Select Committee on Public Accounts Appendices to the Minutes of Evidence


Supplementary memorandum submitted by HM Treasury


  In its 29th Report of Session 1999-2000, Progress on Resource Accounting and the Adoption of Resource-Based Supply, the Committee asked the Treasury to provide a summary and analysis of the resource accounting action plans put in place by those departments that did not receive an unqualified audit opinion in respect of their "dry run" resource accounts for 1998-99.

  A memorandum is attached in response to this request. The Treasury Departments are of course willing to provide additional information on request.



  The PAC's 29th Report, Session 1999-2000: Progress on Resource Accounting and the Adoption of Resource-Based Supply[28] requested that the Treasury provide the Committee with a summary and analysis of the action plans prepared by those Departments that had not received an unqualified audit opinion on their "Trigger Point 3" accounts—the dry run resource accounts for 1998-99. In its response[29], the Government undertook to do so. The appendix to this memorandum contains a summary of the action plans for all 26 bodies, [30]including three public service pension schemes.


  From an early stage in the project to introduce resource accounting and budgeting (RAB), the Committee sought and received an assurance that the existing cash based system would not be discontinued without its consent. To provide Parliament with information and assurance to Parliament about RAB implementation, the Government announced four "Trigger Points" against which progress in implementing RAB would be monitored and reported to Parliament.

  "Trigger Point 3" involved the preparation of the first set of departmental resource accounts, and their audit by the National Audit Office (NAO), on a "dry run" basis. The results were reported to the Committee by the Treasury in two successive memoranda in January and May 2000.

  Despite the number of qualifications of Trigger Point 3 accounts, and, in a very few cases adverse opinions or disclaimers, the Government's view—contained in its May 2000 memorandum was that by 2001-02 the level of qualifications is expected to be no higher than the rate of qualification of cash-based appropriation accounts. This expectation of sufficient progress in time for 2001-02 was based on a case by case assessment of progress and the agreement of a programme of work between individual Departments and the Treasury. This was designed specifically to resolve issues still outstanding in time for "live" running in 2001-02.


  Following the evaluation of Trigger Point 3, and the successful completion of Trigger Point 4 (making available to Parliament a set of "dry run" resource based estimates for 2000-01, the Government recommended the discontinuation of cash based appropriation accounts and the introduction of resource Estimates in 2001-02, in line with the original project timetable.

  In its Report, the Committee agreed that the Government should proceed to this timetable. The Committee nonetheless concluded that risks remained, and looked to the Treasury to retain a monitoring role to see that the risks and issues identified at Trigger Point 3 were dealt with in a timely and appropriate way. As part of this, the Committee asked the Treasury to provide a summary and analysis of the agreed action plans in respect of those Departments that did not receive a clear audit opinion at Trigger Point 3. The Treasury accepted this recommendation.

  Since then, Sir Andrew Turnbull, the Permanent Secretary to the Treasury, has written to all Accounting Officers informing them of the Committee's decision and emphasising the importance the Treasury attaches to addressing successfully all the remaining difficulties. The Treasury has been liaising closely with Departments in the course of the production of their 1999-2000 accounts, with the aim of ensuring that departments maintain the progress set out in their action plans. The Treasury is continuing actively to support Departments in implementing all aspects of resource accounting and budgeting (RAB), through the provision of advice and guidance and the dissemination of good practice. Guidance on the preparation of the first set of statutory resource based Estimates in spring 2001 has already been issued.


  The Committee asked that the Treasury should set out the steps Departments are taking to address the issues raised during the Trigger Point 3 process in respect of systems and processes, staffing and training.


  Many departments have adapted, refined and improved their systems and processes to tackle the problems raised at Trigger Point 3. The action plans set out in the appendix show that a number of Departments that received qualified TP3 accounts have acquired or are about to acquire new accounting systems aimed at, for example, integrating processes for data collection, or recording fixed asset information more accurately. Many others have undertaken reviews of their processes for, for example, gathering information on working capital or the allocation of resources to objectives.

  Further information about Departments financial and accounting systems, and the use that they are making of them, is contained in the Treasury's parallel memorandum on management information systems. This memorandum shows that across Departments, sound management systems are in place or are being put in place. The Treasury recognises that progress has not been uniform across Departments, and will continue to monitor departments' progress in developing suitable management information systems as part of its Modernising Government agenda.


  Both the Treasury and the Committee have long emphasised to Departments the importance of having an adequate complement of fully qualified and competent staff to support the implementation of resource accounting. The action plans demonstrate that Departments have taken and are continuing to take significant steps to improve the level of financial expertise within their organisations. Many Departments have recruited qualified accountants externally and/or engaged private sector expertise to support the preparation of resource accounts. Many Departments are also sponsoring existing members of staff who are pursuing professional financial and accountancy qualifications.


  During the Trigger Point 3 process, Departments were required to provide a detailed assurance to the Treasury that adequate RAB training programmes were in place and underway, to ensure that staff had the necessary skills to interpret, analyse and use the information generated by RAB. The Treasury continues to monitor the implementation of training plans in Departments, and is in regular contact with individual Departments to ascertain what support and assistance can be given in respect of training. An interdepartmental Finance Training Committee meets regularly to review progress and consider future training needs. A number of Departments have also formed Finance Training Committees within their own organisations.

  As a result of this action, Departments across Government have developed training programmes on RAB and financial awareness for both financial and non-financial staff at all levels. The action plans demonstrate that many Departments are continuing and enhancing the provision of such training.

  The introduction of resource accounting and budgeting has raised the profile of general finance awareness skills in departments. Departments have reported a good uptake of non-mandatory finance training, and the number of people at all levels in the Civil Service expressing an interest in pursuing professional accountancy qualifications is on the increase.


  For completeness, the action plans set out those instances where unresolved accounting policy issues led to or contributed to the qualification of a resource account, as was the case for a number of Departments. These issues have been the subject of further discussion between Departments, the NAO and the Treasury throughout the course of this year. Most have been resolved in time for the preparation of the 1999-2000 resource accounts. The remainder should be settled in time for the 2000-01 accounts.


  As a result of the action being taken by Departments to address the issues raised at Trigger Point 3 and set out in the action plans, the Treasury expects that significant improvements will be evident in the audited resource accounts for 1999-2000. There should be further improvements in 2000-01.

  The Treasury acknowledges that the risks identified by the Committee in its report remain. Fully implemented, the action plans point the way to addressing these risks. Consequently, the Treasury accepts that it needs to keep track of developments in respect of, for example, progress made by Departments in adapting their systems or recruiting and retaining qualified staff. The Treasury will continue to monitor progress against all aspects of action plans, and to liaise with Departments and with the NAO to maintain the required level of progress. For a very few the action plans state that some problems might not be resolved in time for the 2001-02 accounts, and the Treasury will watch developments in these Departments particularly closely.

  The Committee has asked the Treasury to produce an analysis of the quality of Departments' 1999-2000 resource accounts, and we will do so as soon as possible after their publication.

  The individual action plans are summarised in Annex A. Further information in respect of individual departments can of course be provided on request.

Ciaran Martin

General Expenditure Policy

HM Treasury

December 2000

28   29th Report of the Committee of Public Accounts (HC 556, Session 1999-2000). Back

29   Treasury minute on the 27th-29th and 37th Reports of the Committee of Public Accounts, session 1999-2000 (Cm 4901). Back

30   This is slightly fewer than the list of bodies previously provided to the Committee. The Health and Safety Commission is now included within the resource account for DETR (the accounts are also separately published). OFFER and OFGAS have been amalgamated into the Office for Gas and Electricity Markets (OFGEM). The Treasury did not seek an action plan from the Central Office of Information, having received a copy of a letter from the National Audit Office confirming their ability to produce the required standard of accounts. Nor was one sought from the Export Credits Guarantee Department, where issues giving rise to a minor scope limitation were resolved after further clarification and explanation. Back

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