Look after the pennies ...

It is an old saying that if you look after the pennies the pounds will look after themselves. Maybe, but one might say that being focused on details means that one misses the big picture. It seems to me that this is the effect of the government's transparency policy: by enabling anyone to see details of payments for £500 swamps them with masses of data but they aren't really holding anyone to account. Accountability, you see, requires explanation as well as information (just as accounting requires words as well as numbers). Knowing what £500 was spent on does not tell you whether it was spent on the right thing. As Carnegie and West put it: “a hospital that is well managed in financial terms cannot be presumed to be meeting a community’s needs for health care.”

I spotted a couple of things in yesterday's news that brought this issue to mind. First I saw that Grant Shapps was criticising the Audit Commission for spending £20,000 on the failed recruitment of a chief executive last spring. The amount doesn't seem unreasonable to me and the fact that no chief executive was recruited had more to do with Shapps's boss than anything else. Shapps was also critical about the various minor payments made by Audit Commission staff on its procurement card. Now, procurement cards are usually normal-looking credit cards that are restricted only to allow purchases of certain classes of goods and services. They are promoted to public sector organizations to make the purchase of low-value goods in a cheap and efficient way by avoiding all the red tape of writing formal orders and processing invoices etc. In my experience their use is well-controlled, often the control being better than under previous systems because the credit card company can provide so much information about when and where the card was used. The fact that someone in the Audit Commission bought something from an HMV shop suggests to me that there was a business reason for buying whatever it was. I would be very surprised if it turned out that someone bought the latest Take That CD to listen to in their car on the way home from work. That sort of thing rarely happens, and it is even less rare, I believe, when it is as easily detectable as a payment made on a procurement card that will have an itemised bill sent to the finance department. All in all, the Audit Commission will probably spend more time and money providing evidence to Grant Shapps that it was a legitimate business expense than the item cost. That's not value for money in anyone's book.

The second story I saw yesterday was about the Department for Education spending £21million on consultants. A much more significant amount of money, you'll agree,  and it may well be that it is much less than Labour spent. But the figure by itself doesn't tell us what the consultants have done so that we can judge the value for money of their services. If I can only have one explanation, I'd rather know what the £21million bought us than the £20,000 spent by the Audit Commission on its procurement cards.

Carnegie, G. D., & West, B. P. (2005). Making accounting accountable in the public sector. Critical Perspectives on Accounting, 16(7), pp. 905-928. doi:10.1016/j.cpa.2004.01.002