The NAO's response to the resource accounting White Paper welcomes the principle of moving to private-sector accounting practices, but indicates doubts over some of the proposed detail. When implemented in 1999, resource accounting and budgeting will require public bodies to record properly their use of capital assets, showing depreciation and charges for use of assets.
Under the White Paper proposals, departments would only need to seek parliamentary approval for capital expenditure where additional sums were needed. If departments could fund capital purchases out of disposals of existing assets, parliamentary scrutiny could be avoided, even though large and politically contentious procurement might be involved. The NAO believes this would be wrong, warning that "this could leave Parliament with no information or control over that process".
The NAO's report, written by its head, Sir John Bourn, also criticises the Treasury for proposing audit standards that might be seen as inferior to those adopted in the private sector. It is intended that auditors will confirm that annual accounts "present fairly" the position of a public body, rather than show a "true and fair view", as is required in private sector accounts.
Sir John suggests that "in some eyes a 'presents fairly' opinion could be seen as a second-class opinion, which could wrongly imply that the audit and opinion fall short of a true and fair view, and could confuse or mislead the user of the accounts".
Possibly even more significant is the move to performance management - the assessment of a body according to its achievements - which is worthless unless matched by a commitment to validating outputs, argues Sir John. This goes to the heart of the reforms of public sector management over recent years, even predating the introduction of resource accounting, and a subject over which the House of Commons Public Accounts Committee has already expressed concern.
The NAO argues that "if the focus of attention is to shift from inputs to the outputs and achievements of programmes, departmental performance reporting will need to be underpinned by sound performance data, subject to validation". It is only in this way that Parliament and the Treasury can properly judge the work of public bodies, says the NAO. The views of the NAO will now be carefully considered both by the Public Accounts Committee and the newly established Financial Reporting Advisory Board (Frap), which is to advise the Treasury on the introduction of resource accounting. Frap's membership was announced last week, and contains six senior government accounting officers, along with David Mayston, professor of public sector economics at York University, Ken Wild, chairman of the public sector and not-for-profits committee of the Accounting Standards Board, and the chairman of Frap, Elwyn Eilledge, incoming chairman of BTR and former senior partner at Ernst and Young.
Although the NAO has warned that it is important for Frap to be independent from Government, Ken Wild believes that the initial membership is suitably balanced between the outsiders who take an objective view, alongside insiders who know what is actually going on. "We need a situation where we have people who are close to the issue," says Mr Wild.
Mr Wild believes that the NAO's comments are timely, and the concerns can be accommodated by Frap. "It is probably right to be talking about them, though not yet to be struggling with them," he says. But, adds Mr Wild, the sheer scale of the change will throw up many fundamental problems that will be difficult to overcome.
Nor is it reasonable to expect that the introduction of resource accounting will, in the short term, lead to a unification of public sector accounting standards. For the foreseeable future different public bodies will continue to use significantly different accounting practices. Accountants and accountancy institutions have complained for years at the differences even within the public sector.
"What you want is not just consistency within the public sector," suggests Mr Wild. "You want consistency in accounting systems across the public and private sectors. There will continue to be differences, but those differences should only exist where the different nature of organisations mean you need those differences. I don't think we will come to answers for lots of those differences inside Frap."
Mr Wild says that it will gradually emerge which practices work best for resource accounting. It will only then be possible to agree new standards for the public and not-for-profit sectors that properly draw on the best in the private sector.
The creation of a common accountancy standard sounds like a very long haul indeed.