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Frequently Asked Questions about Whole of Government Accounts (WGA)(These FAQs are due to be updated to reflect the recent announcement of the extension of WGA from Central Government to Local Authorities, NHS Trusts and Public Corporations. Subscribe to this site if you wish to be informed by e-mail when the new FAQs are available.)
Q. Will WGA reflect reality or be used for political ends - and who will decide?A. The form and content of WGA is required under section 9 of the Government Resources and Accounts Act 2000 to aim to present a true and fair view of the Government's activities and to conform to Generally Accepted Accounting Practice in the UK (UK GAAP). The accounts will be based on the policies set out in the Treasury's Resource Accounting Manual (TRAM) which are reviewed by the independent Financial Reporting Advisory Board. Q. Why produce WGA on a GAAP basis?A. The Code for Fiscal Stability commits the Government to producing accounts for the whole public sector on a consolidated basis where reasonably practicable. It also commits the Government to applying best-practice accounting methods - UK GAAP adapted for the public sector - in the production of its accounts. GAAP-based WGA will be fully auditable, yielding additional confidence in their reliability and will be based on established accounting practice providing a true and fair view of the Government’s financial performance. They will therefore provide better transparency and accountability to Parliament as well as providing information to underpin fiscal planning. Q. Are other countries preparing WGA?A. There has been a general, if gradual, move in recent years towards an increased emphasis on transparency and accountability in budgetary and fiscal decision making processes overseas. New Zealand, Australia, Canada, Sweden, Iceland and the USA are all producing WGA in some form and a number of other countries are taking steps in that direction. The decision to expand on the reforms started with RAB to produce GAAP-based WGA places the UK amongst the forerunners in the field of countries who are developing financial reporting to support their fiscal frameworks. Q. Is this another Brussels Directive?A. No. WGA has nothing to do with Brussels. European Union measures, such as general government net borrowing and general government gross debt, are reported using national accounts data on the basis of rules issued by Eurostat. Q. Why is there a need to provide extra information in addition to resource accounts and returns to ONS?A. WGA will treat Government as if it were a single (consolidated) entity. Although WGA consolidation returns from individual bodies will be based on the formats and policies in the FReM, some extra analysis will be required of transactions and balances with other public sector bodies, so that these can be eliminated. Transactions within the departmental group will be eliminated through intermediate consolidation at the departmental level. Transactions between the departmental groups will then be eliminated in the top-level consolidation by the Treasury. Q. Does this mean that the Resource Accounting and Resource Budgeting boundaries will have to change?A. No. WGA are intended to provide a better overview of the Government’s finances, not to replace underlying control structures. The resource accounting boundary was set for in-year control and Parliamentary reporting purposes which remain valid. A different (wider) boundary has been set for resource budgeting purposes, so that it picks up all public sector expenditure and income. This also remains valid. Q. Will resource accounts still be needed?A. Yes. WGA will be intended to present a “true and fair” view of Government’s activities and will be audited against this criterion alone, with no opinion on regularity. Regularity will continue to be covered in each of the underlying accounts. WGA are intended to provide additional information on the Government’s overall finances, not to replace any existing reporting requirements. Q. Will tax revenues be included?A. Yes. An inter-departmental working group was set up to deal with the issue, and its initial proposals have been accepted by the FRAB. These proposals are currently being field tested. Q. What’s going to happen about Government’s long term liabilities?A. All liabilities which meet the detailed criteria for establishing a balance sheet provision set out in Financial Reporting Standard 12 will need to be provided for in order to allow WGA to present a true and fair view of the Government’s finances. Under the Standard provisions should only be recognised when an entity has a current obligation as a result of a past event that will require settlement and can be reliably estimated. It may be appropriate to disclose other liabilities which do not meet these balance sheet recognition criteria in the notes to the accounts. Q. How will organisations know if they are included in WGA?A. The bodies to be included within WGA will be listed in an annual Statutory Instrument. HM Treasury will then write to the Accounting Officer (or equivalent) for each body to confirm its inclusion and explain the reporting requirements. Q. Is the information going to be needed at the same time as other requirements such as resource accounts and resource estimates?A. The WGA consolidation returns are a standardised version of the information in each body’s normal year end accounts. Although some initial effort is required to map the body’s existing accounts into the consolidation return format, it will increasingly make sense to prepare the consolidation returns as an integral part of the year end accounts preparation process, as the WGA project progressively leads to convergence of accounting guidance and reporting formats. Q. What additional costs will WGA impose on individual organisations?A. The introduction of WGA will build on the implementation of RAB and other changes in public sector reporting already proposed. We have also structured the accounts preparation process around the same departmental groups as are used for budgeting purposes. Preparing WGA should therefore not involve significant additional expenditure by most public bodies because the majority of systems and procedures required will already have been put in place. Although some additional organisational effort will be required at the outset, the preparation of WGA consolidation returns should quickly become an integral part of the year end accounts process, as is already the case with NHS Trusts, and in commercial groups of companies. Q. Will WGA require the replacement of computer systems?A. This should not be the case for individual bodies, as the WGA consolidation returns are a standardised version of the information in each body’s normal year end accounts. HMT will undertake the top-level consolidation with departments being asked to perform intermediate consolidations of the returns from their own sponsored bodies. These intermediate level consolidations can be performed within the COINS (Combined On-line Information System) consolidation system that has been rolled out to Departments. Q. Who will pay the additional audit costs?A. The WGA consolidation returns should be audited by bodies’ existing auditors as an integral part of their normal audit work. We would hope that any additional costs to those bodies would be minimal - although, of course, this will be a matter for discussion between the body and its auditors. Additional funding for local government to cover audit costs was provided in the 2004 Spending Review. Q. Will HMT make sure that accountancy manuals are up to date / timely?A. Yes. HMT will need to revise its consolidation returns and guidance on their completion on an annual basis. All key guidance is posted on the WGA website. The intention is to maximise the use of the internet and E-mail in this process. The FReM will continue to be updated. Q. Will local authorities be included within WGA?A. It is planned that local authorities will be included within WGA when the coverage of the accounts is extended from central government to the whole of the public sector. However there are a number of significant issues to be addressed before a final decision on the expansion of coverage can be taken. Q. Will my body need to change its year end if it is not 31 March?A. UK requirements would limit us to a year end up to three months prior to 31 March, whereas International Accounting Standards allow consolidation for year ends 31 December to 30 June (inclusive) where the reporting body's year end is 31 March. We have discussed this with the FRAB which has accepted that the broader IAS is appropriate and there is no immediate need to change a body's year end if it falls within three months either side of 31 March. If the year end does not fall within the period 31 December to 30 June (inclusive), then it will need to change, and you should discuss this matter with your sponsoring department. Q. Won't WGA inevitably receive a qualified audit opinion because some of the underlying accounts are qualified?A. This is not necessarily the case. However, the form and content of the audit opinion is a matter for the Comptroller and Auditor General to decide. Q. How will WGA help individual bodies?A. Preparing WGA will require convergence of the various different sets of accounting guidance covering public sector bodies. This will result in greater comparability of performance data, increasing the ability of individual bodies to benchmark their own performance against that of others, in turn supporting their implementation of the Modernising Government agenda. It will also enable targets, both within bodies and externally, to be set and measured on a consistent basis, allowing relative trends in performance to be more accurately evaluated. On the practical level, the intention is to minimise the differences between accounting and budgeting policies. This will reduce the workload on departments caused by returns being required on different bases. By promoting convergence of financial reporting guidance, and improving the links with Resource Budgeting, WGA will also allow bodies to get away from arguments about measurement bases, thereby increasing the effectiveness of funding bids. Q. Will the state pension be provided for in WGA?A. Determining the correct accounting treatment for the basic state pension is complex, and The Financial Reporting Advisory Board (FRAB) has accepted the Treasury's initial view that there appears to be no clear cut case under UK GAAP for making a provision. Other countries have found similar difficulties and the International Federation of Accountants’ Public Sector Committee has set up a Steering Committee to develop an International Public Sector Accounting Standard on ‘social policy obligations’. The Treasury is represented on that Committee and the plan is that a decision on the accounting treatment of the basic state pension should be reached in time for the first set of published central government accounts. In the interim, the FRAB has agreed that the working assumption should be that expenditure on the basic state pension should be recognised in the year in which the amounts fall due. Q. Will liabilities to former employees under public sector pension schemes be provided for in WGA?A. Yes. The Government plans to implement Financial Reporting Standard
17, and has agreed it's planned approach with The Financial Reporting
Advisory Board. |
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WGA - Improving
Government information through joined-up reporting The Whole
of Government Accounts Programme is a part of the Government
Financial Information and Reporting Team, 1st Floor, HM Treasury, This page
was last updated on
20/04/07 11:36
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