was that different entities within departments used different accounting policies and different reporting styles. CLOS has forced entities who have a lot of arm’s length bodies to rationalise their accounting treatment. This puts Parliament in a better position to scrutinise public spending more effectively. (GOB5)

Similar views were expressed by interviewees from a national accounting background. While accepting that current systems could be refined further, these interviewees affirmed that accountability to Parliament and the public had improved through CLOS because IFRS and ESA classification differences were explained.

Treasury's resource accounts and budgets is the main source of our data on the government sector. We take those figures and reclassify them to ESA rules. Sometimes we might classify something as being part of government whereas the resource accounts or WGA would not. This means there’s a difference between the two, which leads to questions from Parliament and other stakeholders like the Financial Times. For us, CLOS has been extremely helpful. It means we must check whether our own numbers make sense to ensure that the story we're telling is similar to what is going out in the accounts and, if it isn’t, try to explain it. (GOB9)

The responses above indicate that the managerial logic underpinning CLOS has enhanced the value of the national accounts. Although, consistent with Friedland and Alford (1991), we find evidence of a need for caution when considering the extent to which the managerial and national logics coexist.

I was commissioned to help prepare the PACAC [Public Administration and Constitutional Affairs Committee] reports⁹, within which there are sections on Select Committee usage of accounting data. While we found some evidence of where it is used in a very focused way (Department of Education), our general conclusion was that there remains little evidence that the [departmental resource accounts] are of any use to Parliament for scrutinising the Government. (POB5)

4.2.2. Significantly enhanced ability by government to maintain firm control over public spending, while not altering the way the fiscal rules are defined

For a new practice to be accepted, it must be legitimated in the eyes of the prevailing logics. Rather than seek to replace the national logic, HMT sought to complement it with the managerial logic. However, full harmonisation could not be achieved due to the influence of a professional logic arising from the introduction of RAB. For example, under the professional logic, capital grants to the private sector were treated as resource expenditure in the Estimates and resource accounts to reflect IFRS requirements, but as capital expenditure in the budgets to comply with the national logic (see Table 3).¹⁰ As a compromise, CLOS aligned the treatment of capital grants within the budgets and Estimates (as capital expenditure) but retained their treatment as resource expenditure in the resource accounts (HMT, 2009). Whilst this approach is deemed legitimate by HMT, it demonstrates the tension between the professional and national logics, with the consequence being continued misalignment.

HMT, the oversight body responsible for delivering CLOS, affirmed the duality of systems (i.e. an accounting system (gaining the approval of spend in the Estimates) and a fiscal system (managing the departments through budgets)). While the option of treating all capital grants as capital was considered, it was rejected on the basis that doing so would create assets on departmental balance sheets that were owned by the private sector. The alternative of treating capital grants as resource expenditure was also rejected as this would be a departure from the national accounts (where they are treated as capital) and contravene the principle that such grants must be used for capital purposes. The concession was to:

… align the treatment to capital in budgets and Estimates to fit with the national accounts but maintain treating them as resource in the resource accounts to maintain compatibility with IFRS and best practice. This way it protects the fiscal position whilst at the same time making the budgets and Estimates closer. (GOB4)

Although the UK, which was never a member of the Eurozone, has recently left the EU and is no longer obliged to follow 2010 ESA, safeguarding the fiscal position remains important. Statisticians preparing the information that feeds into national accounts data asserted that the decision to continue following ESA 2010 rules has been voluntary.

There's no requirement to supply the data to Eurostat anymore. But, in terms of comparability across different regions and countries, its good practice. So, we will continue to adhere to that guidance. (D10)

This indicates that the concept of national accounting is part of UK government philosophy (see Section 2) despite leaving the EU and therefore no longer having to follow Eurostat methodology to monitor macro-economic performance.

From a departmental perspective, CLOS has enhanced the control of public spending by increasing awareness of the activities of arm’s length bodies.

I think it gives us [departments] greater financial control because we get a breach if one of our partner organisations did something in their underlying activities that had a significant accounting and therefore budgeting implication. Before, we would only breach our Estimates under a much more limited set of circumstances because we only reflected the cash we paid out. (D7)

Because you didn’t have to consolidate them [NDPBs], you never had to think about them. Now we have to understand their finances so we can consolidate their accounts. That has been beneficial because we can now see the effects on our budgets and what budget variances they have. (D3)

4.2.3. Building into the system the right incentives to deliver better value for money

VFM in the public sector stems from the managerial logic of ensuring that money has been spent in the most optimal way to achieve the intended outcomes (NAO, 2019). Interviewees agreed that whilst the public may not even be aware of CLOS, it augments RAB and WGA by providing better information on which to base decisions on service delivery and the use of public money.

CLOS adds another piece to the accountability and transparency puzzle. It reassures society that the scrutiny of public expenditure remains at the highest standard. (A3)

Notwithstanding this potential positive contribution, departmental interviewees highlighted that the remaining inconsistencies could inhibit the delivery of improved VFM in practice.

I do think that Government should account for its performance and its financial transactions on as similar a basis to the private sector, as is relevant. That discipline is really important. But at the end of the day, the problem goes back to the difference between the financial and national accounts. Unless the national accounts move, there is a significant risk of dual reporting, which is going to hugely increase the administrative burden. I don’t think that is value for money. (D6)

4.2.4. A more coherent presentation of financial reporting documents that meets the needs of government and parliament, is consistent with best practice in the private sector and does not create complexity elsewhere

Whilst departmental interviewees acknowledged that CLOS offered a more coherent financial reporting structure, mixed views were again expressed as to the extent of the practical benefits of the changes, especially in terms of meeting the needs of government and Parliament.

Does it meet the needs of Parliament? To meet their needs, one would need to be using the resource accounts which shows the outturn and that doesn’t really happen. So, I think that would be stretching it. (D4)

Perhaps inevitably, misalignments remain between the various fiscal reporting documents (see Table 3). Interviewees contended that a primary cause of this is the macro professional accounting logic conflicting with the micro professional practice logic in certain sectors. For example, academies have a different financial year end to the rest of the public sector for funding purposes, are excluded from the Department for Education’s ARA and prepare their own sector report. This causes problems for the Department.

Every year the DfE [Department for Education] have the issue of how they translate the academies to adhere to IFRS for ARA [Annual Report and Accounts] and WGA. (GOB5)

To address this, the Alignment Review Committee (ARC) ruled (by exception) two separate accounts should be prepared: one for the Department and its arm's length bodies; and another for the academies sector on an academic year basis (September to August).

4.2.5. A rationalisation of the number of occasions each year on which government presents financial reporting documents to parliament, resulting in greater coherence and comprehensibility in the government’s reporting to parliament

The managerial logic supports a reduction in the number of expenditure-related publications produced annually, with claims that the publication process made understanding the differences between the various frameworks difficult (HMT, 2010). Table 4 outlines the publication schedule pre- and post-CLOS.

Table 4. Schedule of publications.

	Publication date
	Pre-CLOS	Post-CLOS
Main Estimates	April/May^a	April/May^a
Supplementary Budgetary Information	April/May^a
Public Expenditure Statistical Analyses	April/May^a	April/May^a
Departmental Reports	May
Department Resource Accounts	June/July
Departmental Reports and Accounts		Mid-June
Summer Supplementary Estimates	June
Public Expenditure Outturn White Paper	July
Winter Supplementary Estimates	November
Vote on Account	November
Spring Supplementary Estimates	February
Statement of Excesses	February
Supplementary Estimates, Vote on Account and Statement of Excesses		January

^a 5 weeks after the budget.

Source: HMT (2009, p. 12 and p. 35).

HMT’s (2012) post-implementation review of CLOS found that reducing the number of publications (see Table 4) led to cost savings, including £50,000 per annum from no longer publishing the Public Expenditure Outturn White Paper and £400,000 per annum arising from the release of posts in the Estimates branch and HMT spending teams. The post-implementation review also revealed the estimated costs borne by HMT to implement CLOS were £1.4 m over three years (2008–2009, 2009–2010 and 2010–2011). However, HMT’s (2012) post-implementation review did not “attempt to carry out a detailed assessment of the potential wider financial implications for departments” (p. 6) on the basis attempting to quantify the costs and benefits would cause entities to lose sight of the benefits to be gained from “no longer having to reconcile several sets of public spending information” (p. 7).

Despite the perceived improvement, issues remain, with the timing of publications being considered a “barrier” from the Westminster system.

Things have improved but there are areas where you ask yourself whether it could be better. For example, the budget for the year is not presented until after the year has started, and not voted upon until three months after the year has started. Then, the revisions to the budget are presented at the tail end of the year, to which Parliament has three weeks’ notice to approve them which is not a lot of time … I question whether this remains the most rational way to do things. (POB2)

4.2.6. A financial regime which is burden-reducing for departments and promotes greater administrative efficiency, thereby enabling departments to focus on making substantive improvements to the value for money of their spending

In the short term at least, plans to reduce the burden on departments have had the opposite effect, with departmental interviewees reporting that having to align departmental and NDPB accounting practices was time-consuming. Furthermore, departmental interviewees contended that a lack of collective HMT guidance on how to implement CLOS was likely to have contributed to the inefficient use of resources and inconsistent approaches being adopted across departments.

In the beginning we [departments] were all told to go away and do CLOS. As a result, we created our own excel template. I am certain therefore that loads of time and money was wasted. (D7)

In some instances, this was believed to have contributed to “a breach of voted total” and an automatic qualification.

I had a situation in [department X] where I breached my Treasury budget but I didn't breach my Parliamentary control total. To the NAO, this was fine. But not for Treasury. In the end, Treasury decided they would give us the extra budget to make sure it wasn’t breached. The issue arose from Treasury splitting our RDEL [resource departmental expenditure limit]. The budget is set based on fiscal RDEL but the Parliamentary total is both fiscal and non-fiscal RDEL. They add up to the same total, but there are subsets for Treasury which are not enforced by Parliament. (D3)

Interviewees expressed surprise that CLOS had not been implemented using a structured “timetable-driven” manner (like IFRS).

I don’t quite understand why Treasury took the approach to let departments implement this [CLOS] in their own way. I guess there was the general understanding that every government department is different with respect to objectives, procedures and number of NDPBs. But still, I think that some guidance would have been helpful. (GOB1)

5. Discussion

What started as a means of resolving the tensions between the PA, managerial and national logics has, to some extent, rectified some issues and exacerbated or exposed others. This is caused predominately by the professional logic, primarily the UK’s adherence to IFRS which prevents fiscal reporting from being fully aligned. Consistent with Ezzamel et al. (2012), this research reveals how competing institutional logics in the fiscal reporting system not only gave rise to reforms to resolve such conflicts but also led to compromises and exposed further issues. Of specific importance during a change initiative is the role of a supporter who brings new institutional logics to the attention of organisations. While earlier reforms were driven by a managerial (RAB) and professional (IFRS) logic, CLOS was not the carrier of a new logic. Rather, it was promoted as the final piece of a puzzle to harmonise fiscal reporting, driven by a growing professional logic and championed by organisations such as the Hansard Society (which seeks to promote interest in Parliament), Liaison Committee (which has the ability to make policy) and Scrutiny Unit (which supports MPs but does not make policy).

RAB arguably led to divergent cultures (i.e. professional accountants, consultants and politicians) being drawn together, triggering a shift in the institutional logics which previously guided public sector financial reporting (Thornton et al., 2005). The consequence of this was greater attention on outputs and long-term decision making. Although RAB exposed significant inconsistencies in fiscal reporting, it unintentionally increased complexity and opaqueness in other areas. Whilst legally NDPBs are independent from government departments, operationally they are closely linked to government departments as a substantial portion of money voted through the Estimates is spent by NDPBs. Therefore, the decision to exclude NDPBs from the accounting boundary when implementing RAB created tensions between the professional and national logics, with CLOS seeking to resolve these.

Exploring the relationship between logics is often overlooked in academic research (Berg Johansen & Waldorff, 2017). In accounting practice, institutional logics are most influential when they complement organisational goals (Hyvönen et al., 2009). While our findings suggest that the professional logic conflicts with the objectives of CLOS, this may not be an insurmountable problem as individual logics can coexist even when there are tensions (Rautianen & Järvenpää, 2012). CLOS has strengthened the relationship between the PA logic (which centres on input), the managerial logic (which centres on output and outcome), and the professional logic which is the specialised apparatus that offers legitimacy through results. The national logic which centres on monitoring the debt and deficit must now be cross-checked against the IFRS reports, with discrepancies explained to both government and Parliament.

Full alignment however is not possible. As different conceptual frameworks govern the work of accountants (IFRS) and statisticians (ESA 2010), contradictions between these systems need to be managed, with alignment only being achievable if the UK abandons IFRS or national accounting conventions, neither of which appear likely. In addition, “the periodicity of revision is completely different” between the systems (Treasury Committee, 2008, p. Ev70). For example, IFRS evolution is often rapid and piecemeal in response to new issues, whereas ESA is subject to revision at long intervals, slowing changes to the System of National Accounts. Reay and Hinings (2009) found that competing logics can be managed through forming collaborative relationships whilst maintaining the independence that guides the logics. We found similar mechanisms between government and Parliament such as the ARC, where alignment issues are addressed through case-by-case adjustments. Although this enables competing logics to be managed on an ad hoc basis, the longer-term suitability of this approach is questionable, especially as disagreements remain between government, Parliament and the NAO as highlighted in our findings.

HMT also try to manage the competing logics and validate WGA’s legitimacy by analysing the conceptual differences between the national accounts and WGA and reconciling the debt position between the two in its annual WGA. A consequence however is that these efforts to clarify the misalignments further complicate matters, especially for non-specialists. Moreover, the complexities of the competing national and professional logics can create opportunities to affect the managerial logic, namely increasing calls for a “simpler system”, with the extent to which the UK has achieved this being questioned. Governments that use or are in the process of adopting any form of international accounting standard, such as IFRS or IPSAS, may experience similar tensions if ESA 2010 forms part of the mandated reporting system. The influence of ESA 2010 on UK fiscal reporting is therefore coercive and this will continue while it remains institutionally legitimate, even though it is no longer an EU member.

6. Conclusion

Institutional logics, including how they change behaviour and form relationships with existing logics, is of academic interest (Lounsbury & Boxenbaum, 2015). Our research considers the different elements that comprise fiscal reporting and the logics that are at play to determine whether an accounting reform (CLOS), which seeks to reconcile differences, has been beneficial. To do so, archival data on CLOS, together with semi-structured interviews with those involved pre- and post-CLOS implementation at a departmental, governmental, Parliamentary and advisory level were conducted. This paper’s contribution is threefold.

First, it contributes to our understanding of how and why institutions will (in certain cases) resist the pressure to succumb to isomorphic forces and both engage in and encourage practice variation, rather than breeding homogeneity as traditional institutional theorists suggest (Modell, 2019; Oliver, 1991). The national accounts represent a historical institution and taken-for-granted way of formulating fiscal policy. While the NPM-driven managerial logic has sought to improve the monitoring of public expenditure, it has not diluted the dominant national logic. Instead, we find that CLOS is an example of how the UK government resisted elements of both the professional and national logics in a desire to streamline the fiscal reporting maze and make it more effective. Judging whether this has succeeded depends upon who is asked. Those advocating harmonisation of the national and governmental accounting systems would contend that it has not (Benito et al., 2007; Van der Hoek, 2005). Eurostat is proposing that EU member states move to accrual accounting and budgeting using EPSAS, which closely aligns with ESA 2010 (Dasí González et al., 2018). However, progress has been slow as the European Commission continues to explore the costs and benefits of EPSAS given the anticipated political resistance (Rensch, 2019).

Our second contribution is the presentation of empirical research which offers further insight into the logistics of fiscal reporting at the operational level. Our findings suggest that CLOS has contributed to the wider agenda of improving the planning, management and control of public expenditure. To an extent, it has eased the fiscal reporting process and enhanced the transparency of public finances, linking more clearly budgeted, approved and incurred expenditure. However, the findings indicate that the potential benefits are constrained by the limited opportunity to debate and scrutinise this information (e.g. Estimates at the approval stage). Similarly, whilst accepting that WGA are scrutinised by the Public Accounts Committee, there is evidence that the information in the departmental resource accounts (and WGA at a macro level) is used to a limited extent by government and Parliament to inform their decision making. While the national accounts are considered regularly in the various fiscal reports published by the Office for Budget Responsibility, departmental resource accounts and WGA appear to receive less attention. As highlighted in Table 1, transparency and faithful representation of financial performance are the logics that underpin accounting. The UK continues to signal a strong commitment to transparency. However, if the publications are not being fully utilised to better understand financial performance, this infers that the institutional logics underpinning the accounting profession are of less importance to Parliament.

It is asserted that policy makers are placing increased reliance on departmental annual reports and that these are an integral part of citizen engagement (HMT, 2019). But, others dispute the value of, and interest in, such reports despite the considerable resources devoted to their preparation. There is limited empirical evidence indicating that policy makers consider departmental annual reports a vital information source. Moreover, the NAO (2018, p. 31) has highlighted that they need to dedicate more time to individual audits because tightened financial reporting standards meant accounts had become “more complicated both to prepare and to audit”. Budget pressures have left some departmental finance teams stretched, leading to delays in reporting and creating further work at the audit stage. This is important given that the national accounts continue to be the primary source of financial information in the setting of fiscal policy.

A further issue is whether the application of CLOS is sustainable in its present form given the UK’s use of IFRS. As these standards become more prescriptive and complex, further exceptions to the core alignment principles are likely. For instance, the introduction of IFRS 16 Leases is likely to eliminate off-balance sheet accounting for lessees, with FRAB (2019, p. 9) stating that the recognition of misalignment between IFRS 16 and the national accounts is significant and will “go against the principle of consistent reporting across budgets and National Accounts”. Indeed, Reay and Hinings (2009) contend that competing logics can co-exist over an extended period in tension. Here, we suggest that whilst alignment has resulted in a degree of coherence in logics, the growing tensions stemming from IFRS evolution will eventually reshape the alignment landscape, resulting in hybridisation or even a loosening of the core alignment principle. This raises a further question of how tolerant the PA, managerial and national logics can be with the professional logic and the extent to which it can be practiced in the public sector (Greenwood et al., 2009).

The UK’s alignment of its public sector’s budgets, Estimates and accounts is among the most advanced practices in the world. Notwithstanding this, there has been significant criticism of the UK’s post-CLOS system of parliamentary accountability and claims that the Estimates, departmental resource accounts and WGA are used sparingly by Parliament (and the public) (Procedure Committee, 2017; Public Administration and Constitutional Affairs Committee, 2017, 2018). Our findings support these concerns, with clarity around usability remaining illusive. Each country’s system of government is different, together with the political appetite for transparency. With continued encouragement from the IMF to work towards fostering a system that can produce fiscal outlooks, mitigate risk and limit exposure to financial shocks (such as those arising from Covid-19 and the war in Ukraine), we believe that others can learn from the UK’s experience with alignment. As more emerging economies embark on their reform agendas (Belal et al., 2019), this research provides insight into the potential conceptual and operational challenges to achieving this. For example, the UK’s experience shows that to reduce resistance to change, the integration of alignment should be handled carefully, notably with support from champions to initiate and oversee the process, along with up-to-date integrated IT systems between entities that fall within the scope of alignment.

There are limitations to our analysis which offer potential areas for future research. First, our research focuses solely on UK alignment. Moreover, it is explorative by nature and assesses the extent to which CLOS has been perceived as beneficial based upon the experiences of implementers and overseers. An avenue for further research is to empirically test this and compare countries with different government systems to assess (where possible) its outcomes. Second, as research indicates that accounting in some countries is regarded as an activity rather than a profession, caution must be exercised when generalising our findings as the professional logic may not be as prevalent in other countries as it is in the UK (Carrera et al., 2008; Hyvönen et al., 2009). Lastly, whilst our objective was to explore the UK’s CLOS initiative to gain a better understanding of the logics that prevail in public sector fiscal reporting and how their efforts to reconcile those logics has unfolded, the practical usefulness of the aligned framework needs further unpacking. Future research could explore specific departmental activities to identify the attraction of logics from a policy-making perspective.

Acknowledgements

We thank the participants of the conferences and workshops where this work was presented (such as the 2021 Comparative International Governmental Accounting Research Network conference and Queen's Management School internal seminar series), for their constructive comments and feedback. We are also grateful to the anonymous reviewers and the editors of Accounting Forum for their thoughtful comments on our manuscript.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For a full list of differences between departmental accounts and budgets, please refer to the consolidated budgeting guidance framework (Annex A): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876155/CBG_for_publication.pdf

2 See Government Resources and Accounts Act, 2000, Explanatory Notes:https://www.legislation.gov.uk/ukpga/2000/20/notes/division/3?view=plain

3 Grant-in-aid is defined as “a payment by a public sector funder (normally referred to as the “sponsor department”) to finance all or part of the costs of the body in receipt of the grant-in-aid” (https://www.nao.org.uk/decision-support-toolkit/stage-2-strategic-decisions/choose-a-funding-channel/).

4 Section 5 of the Government Resources and Accounts Act (2000) states that resource accounts should be prepared in accordance with directions issued by the HMT which under Section 474(1) of the Companies Act 2006 incorporates the application of international accounting standards.

5 NDPBs are a form of arm’s length body that “operate in areas which Government has an interest but where the function, such as regulation or funding decisions, needs to be carried out at arm’s length” (NAO, 2010, p. 4).

6 Executive agencies are semi-independent organisations set up by the Government to carry out some of their responsibilities.

7 Trading funds are categorised as public corporations (HMT, 2013). The 1995 White Paper changed the reporting of trading funds to fall outside the boundary to reflect “their legal status as bodies with a more commercial, arm’s length relationship with parent departments” (HMT, 1995, p. 6).

8 The Accounting Officer is responsible for the regularity and propriety of expenditure, robust evaluation of different mechanisms for delivering policy objectives, value for money, the management of risk and accurate accounting for the use of resources within their department (Public Accounts Committee, 2011).

9 Public Administration and Constitutional Affairs Committee (2017, 2018).

10 At the time, UK central government prepared departmental resource accounts under UK GAAP. This changed to IFRS from the 2009 to 2010 financial year.