PUBLIC TRUST OFFICE: UNCLAIMED BALANCES
HELD IN FUNDS IN COURT AND THE OFFICE'S 1998-99 ACCOUNTS
THE AGENCY'S STEWARDSHIP OF FUNDS
Recovering Charges from Mental Health Sector patients
8. Under the Mental Health Act 1983 the Court of
Protection has the power to appoint an individual or organisation
(private receivers) to administer the financial affairs of mentally
incapacitated persons. Where no one is willing, able or suitable
to act as receiver the Court may appoint the Public Trustee as
"receiver of last resort".
The Agency charges clients an annual administration fee for the
services it provides, which is due on the anniversary of the First
General Order appointing the receiver. This fee is linked to the
level of a client's total disposable income less certain allowable
deductions. The Agency charges an estimated fee to each client
on the anniversary of their case, and this fee is recalculated
following submission of a receiver's account. Where there is a
difference between the estimated and actual fee due the Agency
issues a further demand or pays a refund.
9. Receivers are required to submit annual accounts
to the Agency within one month of the anniversary of their appointment.
In his earlier report, the Comptroller and Auditor General had
drawn attention to delays in the review of receivers' accounts
and thus in actioning fee adjustments, and the failure to take
appropriate corrective action. Additionally there were errors
in recording fees in the Agency's accounting systems including
adjustments recorded in the wrong year of account, fees due but
not raised or raised in duplicate, and mispostings.
10. In May 1998 the Agency set up a taskforce for
calculating fees for private receivership cases and for reviewing
past fees where appropriate. However, by the end of November 1999
some 3,100 or more than ten per cent of 1998-99 receivers' accounts
had not been received, at least seven months after the due date
The Department stated that this number had since been reduced
to about 1,000. The Agency had appointed a new Director of Mental
Health in December 1999 who had developed a more robust procedure
with the Court of Protection for chasing outstanding receivers'
accounts. About 500 accounts a week were being received and the
Agency was reviewing 1,800 accounts a month compared to 800 per
month prior to December 1999. It estimated that there were now
less than 4,000 accounts which had not been received within the
two months at which an account was regarded as overdue.
11. The Comptroller and Auditor General's report
noted that the taskforce review of fees had resulted in an increase
in fees of £1.25 million for 1998-99 and £800,000 for
earlier years. The Agency explained that a key difficulty had
been its fee structure which comprised eight different fee bands.
This made fee calculation complex as a client could move fee bands
between the time an estimated fee was raised and the final adjustment
on receipt of an account. The Agency has now reviewed and simplified
the basis for annual administration fees. As an intermediate step,
from 1 October 1999 the Agency reduced the number of fee bands
from eight to six. It also introduced a maximum fee of £1,750
for private receivership cases and £4,600 for Public Trustee
The Agency stated that it was now about to move to a simple flat
fee structure which would be easier to administer, although this
had yet to receive the Treasury's approval.
12. The Agency's financial objective is to recover
the full costs of its operations through client fees. The Comptroller
and Auditor General's report drew attention to costs incurred
by the Agency through poor financial management. For example,
the Agency had written off irrecoverable debts of £72,000
relating to commencement and Enduring Power of Attorney fees,
and the Lord Chancellor's Department had failed to reclaim £124,000
of VAT on the Agency's behalf from HM Customs and Excise. The
Department and the Agency confirmed that these losses would be
borne by clients.
Managing Unclaimed Balances in Funds in Court
13. In general, once an account has been dormant
for five years, and if the Court Funds Office (the Office) is
satisfied that all reasonable steps have been taken to trace the
person entitled to the balance, the sums on that account are transferred
to the Unclaimed Balances Account (the Account).
14. A key function of the Court Funds Office is the
custody of money or assets held on behalf of others. Hence the
Office must be able to attribute money or assets to the persons
on whose behalf they are held. To ensure completeness of funds,
and to enable any errors or misappropriations to be readily identified
and rectified, the total funds held should be agreed regularly
to the total of the sums owed to individuals.
15. During their audit of the Funds in Court Part
A Account for the year ended 28 February 1997, the National Audit
Office asked for a list of the unclaimed balances making up the
total liability of £31.4 million on the Unclaimed Balances
Account. However, the Court Funds Office did not hold a single
record of payments into and out of the Unclaimed Balances Account
before 1 March 1976, the date on which the net balance on the
Account was carried forward to the Office's computer system. For
balances which arose before that date, the Office had to refer
to listings of unclaimed balances which had been published in
the London Gazette until 1938, an unpublished listing dated 1953,
and various other records including index cards. For balances
arising from 1976-77 onwards data on receipts and payments were
analysed to identify balances outstanding. Much of the balance
had in practice arisen in the last 15 years or so.
16. The Department stated that the various records
held were sufficient to identify an individual balance when required.
However, they accepted that the Agency's accounting systems should
have permitted the ready reconciliation of individual balances
to the total funds held.
17. At the time of the Comptroller and Auditor General's
report some £9.8 million of the £32.3 million held in
the Unclaimed Balances Account at 28 February 1998 could not be
substantiated to individual balances. Further work by the Agency
had reduced this sum to £2.1 million which represented many
thousands of small items which had accumulated between 1726 and
The Department had been told that the estimated cost of analysing
these sums was approximately £30,000. They considered that
the likelihood of claims against these balances to be small, and
hence in their view it would not be cost effective to take any
further action. Under current legislation unclaimed funds accumulate
in perpetuity and the Department agreed that new legislation might
be necessary to resolve this situation, so that the funds could
be put to better use or be surrendered to the Consolidated Fund.
18. The Agency acknowledged that better control over
monies paid into the Account was key. The Agency had enhanced
its operating procedures for identifying persons entitled to Funds
held in Court to reduce the extent to which such balances were
unnecessarily transferred to the Unclaimed Balances Account. For
larger sums in particular, the Agency now telephones either the
solicitor or the Court to try to identify the person entitled
to the money.
19. It was unlikely that many of the sums already
paid into the Unclaimed Balances Account would now be reclaimed.
Some people to whom money was owed had apparently disappeared,
and solicitors who had paid monies into court had not reclaimed
them. The Agency acknowledged that it could probably trace more
of the money to owners, but did not regard this as its task, pointing
out that solicitors were remunerated to safeguard their clients'
interests. There were facilities for would-be claimants to find
their money and it was for them to take the initiative to track
down sums due to them. The intensive clerical exercise to identify
the case, and to trace and contact the solicitor would be a very
expensive use of public money. The Agency had investigated hiring
a tracing agent to be remunerated on a commission basis, but had
found it did not have the legal authority to do so.
20. Since 1983, County Courts have also been able
to pay sums into the Unclaimed Balances Account. Of the £5.2
million paid in by County Courts from 1983 to February 1998, £100,000
had subsequently been paid back to the rightful owners. County
Courts provided the Court Funds Office with manually produced
forms based on their own records to support payments into the
Account. The Office annotated these forms when balances were repaid.
The National Audit Office found that many of the forms submitted
by County Courts included entries which provided no details about
the sums transferred. In such cases there was no evidence that
the sums related to unclaimed monies and that they were appropriate
for transfer to the Unclaimed Balances Account.
21. The Agency agreed that these monies should not
have been accepted without supporting details, and noted that
it had now changed its procedures.
The November 1999 Quinquennial Review of the Agency suggested
radical changes to its organisation and operation, including the
transfer, from April 2001, of the functions of the Court Funds
Office to the Court Services Agency. The Department suggested
that one advantage would be a closer relationship between the
Court Funds Office and the County Courts, which would enable better
control and monitoring of balances. In the meantime, the Agency
was taking steps to ensure that the Court Funds Office and the
County Court records and systems were consistent.
22. The Court Funds Office is required by law to
maintain a list of the accounts where funds have been carried
over to the Unclaimed Balances Account, and this list (referred
to as the 'Index') must be available for public inspection. In
May 1999 the National Audit Office found that the Index was eighteen
months out of date. The Index comprised over 10,000 sheets of
paper and many of the entries on the Index were not meaningful
and would not facilitate a search by an interested party.
23. The Department agreed that the Unclaimed Balances
Index was not user friendly and that the weaknesses should have
been identified and corrected at a much earlier stage. They described
it as risible, and acknowledged that its shortcomings were unacceptable.
They attributed the weaknesses to a substantial underinvestment
in the past in information technology and information systems
support in the Agency. To improve public access to the Index,
the Court Funds Office had now set up a database search facility,
at a cost of £3,400, which became operational in March 2000.
24. In its 35th report of 1998-99 (HC
278) the Committee drew attention to the Agency's failure to collect
and review receivers' accounts on a timely basis. Prompt receipt
of receivers' accounts was critical to the Agency recovering the
correct fee from its clients. Whilst we acknowledge the actions
taken by the Agency's current management to improve performance,
for example the more robust procedures established with the Court
of Protection for chasing outstanding receivers' accounts, there
is still scope to reduce further the number of accounts more than
two months overdue.
25. The Agency had to establish a separate taskforce
to calculate fees and review past fees, which secured an increase
in fee income of £1.25 million for 1998-99 and £800,000
for earlier years. The accurate calculation and prompt recording
and collection of fees should have been an integral part of the
Agency's business processes.
26. As custodians of monies paid into Court, the
Court Funds Office should have established systems which permitted
the ready identification of balances owed on individual unclaimed
cases, and the regular agreement of these balances in aggregate
to the total of unclaimed funds held by the Office. The latter
is an important financial control over the completeness of funds
and a deterrent to misappropriation.
27. Current legislation effectively requires the
perpetual accumulation of unclaimed balances. We support the Department's
proposal to recommend to Ministers a review of this legislation
which might allow payment into the Exchequer or to suitable causes
of sums never likely to be reclaimed.
28. Most of the sums held on the Unclaimed Balances
Account have been transferred to the Account in the last 15 years
or so. The Agency acknowledged that its procedures to identify
potential claimants before transferring sums to the Account should
have been better, and it is now pursuing owners or solicitors
more actively. A list of unclaimed balances is required by statute
to be available for public inspection, but the Department and
the Agency acknowledged that it was far from user friendly. The
Agency is now addressing these issues. The Court Funds Office
will need to give higher priority to improving customer service
in these respects.
29. The Agency indicated that it did not consider
tracing owners of sums held on the Unclaimed Balances Account
to be a proper use of its resources. The Agency had tried to make
it easy for claimants to find their money, and believed that it
was the responsibility of solicitors to look after their clients'
funds. The Agency acknowledged, however, that more could have
been done to trace the owners before transferring sums to the
Account and to provide a more acceptable search facility for potential
claimants to use. In our view it should consider reopening at
least the larger cases where owners might still be found.
30. County Court balances paid into the Account often
had no details at all about the source of the funds. Although
the Agency no longer accepts sums from County Courts without supporting
details, the Department should consider whether County Courts'
procedures for accepting monies into Court, and their record keeping,
10 C&AG's Report, HC 416 of 99-00, para 1 Back
paras 13-14 Back
para 19 Back
para 15 Back
paras 16, 19 Back
Report, HC 416 of 99-00, paras 13, 32 Back
paras 16-25, Evidence Q5 Back
Report, HC 416 of 99-00, paras 39, 47 Back
Report, HC 833 of 98-99, para 2.2; Evidence Q40 Back
paras 4, 12 Back
paras 10-11, 2.8, 3.4, 3.20; Evidence Q43 Back
Qs 1, 59-60 Back
Report, HC 833 of 98-99, paras 4.6-4.7; and Evidence, pp 1-3 Back
paras 14, 4.14-4.16; Evidence Qs 50-51, 62-63 Back
pp 1-3; Evidence Qs 2, 71 Back
Qs 42-43, 69-72, 75-77 Back
Report, HC 833 of 98-99, paras 3.8-3.9 Back
Qs 45, 71 Back
Report, HC 833 of 98-99, paras 3.23-3.27, 4.9 Back
Qs 4, 11, 109 and Evidence, Appendix 1, pp 14-15 Back