Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 80-99)



  80. I just make one final point. The Treasury itself, which you are part of, failed to account for £6 billion which had been excluded from its balance sheet in terms of subscriptions to financial institutions. The Lord Chancellor may have forgotten about an antique chair or two—although given his reputation it is rather surprising he did—but the Treasury to forget about £6 billion is extraordinary, is it not?
  (Mr Loweth) The Treasury did not forget about the £6 billion. There was a question as to whether that should properly be shown on the Treasury's resource account or as part of a wider Government account.

  81. You accept that the Treasury got it wrong?
  (Mr Loweth) As I recall, the Comptroller and Auditor General's qualification for the year 1999-2000 did not include the international subscriptions.

  82. Do you accept the Treasury got it wrong, as this Report says?
  (Mr Loweth) As with any accounting issue it is a matter of judgment. Personally I do not accept that the Treasury got it wrong.

  Jon Trickett: Your judgment and mine are obviously substantially different.

  Chairman: Thank you Mr Trickett. Brian Jenkins?

Mr Jenkins

  83. Now for the easy questions because I do not even understand all this so I am going to ask you to take me through one or two parts. Looking at the overall scheme and not the details, when you put this scheme in there was always going to be a cost and there was always going to be a risk that the existing scheme fell over. So someone sat down and did a plan and all the risk assessments and they worked out the extra resources that would be required to put this system in. How much was it going to cost?
  (Professor Sir Andrew Likierman) We knew when we started that there were going to be a number of elements of cost which were not specifically related to this project but which were related, as I indicated earlier, to the replacement of systems, so when we replaced systems we did not always look at the question of how much the additional elements associated with those systems were to do with this particular project. That is one dimension. The second is that we knew there would be training but we did not know how much training there would be because quite of lot of the training that we have undertaken, and are still undertaking, is basically training that we should have undertaken before regardless of this project. So this is not associated with resource accounting, it is associated with basic financial understanding in government departments, for which this is a very useful vehicle. When consultants were brought in to sort out problems, some of the problems were associated with this project and some of them were not, so we cannot always disentangle one element from the other. The answer is there is not a straightforward answer to your question about the incremental cost of this project. We cannot disentangle the incremental cost from the cost of a lot of the replacement of systems, the training and other elements of improvement that we have undertaken during the course of it.

  84. If I was going to go from A to B I would have a map and if I did not know the area I would have a very good map. It appears that you set out without having sufficient detail on your map to know where you are at any point in time.
  (Professor Sir Andrew Likierman) I hope that is not true because what we did is that we set the timescale, we set the parameters of the project at the beginning, and we knew therefore what it was we were seeking to achieve. On the question of the route, there were a number of possible ways to travel the route and things which, over time, we changed in order to achieve the objectives we set out originally.

  85. You referred to training and the need for training, which I consider to be vital in any area. Obviously you are monitoring the training. Who actually monitors it? Who physically monitors the training? How big a team do you have?
  (Professor Sir Andrew Likierman) What we do is we give departments indications about how they can train, we give them material, we give them ideas, but it is up to them to decide how to do the training and how to monitor it. I can tell you how we in the Treasury, monitor it because what we do is we look at not only assessments of courses people go on but we also look at the question of whether it has been useful to them in the way they undertake their jobs. We look at outcomes as well as the outputs, if you like, for training. Individual departments have their own ways of assessing the training they have got. Again it is not for us to look at every element of the way that training is delivered.

  86. There is an old saying in industry that "if you want to learn, sit next to Nellie". That was good as long as Nellie was a good operator but if Nellie was not a good operator you just got two bad ones. So who is monitoring the training?
  (Professor Sir Andrew Likierman) That is for the sections involved with departmental training to do, not for us. We cannot monitor training around Whitehall to say how well has the training been, how good are the outcomes. What we can do is to make sure we know that training has been delivered especially in departments where we feel there is a need for training and that is something we are continually doing.

  87. I would be very concerned if I did not have some degree of monitoring and some degree of assessment and some degree of feedback to ensure that departments met certain standards and criteria at each stage and I got the best use of resources that we were utilising.
  (Professor Sir Andrew Likierman) At the risk of raising another laugh as I mention another book—

  88. Not a pink one!
  (Professor Sir Andrew Likierman)—We have a produced a pink book and the pink book has in it on page 26 how departments can evaluate their training, and this sets out very clearly how we suggest the departments should do that evaluation, the criteria they should use, and the way in which they might know it was successful, but we cannot then do all the monitoring ourselves.

  89. Okay. Training is expensive, it has to be by its very nature; where does the money come from?
  (Professor Sir Andrew Likierman) Departmental training budgets.

  90. Are there sufficient funds in the departmental training budgets to overcome what is apparent to us a very great need for training?
  (Professor Sir Andrew Likierman) I think one has to take it department by department. We have no indications yet that a department has said, "We cannot do the training simply because we have not got the funds", so we have not seen as yet a resource constraint associated with training. Indeed, since we regard this training as extremely important, we have pressed departments to make sure that in as far as there are allocations of training budgets that they go on training associated with better financial management.

  91. I can appreciate that when you are implementing a system all the easy work goes out very quickly and when you get to the more difficult situation and you are going to have to find out the details and go through the process, it does take time, and that is one of the reasons why the delay occurred, but reading the documents another reason for the delay is the fact that they did not have sufficient resources to put in the scheme, they were short of trained personnel, and there was a problem there.
  (Professor Sir Andrew Likierman) I would agree with that in a number of cases.

  92. One of the departments you mentioned was MAFF or DEFRA and that has suffered dramatically from a lack of staff at all levels for years.
  (Professor Sir Andrew Likierman) I am afraid to say that this is not only so for this project. Yesterday, since I am the senior responsible officer for the Whole of Government Accounts Project, I went on a training course organised by the Office of Government Commerce and we looked at the reasons why projects get into trouble. Not putting in enough trained manpower applies not just for the public sector but also the private sector. I am not saying this by way of pride, but I agree with you, there was in some cases an under-estimate of the need for sufficiently trained manpower.

  93. This is an indication of what I consider to be poor management.
  (Professor Sir Andrew Likierman) All I can say is that I think one of the benefits of this project has been to focus on the need for better financial management and better financial training throughout Whitehall.

  94. When reading the documents I noticed very very often they referred to "better management systems". I kept thinking why because the information is only as good as the people who are going to use it. I just want better management please and we do not seem to get that. When we go back into this, and it is a very complicated time-consuming process and it is nice that we have one set of gamekeepers looking after another set of gamekeepers in this situation, with regard to the project, as my colleague Mr Davies said, the question is how does this affect the taxpayers, how does this affect the punters? It is outcomes, it is not process. If there are no defined outcomes and we are not seeing those outcomes appear, we have to worry about the people in charge of the process and we have to go back into it. We have used targets in the past and we have agreed levels where, I remember only a couple of years ago we said to the police "you will find two per cent of your budget through increased efficiency". We have set precedents in the past and I see no reason why we cannot go to departments and just chop their budget by a percentage, bearing in mind that with all the new management systems they should find improved efficiency. What is wrong with that?
  (Professor Sir Andrew Likierman) I cannot comment on the question of budget allocations in that sense. Perhaps I might ask Mr Sharples to comment on that.
  (Mr Sharples) It sounds to me like an excellent idea! We are very happy to take advice from the Committee on this point. Your basic point is obviously a very important one, that the financial information systems are only part of good management. Good management is also about being clear about what it is you are trying to achieve, what results you are trying to deliver. It is precisely to achieve clarity on those points that we have introduced quite a well-developed system of targets for departments in the form of public service agreements which are set as part of the spending review. I think each of these is a component of the overall framework for good management in departments, but I think the parts do fit together. You cannot manage well unless you know what resources you are using but, equally, you cannot use the resources well unless you know in what direction you are heading.

  95. Unfortunately, I am suffering from only having one book prior to coming to this Committee, and I notice on page 8 of the blue book you looked at Ministry of Defence and one of the outcomes you have written down here is "The Ministry of Defence now budgets for its £7 billion of stock on a resource basis." Brilliant. "This means that the stock is included as a cost in the resource budget when it is used, rather than when it is purchased (as it was under the cash budget). This better reflects how much stock is being consumed in one year." So? I do not even understand why you look at that as being an outcome, to be honest. It is probably the wrong department to pick at the present time, but all departments would be the same. I would be asking whether it is valid to have £7 billion worth of stock, what sort of stock controls systems are in place, have they done it historically? And if I am putting a new system in I would ask what advantage am I going to get out of the new system? What is our new target?
  (Mr Sharples) That is precisely what these new arrangements have achieved and it is to the enormous benefit of the Ministry of Defence. Under the old system stocks scored when cash was spent on accumulating them and once they had been purchased people tended to lose track of those stocks. There was no central record of the stocks held, so the process of constructing a balance sheet for the department led to the unearthing of all sorts of information about the stocks being held. The new arrangements mean that people know what they hold and they know what they are consuming out of those stocks. This is only part of the financial information flows and the information that is available to support good management. It does not guarantee good management but it does provide what I would regard as an essential information flow to help good management.

  96. Yes and maybe we can get some better stock controls and we can ask you to reduce the price of the stock. After all, grey paint has got a one-week delivery and so we do not need a million gallons in stock.
  (Professor Sir Andrew Likierman) Mr Jenkins, may I add as a supplementary to that. When we started the project I do not think we quite anticipated just how important and valuable the information would be on the working capital held by central government. We tended to focus at the beginning very much on fixed assets, on buildings and land and so on. What we have identified, that was not identified in the cash account, is just what very large quantities of working capital there are around central government. Managing that working capital is a potentially huge benefit for central government.

  97. I feel like a double act here because I am going to move on to the green document on page 3 to the Department of Culture, Media and Sport where they have managed to reduce the amount of cash they held at the bank for the BBC from £240 million to £70 million, which is laudable. I think anyone who has got that sort of money left in the bank and is not out utilising that cash and not moving it around departments is a criminal act in resources. Where did the £240 million go? We have got £70 million in the bank now, if it has not gone to the BBC and it is not held by the department, where did it actually go?
  (Professor Sir Andrew Likierman) I look to my colleagues on this point.

  Mr Jenkins: Can you drop me a note on that one because I would like to know where the cash had been utilised if it was not lying in the bank. This is the outcome of good management with information to make decisions and to streamline the system but the end product must be, as I say, delivery. It is outcomes which is our target and although we have read and we have seen the progress you have made, it is apparent that it was under-estimated just how difficult a task it was. I would love to have seen the risk assessment and what the criteria set out. I would like to see the plan. I think that is the only thing missing. I would like to see if you are realistically on target to meet the plan. Thank you, Chairman.

  Chairman: Thank you very much. I think Mr Bacon has one last question.

Mr Bacon

  98. I would like to go back to this question of responsibility without power because that is how you describe your position—you are the Treasury, you have responsibility but you have no power. As I understand it, generally speaking it is thought that the person who has the money has the power. "He who pays the piper" and all that. If you look at the federal system in Washington or Canada or if you look at the arrangements between Brussels and bodies, be they local government or any other kinds of bodies in the Member States that want money, it is what one might call the federal level or the Washington level or the Brussels level which says "jump" and the people who want the money who say "how high?" You have got the money, you are the Treasury. At the moment it may be because Parliament has not given the Treasury the right powers that you are unable to do what you would like to do, I accept that may be the case, but what powers would you like to have that you currently do not have?
  (Professor Sir Andrew Likierman) I would need to think quite carefully and take advice, if I may, before I could answer that question. It seems to me that the question has quite significant implications for the relationships between the Treasury and the departments and the National Audit Office. I do not wish to make a foolish statement.

  99. Would you like to write to us on the subject?
  (Professor Sir Andrew Likierman) I will certainly take advice.

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