Simplifying and streamlining statutory annual reports and accounts

Vikki Lewis

Agenda

Simplifying and Streamlining Project

• Background and project timeline

• Project overview

• Recommendation

• Approach

• Proposal to Parliament – restructured Annual Report and Accounts (ARAs)

• Implementation – reporting and challenges

Post implementation review and next steps

Good practice example

2

Why did the Project start?

• Criticism of inaccessibility and lack of understanding of ARAs with a loss of effective scrutiny

• Move to address criticisms and improve accountability and financial management more broadly

• Interest in longer term expenditure trends and performance against objectives

• “Cutting clutter” debate in the private sector to improve usefulness of ARAs

Background

3

Project timeline

4

• Start of debate to drive improvement

2011

• Project launch – outreach & public consultation

2013 • Proposals to Parliament and approval

• Notify entities

2014

• First year of implementation

2015-16 • Post implementation review

2016

Project overview – Simplification and streamlining ARAs

• to simplify and streamline the presentation of annual report and accounts (ARAs)

• to better meet the needs of users of the ARAs

• to gather a clear understanding of the purpose of the ARAs

• to remove unnecessary burdens on preparers

Purpose of the Project

Stage 1: Review of

current reporting

Stage 2: Identification of user needs

Stage 3: Understanding

preparer issues

Stage 4: Private sector

and international comparisons Recommendation:

First Principles Approach

5

Including some of

the spirit of Integrated Reporting

Recommendation

6

First Principles Approach to Public Financial Reporting Requirements

Red pen exercise

FD ownership & challenge

Clarification of existing guidance

Cohesive narrative and

consistent KPIs

Reduced disclosures based on materiality

Improved segmental reporting

Risk reporting

Financial statements based on

WGA format

Separate section for

Parliamentary accountability

Group reporting

Simplification and streamlining approach

7

Red pen approach

FD Ownership & Challenge

Clarification of existing guidance

Preparer requirements are to undertake a ‘red pen’ mark-up and question the need for disclosures, align

financial information to performance reporting as well as ensure strong management engagement throughout the

accounts production process

Guidance for entities revised to reflect new approach along with illustrative financial

statements

Telling the department’s story

Proposal to Parliament– Restructured ARAs

Performance Accountability Financial Statements

• Purpose is to “tell the story” of the reporting entity in a way that addresses user criticism that ARAs lacked an overall narrative and are difficult to understand

• In two parts:

Overview

Performance analysis

• Purpose is to meet key accountability requirements to Parliament stemming from the fact that it is the primary user of the ARAs

• The section used to demonstrate compliance with norms and specific codes of good corporate governance

• Includes: Corporate governance report

Remuneration and staff

report

Parliamentary accountability and audit

• Financial statements that present the entity’s financial position and performance in accordance with IFRS as adapted and interpreted for the public sector and in accordance with the Government Resources and Accounts Act 2000

• Notes for material balances only with cross referencing

• Consistent with WGA format

• Reduced burden on preparers and easier to understand for users

8

Implementation – reporting and challenges

9

Narrative Explain the organisation’s purpose and key priorities Show how these priorities are managed through the group structure Flag assets which support key priorities Connect notes and policies to priorities

Presentation Reduced number of notes to the financial statements Reduced technical jargon and greater brevity Link notes and policies More use of graphics and tables Style and content consistent with other reports

Key challenges Process and structure – project management Engagement and communication with stakeholders Ownership Additional audit buy-in IFRS and accountability disclosures remain

High level review of 17 main government departments:

• Red pen approach successful:

Greater focus on material disclosures and slimmed down publications

Increased use of graphics to present information

• Improved narrative of priorities and risks

• More relevant and cohesive reports

Stakeholder feedback:

• Easier to prepare

• Better signposting of information and easier to understand by users

• Accountability report particularly welcomed

• Appetite to go further and reduce duplication even more (subject to IFRS requirements)

• Early engagement with auditors essential

Post implementation review

10

Post implementation review – next steps

• Clarify guidance • Good practice examples

• Feedback from Parliament

• Review of ARAs following second year of adoption

• Whole of Government Accounts to implement simplification and

streamlining

Good practice example – FCO 2015-16

Good practice example

Good practice example

Good practice example

Good practice example

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/539413/FCO_Annual_Report_2016_ONLINE.pdf