S.I. 2003/533: second memorandum from
the Office of the Deputy Prime Minister
86. The Committee has asked for a memorandum
to explain the various matters set down below arising from the
Office of the Deputy Prime Minister's memorandum dated 31 March.
(1) The Department states that a relevant body
commits an offence if it fails to comply with regulation 4(1).
How is the relevant body able to determine whether or not it commits
the offence, given the imprecise nature of the requirements which
that provision imposes?
87. The Department has considered carefully the
concerns expressed by the Committee but nevertheless considers
that the obligation imposed by regulation 4(1) is sufficiently
clear in the context of the financial management of relevant bodies
of the type covered by these Regulations. The issue of whether
a system of financial management is adequate and effective is
one which will in practice be clear, as will the soundness of
its system of internal control and its arrangements for the management
of risk. These are all matters in respect of which the relevant
body can make provision by using the services of qualified professionals
to establish and maintain financial systems to an acknowledged
professional standard and by ensuring that it discharges its various
functions in a manner compatible with this general obligation.
If the systems are not adequate and effective, that will be apparent
to a relevant body that is monitoring its financial management
properly. The terms of regulation 4(1) reflect discussions with
relevant accounting bodies such as the Chartered Institute of
Public Finance and Accountancy (CIPFA) and the Audit Commission.
(2) The Department states that regulation 10(3)
requires a relevant body to arrange for the statement of accounts
required by regulation 7 to be approved by resolution of a committee
of the body or otherwise by a resolution of the members of the
body meeting as a whole by the date set out in the regulation.
But regulation 19(3) does not purport to impose an obligation
on a body to arrange anything; and it seems doubtful whether it
is the intention to require that the statement of accounts actually
be approved, irrespective of the views of the body's members.
Given that it appears from the Department's memorandum that the
intention is to require a body to make arrangements, should the
provision not have required it to do so so as to ensure that the
statement is submitted for the approval of a committee or body
with a view to that taking place within the intended timescale?
(3) A similar question arises in respect of regulation
88. The provisions of regulation 10(3)(a) (we
assume the reference to regulation 19(3) was a typographical error)
and 10(4)(a) are expressed in terms similar to provisions contained
in regulation 8 of the previous regulations (the Accounts and
Audit Regulations 1996 (S.I.1996/590)). Breach of regulation 8
was also an offence. So far as the Department is aware those provisions
did not give rise to any difficulties while the 1996 Regulations
were in force. The 2003 Regulations underwent a consultation process
and none of those consulted raised any concerns about the repeated
use of the provision in this form.
89. It is accepted that regulation 10(3)(a) and
(4)(a) does not expressly impose an obligation on the relevant
body to "arrange" for the approval of the statement
of accounts etc within the required time limit. However, the obligation
contained in regulation 10(3)(a) and (4)(a) is that the statement
of accounts shall be approved, by the required time limit, by
a committee of the relevant body (which would be acting in accordance
with a function delegated to it by the relevant body) or by the
relevant body itself. The Department believes that it is a necessary
implication of this that the responsibility rests with the relevant
body and that the obligation on the relevant body (acting through
its committee or as a body as a whole) is to approve the accounts
within the time limit. However, it is clear from the obligation
imposed on the relevant body at regulation 4(1) to be responsible
for the adequate and effective financial management of the body
that it would not be expected to approve the statement of accounts
etc irrespective of any concern it might have as to whether they
reflect the true financial position.
(4) Regulation 10(3)(b) requires that, following
approval of the statement of accounts in accordance with sub-paragraph
(a), the statement shall be signed and dated by the person presiding
at the committee or meeting at which that approval was given.
The Department's response suggests that a failure to comply with
this requirement does not constitute an offence. (The same applies
to regulation 10(4)(b)). What is there in the Regulations to indicate
that no offence is committed where the person presiding fails
90. It is correct that the provisions of regulation
10(3)(b) and (4)(b) impose an obligation on the person presiding
at the meeting to sign and date the statement etc and that failure
to comply with this part of regulation 10 is also, by virtue of
regulation 22, an offence. It is also accepted that the Department's
memorandum of 31 March implied that failure to comply did not
constitute an offence. However, that was an oversight in the listing,
in the memorandum, of the various matters that constituted offences.
It should have been included and its omission from the memorandum
was an error for which the Department apologises.
Does the Department agree that, in the light of
the matters raised above, it should amend these Regulations as
a matter of urgency?
91. In the light of the above the Department
submits that there is no need to amend these Regulations in respect
of any of the matters raised.
11th April 2003