Letter from the National Audit Office
to the Clerk of the Committee
Thank you for your letter of 9 July addressed
to the Comptroller and Auditor General.
You ask the C&AG for his opinion as to the
extent to which it is realistic to expect departmental resource
accounts for 2001-02 generally to be published in the Autumn of
this year. To put this in context, about 40 per cent of departments
last year were unable to render signed accounts to the C&AG
for audit by 30 Novemberthe statutory deadline. And the
final audit processes then had to be carried out. So a very sharp
acceleration is required by many departments if their accounts
are to be published by the Treasury's administrative timetable
of the end of October orless specificallyby "Autumn".
The parallel running of resource accounts with
appropriation accounts has been cited in the past as one of the
reasons for the delays on the part of departments in submitting
signed accounts for audit. The cessation of appropriation accounts
from 2001-02 should therefore help bring about improvements in
timeliness. Realistically, however, such a degree of improvement
in the space of a year is unlikely to be achieved by all.
We would therefore expect to see some improvements
this year; and, indeed, some of the signs at present are encouraging.
However, it is too early in the processes of account preparation
and audit to have a firm view yet of the likely outcome. There
are somemainly larger, more complex departmentsfor
whom even at this stage the prospect of autumn publication seems
unlikely or impossible. For a few, the timetable for account preparation
and audit is already based on publication later than Autumn. For
others, given previous experience, there may be slippage notwithstanding
that they have set an Autumn target.
In sum, it is highly unlikely that all the 2001-02
accounts will be published by this Autumn. We fully expect that
there will be some improvement compared with last year (just as
there was improvement last year compared with the year before).
But we cannot say with any certainty how much that will be.
You also ask what steps we envisage will need
to be taken if this target is to be more widely achieved. Part
of the problem is unfamiliarity with resource accounts and with
the detailed accounting guidance. This should reduce with time.
Part of the problem is that resource accounts are more complex
than appropriation accounts and require staff who are far more
professionally skilled and knowledgeable.
So existing staff (not only within the finance
function) may need additional training; and there may need to
be more staffand more professionally qualified staffin
the finance function itself. Some departments are still operating
systems that remain essentially "cash based", designed
for the simple "receipts and payments" approach for
appropriation accounts. Such departments have to sped more time
after the end of the financial year to translate this into the
"accruals based" information for resource accounts,
leading to delay. They therefore need to implement true "accruals
based" accounting systems. These are needed not only for
preparation of the financial statements but for managing their
business on a basis that recognises all the resources consumedand
not just cash. And the complex nature of some departments, including
those that have many executive agencies or other entities to consolidate
into their accounts, requires sophisticated accounting and consolidation
systems if all the strands are to be pulled together quickly.
These are not always in place. Moreover, such departments are
vulnerable to the slowest or weakest link (and in some cases,
to third parties). They also need to focus on that.
Some or all these elements may be present in
"slow" departments and will need to be attended to if
they are to achieve an Autumn publication date.
Your enquiry was in the context of a report
you propose to make on the new departmental reporting arrangements
agreed last year. Perhaps we might say that, notwithstanding the
present delays in publishing departmental resource accounts, we
continue to feel that in due course such accounts should be accompanied,
in the same publication, by a report on performance, such as the
model adopted for Executive Agencies' Report and Accounts. This
would replace the separate reporting envisaged under the new arrangements.