Conclusions and recommendations
1. The Accounting Officer addressed the shortcomings
identified in the organisation's system of internal control, but
acknowledged he should have done so sooner.
In the months following the creation of the new organisation,
the Accounting Officer gave priority to operational performance
at the expense of establishing a sound system of internal control,
for which he is personally responsible. When appointing an Accounting
Officer to a newly established body, HM Treasury should issue
guidance to the Accounting Officer, the organisation's management
board and its sponsoring department on the need to strike an appropriate
balance between operational performance and sound financial control,
as required by the Treasury guide 'Managing Public Money'.
2. Currently, a newly appointed Accounting
Officer, with little or no experience of working for the public
sector, undergoes the same basic training as one with previous
public sector experience. Support and
training needs for Accounting Officers vary, depending upon their
previous experience of working within the Civil Service. HM Treasury
should set a date with the National School of Government for the
roll out of bespoke training and support tailored to the needs
and experience of newly appointed Accounting Officers.
3. The Accounting Officer redesigned the counsel
fee regime in response to concerns raised by the National Audit
Office regarding cost certainty, but some fee notes are still
submitted late. The Accounting Officer
is to be congratulated for ending the longstanding practice of
negotiating fee rates with counsel on completion of the work assignment.
To encourage compliance with the new fee regime, the Department
should explore and develop a common range of sanctions in conjunction
with the other Law Officers' Departments. Ultimately, this may
include a decision not to instruct named counsel on new cases.
4. The three Law Officers' Departments undertaking
criminal prosecution work have no common processes for allocating
briefs to counsel, negotiating fees or monitoring the submission
of fee notes. The Department should liaise
with the Crown Prosecution Service and the Serious Fraud Office
to align more closely their processes for appointing counsel and
managing their fees. This should include the allocation of briefs
and the establishment of agreed procedures for the submission
of timely invoices, the end of year certification exercise and
the fee regime.
5. Reliance on a few specialist suppliers
may create excessive dependency and the perception of a cosy relationship.
The Accounting Officer acknowledged the Department's reliance
on counsel from a few specialist chambers, selected for their
expertise and experience in prosecuting major revenue and customs
fraud cases. The Department should keep the level and values of
work provided to these chambers under review and periodically
assess whether these allocations continue to be defensible. In
the medium term, the Department should seek to encourage a broader
range of suppliers to gain the necessary expertise.
6. Inadequate separation of duties, a weak
control system and failure to make a full disclosure of related
party transactions enabled a senior member of staff to award his
wife a lucrative consultancy contract.
HM Treasury should remind Departments of the importance of demonstrating
propriety in procurement, particularly where someone related to
a senior manager applies for a position within the same public
sector body.
7. The Accounting Officer and his advisers
did not realise the Department needed the prior written approval
of HM Treasury to enter into transactions where there was a potential
conflict of interests. Retrospective HM
Treasury approval should be the exception not the norm. HM Treasury
guidance to public bodies on "novel and contentious"
expenditure makes explicit the need for prior HM Treasury approval,
but is silent on the process of obtaining approval. They should
draw the attention of Accounting Officers to the need for a body
to demonstrate to HM Treasury in advance that it has sufficient
defensible information that the payment is value for money, conflicts
of interest have been addressed and that the payment is within
the bounds of regularity.
8. The Department operated for 15 months with
no code of conduct to highlight the responsibilities of staff
when considering potential conflicts of interest and to set out
the standards of expected behaviours.
New entities should aim to have an appropriate code of conduct
in place as soon as possible after operations commence. All staff
should be required to sign it to demonstrate they have read, understood
and complied with it.
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