ACCOUNTING OFFICER DIRECTIONS AND RISK
Letter to the Clerk of the Committee from
At the Committee's hearing on 24 January the
Chairman raised the question of whether there was a need to amend
the Accounting Officer memorandum to take account of risk management
The memorandum requires an Accounting Officer
to seek a written instruction from the Minister if required to
implement a proposal which the Accounting Officer does not consider
to be value for money. The memorandum does not explicitly refer
to risk issues in the consideration of what constitutes value
for money. However, our view is that risk is an integral part
of the value for money decision which the Accounting Officer should
take into account.
In considering value for money issues, we would
expect departments to follow the Treasury's guidance on investment
appraisal (the "Green Book") which recommends considering
costs and outcomes weighted by probabilities, thus bringing risk
issues into the equation.
At the hearing the Chairman referred to the
possibility of a Minister requiring that a proposal should be
implemented in a very short timescale and whether that should
trigger a letter of direction (because of the risk that the short
timescale would jeopardise cost-effective implementation). The
issues here may depend on the circumstances of the case, particularly
on the policy context. Options need to be ones which deliver Ministers'
policy objectives, albeit these objectives too may at some stage
have been the subject of an option appraisal. In principle, however,
if there were options with different timescales and different
likelihoods of success in achieving an objective, an Accounting
Officer would be entitled to evaluate the options in accordance
with the guidance in the Green Book referred to above and take
this into account in considering the value for money of the options.
This could lead to the need for a direction if the Minister wished
to proceed with an option that the Accounting Officer did not
consider offered value for money.
Treasury Officer of Accounts
9 February 2001