10 accounting legacies after the public sector’s ‘finest hour’

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From an increased workload to colossal cost-cutting measures, coronavirus has thrown up tough challenges for public sector accountants.

The British public sector has been put through the ultimate stress test over the past six months. Its accountants have been at the very heart of this crisis since it started.

When a national emergency hits – or in the case of coronavirus (Covid-19) case, international emergency – it’s the public sector that takes charge: providing hospital treatment, emblazoning ‘stay alert’ messaging on posters and billboards, and keeping citizens safe.

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“In the past few months, we’ve seen the very best of public finance professionals, who have extended large sums of money from central government to those local bodies that need it, while still maintaining internal controls,” says Don Peebles, head of UK policy and technical at the Chartered Institute of Public Finance and Accountancy (CIPFA), the only accountancy body in the UK dedicated to the public services.

“Throughout this crisis, they’ve had to make decisions on complex issues very quickly… it’s demonstrated they really can operate at speed.”

However, with public sector debt recently reaching £2 trillion due to spending on coronavirus measures, the headaches for accountants are far from over yet, as we explain below.

1. Untangling grant trails and year-end accounts

The word “unprecedented” has been bandied about a lot since the pandemic hit, with the government throwing record amounts of cash at public bodies: over £4.3bn to the NHS, over £3bn to local authorities and £1bn to schools.

Given such vertigo-inducing figures, year-end accounts are set to look very different, presenting problems for those accountants tasked with looking after them.

“Institutions like the NHS have had a whole bunch of money thrown at them to deal with Covid-19; the challenge for accountants will be unravelling these huge sums,” says Duncan Brodie, director at training provider Goals and Achievements, which regularly works with the public sector.

“Before coronavirus, moving money between public sector organisations was relatively easy, with clear auditory rules. Now, there’s different trails [that need to be accounted for].”

2. Directive to cut costs  

Accounts in the private sector have been busy helping clients’ businesses stay afloat by poring over cash flow plans and looking at how to cut costs. Similar challenges await accountants in the public sector.

With the public purse potentially facing a £391bn bill, according to the Office for Budget Responsibility, chancellor Rishi Sunak recently ordered government departments to find cost savings.

As a result, public sector restructuring could become more commonplace, such as Public Health England recently being replaced by the National Institute for Health Protection.

“We know there is the likelihood of this happening in local government further down the line,” says Peebles. “When this has previously happened, it’s had implications for public sector accountants who’ve had to identify what the consequences and costs are, and crucially what the savings will be.”

“It’s likely that plans for transformations for efficiency savings will be part of public bodies’ budgets for this year… It’s almost certain that these plans can not be delivered, which means the budget savings these organisations were looking for can’t be achieved, and they may have to generate further income or access funding from central government.”

3. Things are about to get hectic… and there could be pay freezes too

If Covid-19 has a silver lining for public sector accountants, it’s that they’ll be in heavy demand as public bodies need them to deal with the economic shock. However, as Brodie points out: “The public sector hasn’t always got a huge level of resources. As a result, its employees tend to have fairly demanding jobs.”

There’s another potential drawback. In July, when Sunak announced a spending review to strengthen UK plc’s coffers (set to be published this autumn), he also hinted many public sector workers could face a pay squeeze.  

“The work of public sector accountants has always been a challenge,” says Peebles. “But I’d like to think they’re not in the profession purely for financial reward. Many are there because they’re passionate about making a difference.”

4. 2020/21 balance sheets are set to look very different

“There could be some restructuring of balance sheets,” predicts Brodie. “The NHS Trust has ‘public dividend capital’ [a type of equity finance] which is the equivalent of ‘safe capital’ in the private sector. If a public sector department has loans, they may need to be converted into ‘public dividend capital’ because there might not be any possibility of paying these back.”

There is some good news, says Brodie: “If you work in the public sector, you don’t need to worry about your department going bust as you can always get your hands on [government] cash, unlike the private sector, where cashflow is a problem.”

5. Investments being put on pause could be another pain-in-the-neck

“Anything investment-related, such as a new hospital ward or a new campus lecture hall, may be put on hold due to Covid-19,” says Brodie. “Because there are ongoing running costs associated with these and no income coming in, accountants will be tasked with handling it. It could open up new accountancy roles, such as ensuring any business case/investment is scrutinised and put under the microscope.”

“The core skills of accountants will come to the fore [in helping] wind down investments and find new sources of income or savings,” adds Peebles.

6. Finance teams asked to problem-solve

The uncertainty of Covid-19 has meant last year’s financial forecasts are now irrelevant, but Peebles believes public sector accountants are well-equipped to cope: “In the past few months we’ve seen the very best of the public sector; who would’ve thought that the public sector could construct a hospital in just a few days? Forecasting will be a challenge, but public service professionals have demonstrated they can navigate their way through that – they’ll always find a way…”

Risk management and scenario-planning is set to become more important, with Peebles noting: “The days when accountants just had to be numerate and sit in the corner looking at spreadsheets have long gone now. He/she will have to problem-solve and think about what the issues will be for specific parts of the business.”

With businesses seeking more accountants with a strategic, join-the-dots mindset, Brodie predicts the ‘finance business partner’ (a financial employee working across all departments of a business to help provide ‘real-time’ insights to support decision-making) could become an increasingly common sight on public sector organigrams.

Being tech-savvy could help too. “The pandemic has pushed GP practices and universities towards online consultations and lectures,” says Brodie. “These services need financial employees who understand that.”

7. Calculation woes

“The workload of public sector accountants has increased as they’ve adapted to this changing landscape,” notes Peebles. “For example, the Income Compensation Scheme [one-off government scheme which aims to help compensate local authorities for income lost due to Covid-19] has seen professional accountants provide estimates to the government on likely losses. This has been difficult because we’re still in the early days of the pandemic, and only a few months into the financial year. Therefore, it’ll take all the skills of public sector accountants to accurately estimate what these losses will be.”

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8. Challenges in… the NHS/healthcare

Uncertainty is the main bugbear facing accountants working within the NHS, reckons Brodie: “If there’s a second or third breakout of the pandemic over the next year, it’ll present a big challenge for those involved in forecasting… Commissioners, clinical commissioning groups and people buying NHS services will be pondering whether to put money in ‘business-as-usual’ stuff [i.e. operations and services for non-coronavirus patients] or holding back in case there’s another outbreak.” 

“Also, the NHS has Payment by Results (PbR) [a fixed tariff that reflects national average prices for hospital procedures], which means its people and organisations only gets paid for what it delivers… Because many hospitals have such a huge backlog of outpatients and surgical procedures, no income has been coming in and there’s still overheads, which accountants will need to consider.”

9. Challenges within local authorities

With 39% of the workforce still working remotely in August according to the Office of National Statistics, it’s predicted that many businesses may sell their expensive office spaces and switch to working from home permanently. This isn’t great news for local authorities who derive a significant chunk of their income from charging business rates (a tax on properties used for business) and from car parking charges.

“A potential reduction in business rates could have a huge impact because more businesses are questioning whether they need offices,” says Brodie.

10. Challenges within education

In recent years, British universities have increasingly relied on funding from international tuition fees. However, with many foreign students cancelling their studies due to the virus, it’s been estimated that some universities have lost as much as £100m. Given many of these institutions have borrowed heavily to pay for new facilities or have empty student accommodation with significant running costs, it’s something accountants will need to consider when compiling budgets.

“Many working in education will be wondering how they make ends meet in the coming years,” says Brodie. “Can they generate enough revenue to service the site? It’s about finding a business model that’s affordable.”


There is a great deal to straighten out, adapt to and make sense of in the aftermath of the pandemic.

During the crisis, the public sector rose to meet the challenge in the nation’s time of need. Now there is a sense of health trusts, local authorities and Government departments will be unravelling the long-term implications. Accounting professionals will continue to be centre-stage as they help their employers straighten things out.

David Nunn is Content Manager at AAT.

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