7. The Treasury, in their April 2001 memorandum to
the Committee, noted that the Comptroller and Auditor General
had qualified his audit opinion on the resource accounts of 12
departments for 1999-2000, in contrast with 30 for the 1998-99
dry run. The Comptroller
and Auditor General, in his note to the Committee, acknowledged
that this represented significant progress. He also observed that
the 12 included seven departments highlighted to the Committee
in June 2000 which, because of their size and the nature of the
qualifications and the problems underlying them, were of particular
significance in terms of the Treasury's ability to deliver reliable
resource-based Supply estimates and accounts for 2001-02. He considered
that all but two of these, the Ministry of Agriculture, Fisheries
and Food (now superseded by the Department for Environment, Food
and Rural Affairs), and the Home Office, had made significant
progress over their performance in 1998-99.
8. The Treasury told the Committee that in the context
of the previous dry run year in which 30 accounts were qualified,
12 represented a substantial improvement in performance. It was
also within the range of between 9 and 15 that the Treasury had
previously indicated to the Committee they had expected would
be qualified, and they hoped that departments were still on track
to achieve the further progress they were looking for.
This was the second of three years of parallel running and the
Treasury expected a further improvement in the third year. They
were looking to a level of qualification around the range previously
experienced with appropriation accounts, notwithstanding that
resource accounts were more complicated.
9. The Treasury considered that both the Department
for Environment, Food and Rural Affairs and the Home Office had
substantial backlogs of issues to deal with and were the ones
about which they felt the most concern.
The Department for Environment, Food and Rural Affairs did not
expect an unqualified opinion until 2002-03.
There was a lack of audit evidence on the value of information
technology assets, the amounts reported as Supply drawn from the
Consolidated Fund, the balances on certain property-related suspense
accounts and the completeness of amounts capitalised as fixed
assets. The Home Office's account had contained among other things
an unsupported 'correcting' item, errors and omissions in balances
brought forward from the previous year and the double counting
of certain expenditure.
They had however indicated to the Treasury that they expected
to achieve an unqualified audit opinion for 2001-02.
10. The accounts of the Forestry Commission, the
Lord Chancellor's Department, the Department of the Environment,
Transport and the Regions (now superseded by the Department for
Transport, Local Government and the Regions) and the Cabinet Office
had also revealed deficiencies in some areas. The Treasury recognised
that a number of issues remained outstanding. Departments were
still on a learning curve and, on the whole, they had done a 'good
job with flaws' rather than an incompetent job.
11. Of the 12 departments that had received a qualified
audit opinion on their accounts for 1999-2000, the Treasury hoped
that only six would remain qualified for 2000-01. The accounts
of the Cabinet Office, the Treasury, the Treasury Solicitor's
Department, the Forestry Commission and the Department of Health
were not expected to receive a qualification for 2000-01. Nor
should the Department for Transport, Local Government and the
Regions, although there was an issue to be resolved.
The Treasury feltalthough it was difficult to be certainthat
the remaining problems associated with the introduction and implementation
of resource accounting and budgeting would be resolved by 2002-03.
In any one year a problem could however arise with a department
and they recalled that in June 2000 they had indicated that accounts
would continue to be qualified in subsequent years.
12. 27 departments, including the Treasury, failed
to meet the statutory timetable for rendering their accounts for
audit. The Treasury said that this was a long-standing problem
and was unsatisfactory. Part of the problem was the double running
of resource and appropriation accounts, which was putting a strain
on departments. As far as appropriation accounts were concerned
there had been no improvement on the previous year, although resource
accounts had appeared to be coming forward rather faster. Departments
would get better as they got more experience with their resource
accounts, and timeliness and quality would improve.
13. Among the 27 departments were 10 whose accounts
for 1999-2000 were prepared under a Treasury dispensation giving
them an additional two months, until 31 March, to present their
accounts to Parliament. The Treasury replied that they were not
going to give departments dispensations this year. They could
not guarantee that departments would meet the deadline, but they
knew that there was determination to do so at the highest levels
14. The Treasury said that they were discussing with
the National Audit Office and departments a more radical proposal
to reduce the timetable for the presentation of accounts, from
the present 10 months after the financial year end to 3 months.
Their ultimate intention was to present accounts by the end of
June, rather than the end of the following January, though the
change would no doubt have to be implemented in stages. Departments
were not yet ready for the change, and they first needed to try
to get the present system right. Nevertheless, they felt it was
a matter of when rather than whether to bring down the timescale.
They would of course consult the National Audit Office.
15. The Treasury said that there were limits to what
they could do by way of sanctions against departments which failed
to deliver adequate accounts.
The Government Resources and Accounts Act 2000 did not allow for
the imposition of any sanctions for the failure to meet any of
the statutory deadlines. The Act did nevertheless place a responsibility
on the department's Accounting Officer for preparing the accounts
and sending them to the C&AG. Failure to meet the statutory
deadline for sending accounts to the C&AG could amount to
a contempt of Parliament and the Committee could require an Accounting
Officer to explain why the accounts had been submitted late. The
Treasury could remind Accounting Officers of the continuing importance
of keeping to the deadlines, and that it would be appropriate
in the event of a department failing to meet the deadline to ask
the Principal Accounting Officer to report formally to the C&AG
or to the Committee setting out the reasons. The Treasury proposed
to discuss these proposals with the NAO and departments in order
to establish the form and content of such a report.
16. The Comptroller and Auditor General had expressed
concerns about departments having enough skilled staff; whether
their systems were robust enough; and whether there was effective
senior management review of financial information.
On staffing, the Treasury said that they were at one with the
National Audit Office in being concerned over the question of
skilled staffing in departments. They noted that in his memorandum
the Comptroller and Auditor General had mentioned five departments
for which there were specific staffing concerns. Three of the
departments had given assurances that they felt they had enough
qualified staff and two had plans to get the relevant staff. The
Treasury were concerned that there should be a staffing regime
that left departments less vulnerable to staff changes, which
was not yet the case in some areas in Whitehall. Departments had
become more aware of the issue as problems had arisen in the preparation
of the accounts. The Treasury were monitoring staffing, and in
many cases were helping the departments to recruit and then train
the qualified staff that they had.
One of the benefits of the resource accounting project had been
to focus on the need for better financial management and better
financial training throughout Whitehall.
17. On the effectiveness of senior management review
of financial information, there was no history in departments
of using commercial-style accounting information as part of the
way they managed on a day-to-day basis. There had been fewer incentives
in the past to integrate accounting information into departmental
business management than under resource accounting. One of the
benefits of the new system was that there would be much greater
awareness of financial matters, especially by senior management.
Senior managers had not had this kind of awareness, and the Treasury
was doing what it could to try to remedy that.
The Treasury were meeting with personnel directors to consult
with them on how best to reach senior management in departments
with specifically targeted training programmes.
They had produced a 'skills' booklet which included suggestions
on how departments could evaluate their training.
18. The Comptroller and Auditor General had noted
that the use of accrual information to support decision making
in departments was not well developed and departments were only
just beginning to appreciate the full potential of the information
systems now available to them. The perceptions of some consultants
working on the implementation of resource accounting and budgeting
had been that it was not being used as management information.
19. The Treasury told us that only when resource
budgeting was fully in place would it begin to affect departments
on a wider scale, rather than simply a few people preparing the
accounts. Only when resource accounts were the basis on which
departments were made accountable to Parliament would it begin
to be most effective at the highest reaches of departments.
The turning point would come once there was full resource budgeting
from 1 April 2003 as a result of the 2002 Spending Review. Departmental
budgets and the control of those budgets would then be on a resource
basis. The change would not happen overnight but the incentives
then would be quite different from now.
Asked whether efficiency targets should be set as part of the
drive towards improving management, the Treasury said that a well
developed system of targets in the form of Public Service Agreements
had been set as part of the Spending Review.
20. Although the overall picture improved substantially,
important issues remained with about a third of the 12 departments
whose accounts for 1999-2000 were qualified. Two of the departmentsthe
Home Office and the Ministry of Agriculture, Fisheries and Food
(now superseded by the Department for Environment, Food and Rural
Affairs)gave particular cause for concern because they
appeared to have made little improvement.
21. 27 departments failed to meet the statutory deadline
for rendering their accounts for audit (eight months after the
end of the financial year). After five years preparation for resource
accounting, it is unacceptable for departments not to have the
systems and skills to enable them to comply with the law in this
respect. The Treasury said they were considering whether to require
departments that failed to meet this deadline to report to this
Committee, and we await more detailed proposals that are to follow
consultation with the National Audit Office and departments.
22. Availability of sufficient staff with the necessary
skills continued to be a problem for some departments, as the
Treasury acknowledged. Departments need to implement action plans
for dealing with these problems and the Treasury needs to monitor
23. The Treasury have prepared a training guide for
departments, which also offers advice on the evaluation of training.
In view of the skills problems some departments are facing, the
Treasury should consider what further direct actions it might
take, such as preparing or running courses, to ensure that appropriate
training is available.
24. The delays by departments in preparing their
accounts cast significant doubt on whether departments actually
have and are able to use resource-based financial management information
in the course of the year. Only once departments are routinely
preparing and using accruals-based resource information in their
planning and decision taking will the transition to resource accounting
be truly achieved.
25. The Treasury should provide a further memorandum
to this Committee setting out the results of the audited resource
accounts for 2000-01, showing the extent to which the objectives
of the resource accounting project have been achieved and the
further progress that is still required.
1 29th Report of the Committee of Public
Accounts, Progress on Resource Accounting and the Adoption
of Resource-Based Supply, (HC 556, Session 1999-2000 ), para
ibid, para 7 (viii) Back
Ev 35-63, Appendix 3; Ev 63-96, Appendix 4; Ev 96 -111, Appendix
Ev 18-35, Appendix 2 Back
Ev 96-97, Appendix 5 Back
Ev 23, Appendix 2, para 28 Back
Ev 22, Appendix 2, para 21 Back
Qs 78-79 Back
Qs 17-18 Back
Qs 7, 55 Back
Ev 15-16, Appendix 1, paras 5-8 Back
Qs 26-27 Back
Qs 15, 85-88 Back
Qs 105-106 Back