Managing Public Money

After your staff team, money is your next most important resource. But special rules apply to those who are spending public money; rules that often catch out those who are more used to spending money in the private sector.

First, you must constantly bear in mind three basic rules which are designed to prevent fraud:

You may be tempted, especially towards a year end when you are anxious to spend your budget, to ignore one or more of these rules. You absolutely may never do so, on pain of dismissal, even if your intentions are honourable. (There may be occasions when it does make sense to make stage payments, for instance. But you should try to avoid these and - if you feel they are justified - you should make sure (a) that they are linked to clear, measurable and acceptable progress, and (b) that you boss has also approved the payments, in writing or emails.)

Second,you must constantly bear in mind that you (through the department's Accounting Officer) (and not your Ministers) are accountable to Parliament for your stewardship of public funds, including:

You cannot simply spend money because it obviously makes sense to do so. You need to ensure that Parliament has in advance voted money to be spent in exactly the way you intend to spend it, and that you do not spend more than the money that has been voted for this financial year ending 31 March. You cannot, for instance, carry unspent money forward from one year to another.

You also need to make sure that you stay within both the cash limit and the resource limit (which includes depreciation etc.). And you need to be particularly careful that expenditure on salaries and other compensation (such as that paid on dismissal, and housing allowances etc.) is fully compliant with Treasury rules - which are generally much more restrictive than those found in the private sector. You can of course ask for the rules to be disapplied when necessary, but you need to do this in advance of making the payment - not afterwards!

Further very readable and practical advice, including a chapter on learning from others' mistakes, may be found in‌ Regularity, Propriety and Value for Money.

And much more detail is in The Treasury's Managing Public Money.

Programme Spend: Sop or Lever?

Government spending on salaries, accommodation etc. etc. is known as Running or Administration Costs.  Other expenditure is Programme Spend, including the following.

First, there are large scale projects and programs which deliver key policy objectives from within government.  These can often go badly wrong.  If you are not a trained project manager, you will find some excellent advice on the policy-making website.

Then there are similarly large programs which are in effect contracted out to, or purchased from, the private or NGO sectors.  Suffice to say that you need to have very strong contracts with the third parties, the design of which needs high quality legal advice.

Last but not least, I offer the following thoughts on the sensible use of those smaller budgets which are often used to subsidise projects driven by organisations outside central government but which contribute to the Government’s objectives.  One example might be a cash-strapped company seeking a grant to help it develop an innovative new product in an interesting field.  Another might be a local authority wanting to test a novel way of delivering services.  Politicians love announcing such expenditure, but it can be hard to ensure that the it is doing real good. 

‘Money may be used as a sop, or it may be used as a lever. When you use it as a sop . . . you get some friendly notes in the press . . . but it is gone. But if you use it as a lever it may be made to influence matters of far greater consequence than is measured even by the actual amount involved’ - Sir Winston Churchill

It is of course always tempting to throw the Government’s resources behind those seeking to ‘do good’. But don’t rush into a decision. The money will be wasted unless you ensure that the government's contribution is structured in such a way as to maximise the chances of the project being successfully completed, and of its being good value for money. Pay particular attention to the following:

Martin Stanley

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