This introduction summarises the key characteristics of the management control systems in government within the United Kingdom. The main features of these systems are described below under several headings.
Authority for management controls
The legislative basis for parliamentary control of expenditure is the Exchequer and Audit Department Acts of 1866 and 1921. Detailed management controls are not laid down in the legislation, but it provides a basis for systems to be developed and refined over time.
Role of the central agencies
Within the United Kingdom, the main bodies concerned with management control systems in government are the Treasury, the National Audit Office (NAO) and the Public Accounts Committee.
The Treasury is the government department responsible for managing the country’s public revenues and has prime responsibility for determining how public expenditure as a whole should be controlled.
The NAO, headed by the Comptroller and Auditor General, is the country’s supreme audit institution and, as such, has responsibility for the external audit of public expenditure by central government.
The Public Accounts Committee is made up of members of Parliament. Its composition reflects that of the political parties in the House of Commons, the elected chamber of Parliament. The Committee is responsible, on behalf of Parliament, for overseeing that proper control is maintained over the expenditure of public funds.
The Comptroller and Auditor General is totally independent of government. He is appointed as an Officer of the House of Commons on a motion addressed to the House by the Prime Minister acting in agreement with the Chairman of the Public Accounts Committee, by tradition a member of the main opposition party. The Comptroller and Auditor General reports to Parliament via the Public Accounts Committee; neither he nor his staff are civil servants accountable to government ministers. He appoints the staff at the NAO and determines their number, gradings, remuneration, and other conditions of service. The majority of his 750 staff are either qualified accountants or training for professionally recognised accountancy qualifications.
The NAO’s costs are funded by Parliament. A commission, consisting entirely of members of Parliament, examines the NAO’s financial plans and presents the agreed budget for parliamentary approval. The commission also appoints an independent auditor from the private sector to examine the NAO’s accounts and to carry out value-for-money investigations of the NAO’s own activities.
Development and promulgation of management controls
It is the responsibility of the Treasury to develop and promulgate standards for management control systems within government. The principal means by which this has been achieved has been the establishment of a manual, Government Accounting, which serves as a guide on accounting and control procedures for the use of government departments.
The manual sets out the principles governing management control systems over the whole range of government activities and provides detailed information on the form in which departments are required to produce their accounts. It also defines the responsibilities, including those relating to management control, of the Accounting Officer, who is the most senior civil servant in a government department or agency and whose duty it is to serve the minister in charge.
The essence of an Accounting Officer’s role is personal responsibility for the propriety and regularity of the public finances for which he or she is answerable, for the keeping of proper accounts, for prudent and economical administration, for the avoidance of waste and extravagance, and for the efficient and effective use of all the available resources.
An Accounting Officer may be called before the Public Accounts Committee in order to account for the economy, efficiency, and effectiveness with which the department’s resources have been employed in discharging its functions.
In accordance with the manual, the Treasury issues each Accounting Officer with a memorandum describing these and other responsibilities. The manual also provides detailed guidance to assist the Accounting Officer to fulfil the responsibilities outlined in the memorandum.
Of particular importance for management control in government, the memorandum lays down the procedure to be followed when a minister overrules an Accounting Officer’s advice on an issue either of propriety or regularity or relating to the Accounting Officer’s wider responsibilities for economy, efficiency, and effectiveness. The relevant papers have to be sent to the Comptroller and Auditor General who may, in turn, report the matter to the Public Accounts Committee.
The memorandum also requires the Accounting Officer to establish an internal audit function.
Monitoring and evaluating management control systems
As well as promulgating standards of management control, it is for the Treasury to monitor performance against them and to promote best practice. But this is not done in detail since the implementation of Treasury guidance is very much left to departments and agencies. Nevertheless, the Treasury requires departments to seek its approval on matters such as budgetary over-spends and cases of fraud and before committing expenditure on major projects.
Resources, skills, and training for implementing management control systems
Departmental staff are engaged under the Civil Service Pay and Conditions and Service Code. This details all of the terms and conditions under which civil servants are employed, including such matters as engagement, promotion, and dismissal as well as provision for training.
The memorandum of the Accounting Officer’s responsibilities also states that "an Accounting Officer must make sure that arrangements for delegation promote good management and that he or she is supported by the necessary staff with an appropriate balance of skills. The latter requires careful selection and development of staff and the sufficient provision of special skills and services."
Comparison with INTOSAI Guidelines
The United Kingdom has well-established standards for management control systems in central government which accord well with the INTOSAI Guidelines. The sections that follow provide more details on:
-- the role of the NAO in testing the quality of management control systems in government and promoting their use;
-- the relationship between the NAO, the Public Accounts Committee, and the Treasury in encouraging good practice in this area, including promulgating and evaluating standards; -- techniques of auditing management control systems;
-- the perceived value of management control systems to the NAO, the Public Accounts Committee, and the Treasury.