House of Lords|
Refreshment Department Trading Account
Accounts for the year ended 31 March 2001
The House of Lords Refreshment Department operates
under a policy agreed between the House of Lords and HM Treasury
in 1981. In accordance with this policy, the costs of permanent
staff, including salaries and superannuation benefits, where these
do not arise solely from private function trading and retailing,
are borne on the House of Lords Administration Vote (Class XVIII,
Vote 2). The costs of certain services, including accommodation,
heavy equipment and utilities are borne on the House of Lords
Works Services Vote (Class XVIII, Vote 3). Furthermore, the Department
is required to trade on the basis of 50 per cent gross profit
on turnover. After payment of overheads and costs attributable
to private functions, the Department surrenders its net profits
to the Exchequer (House of Lords Administration Vote).
On 23 May 1990, the Leader of the House stated that
sales of tobacco, confectionery and goods to be consumed or used
outside the Department, together with the cost of services at
functions, would be excluded from the turnover figure against
which gross profit is measured for the purpose of this target.
Such sales would continue to count towards the gross profit shown
in the Accounts and would be included in the calculation of net
operating surplus to be surrendered to the Exchequer.
Further performance targets for trading in individual
outlets of the Department have been agreed, and are reviewed annually,
by the Refreshment Sub-Committee of the Offices Committee.
Following agreement with the Treasury, the Offices
Committee approved the introduction, with effect from financial
year 1993-94, of a staff bonus scheme in the Refreshment Department.
The scheme was financed from any profit made by the Department
in excess of the Treasury target, that is in excess of 50 per
cent gross profit on turnover calculated as above. An amount of
up to 40 per cent of the excess profit was available for distribution
as a bonus to staff, subject to that outlet in which they are
principally employed meeting its performance target. The remaining
excess profit was surrendered to the House of Lords Administration
Vote, together with the net profit arising from meeting the Treasury
target. The staff bonus scheme was conditional on the money provided
in the Estimate each year for return to the Consolidated Fund
being no less than that provided in the previous year's Estimate.
By agreement with the Trade union, the percentage available for
distribution was decreased to 10 per cent of surplus profit in
1999-2000 and the scheme was discontinued in 2000-2001.
The Refreshment Department provides a wide range
of catering facilities to Members and House of Lords staff. Members
may sponsor private functions and this type of service accounted
for 46 per cent of sales in 2000-2001.
Trading operations are in£uenced by the irregular
hours of House sittings and the long periods of Parliamentary
The Refreshment Department's policy with regard to
trade creditors is to settle all debts within 30 days following
receipt of goods and services. Potential suppliers are made aware
of this policy before the establishment of any trading relationship.
Performance against the Treasury target of paying creditors within
30 days was fully measured during 2000-2001 financial year. For
the financial year, an average of 74 per cent of suppliers were
paid within 30 days. However, following the implementation of
new accounting software, which led to an increase in the frequency
of pay-runs each month, the percentage at year end had risen to
99 per cent.
Results and Appropriations
The Accounts re£ect a 0.64 per cent increase
in sales and a 0.06 per cent increase in gross profit, compared
with 1999-2000. Gross profit on sales, calculated according to
the formula on the preceding page, was 65 per cent (65 per cent
Net operating surplus for the year is surrendered
to the House of Lords Administration Vote. The net operating surplus
for 2000-01 is arrived at after a transfer of £17,359 from
the Capital Reserve (Note 6). On this basis, ordinary activities
in 2000-2001 have generated a surplus of £632,899 (22.4 per
cent of sales). The surplus from the 1999-2000 financial year
was £695,050 (25 per cent of sales).
The net operating surplus has accrued as a consequence
of the Refreshment Department's trading activities only. It does
not take account of those costs which are borne on the House of
Lords Administration Vote or the House of Lords Works Services
Vote, and which are common to all offices of the House of Lords.
|Chairman,||Clerk of the Parliaments
|18 July 2001|
STATEMENT OF RESPONSIBILITIES OF THE HOUSE OF LORDS OFFICES
COMMITTEE AND OF THE ACCOUNTING OFFICER OF THE HOUSE OF LORDS
REFRESHMENT DEPARTMENT TRADING ACCOUNT
1. Since 1869-70, when a separate Estimate for the ``House of
Lords Offices'' was first presented, the House of Lords Offices
Committee has accounted for the House of Lords Votes. Responsibility
for the preparation of the Annual Accounts is vested with the
Clerk of the Parliaments, who is appointed by Her Majesty by Letters
Patent and is ex-officio Accounting Officer of the House of Lords.
2. The House of Lords Refreshment Department was incorporated,
with the approval of the Offices Committee and of HM Treasury,
into the Parliament Office on 1 April 1980. Under these changes,
the Clerk of the Parliaments became the employer of the Refreshment
Department Staff and Accounting Officer for the Trading Account.
The accounts are prepared in a form determined by the Offices
Committee with the approval of HMTreasury, on an accruals basis,
and must give a true and fair view of the Refreshment Department
Trading Account's affairs at the year end and of its income and
expenditure and cash £ows for the financial year.
3. In preparing these accounts, the Clerk of the Parliaments as
the Accounting Officer is required to:
(a) observe relevant accounting and disclosure requirements,
and apply suitable accounting policies on a consistent basis;
(b) make judgements and estimates on a reasonable basis;
(c) state whether the applicable accounting standards have been
followed, and disclose and explain any material departures in
the financial statements;
(d) prepare the financial statements on the going concern basis,
unless it is inappropriate to presume that operations will continue.
4. The Clerk of the Parliaments as employer and as Accounting
Officer has overall responsibility for the whole House of Lords
administration, including permanent staff of the Refreshment Department
whose costs are borne on the Peers' Expenses, Administration etc.
Vote. It is also the duty of the Clerk of the Parliaments to manage
the Refreshment Department Trading Account in such a way that
gross profit targets agreed with HM Treasury are met. The relevant
responsibilities of the Clerk, including the responsibility for
the propriety and regularity of public finances, for the keeping
of proper records and the preparation of the Accounts were approved
by the Finance and Staff Sub-Committee of the House of Lords Offices
Committee on 7 July 1992. The delegated responsibilities in respect
of the Trading Account are set out in a statement from the Clerk
of the Parliaments to the Principal Finance Officer and the House
of Lords Accountant dated 15 December 1992. The Accountant has
a member of staff permanently resident in the Refreshment Department
to maintain and prepare records of account.
5. In discharging his obligation to provide refreshment services
to the House, the Clerk of the Parliaments has delegated day-to-day
management to the Superintendent operating within a policy framework
set by the Refreshment Sub-Committee of the House of Lords Offices
Committee which represents the interests of Peers as consumers
and advises on pricing policy and other matters. The Chairman
of the Refreshment Sub-Committee, together with the Clerk of the
Parliaments, signs the Refreshment Department's annual Trading
HOUSE OF LORDS REFRESHMENT DEPARTMENT TRADING ACCOUNT:
STATEMENT ON THE SYSTEM OF INTERNAL FINANCIAL CONTROL
This statement is given in respect of the House of Lords Refreshment
Department's Trading Account. As Accounting Officer for this Account,
I acknowledge my responsibility for ensuring that an effective
system of internal financial control is maintained and operated
in connection with the resources concerned.
The system of internal financial control can provide only reasonable
and not absolute assurance that assets are safeguarded, transactions
authorised and properly recorded and that material errors or irregularities
are either prevented or would be detected within a timely period.
The system of internal financial control is based on a framework
of regular management information, financial instructions of the
Finance and Staff Sub- Committee, segregation of duties, and a
system of delegation and accountability. In particular, it includes:
- an annual budget for the surrender of profits to the House
of Lords Peers' Expenses, Administration, etc. Vote;
- a comprehensive system of performance targets for the Department
and its various outlets agreed by the Refreshment Sub-Committee
of the House of Lords' Offices Committee, and a gross profit target
as set by the Treasury;
- the preparation of monthly financial reports which indicate
actual performance against the targets and actual income and expenditure
for each area of the Department's operations.
The control processes in place as described above are considered
appropriate for the trading activities accounted for in the Refreshment
The House of Lords has an Internal Auditor who operates to standards
defined in the Government Internal Audit Manual. The Internal
Auditor submits regular reports containing his independent opinion
on the adequacy and effectiveness of the internal controls examined,
together with recommendations for improvement. Refreshment Department
operations, like those of all other offices of the House, are
considered fully during the formulation of audit plans, and were
the subject of a major review, the results of which were reported
My review of the effectiveness of the system of internal financial
control in the Refreshment Department is informed by the work
over time of the Internal Auditor; by the work of the Superintendent
of the Refreshment Department, his staff and the Refreshment Department
Accountant, who together have responsibility for the development
and maintenance of the financial control framework; by the scrutiny
exercised by the Refreshment Sub-Committee; and by comments made
by the external auditors in their management letter and other
reports. It is to be noted that the Refreshment Department Accountant
is, in management terms, independent of the Superintendent. Where
weaknesses have been found, they have been addressed to my satisfaction.
As Accounting Officer, I am aware of the recommendations of the
Turnbull Committee and am taking reasonable steps to comply with
the requirement for a system of internal control. This system
will be based on an ongoing process designed to identify the principal
risks to the achievement of aims and objectives, to evaluate the
nature and extent of those risks and to manage them efficiently,
effectively and economically. It is my intention to develop the
proposed system during the year ending 31 March 2002, to hold
consultations and a workshop for heads of offices, including the
Refreshment Department Superintendent, and to identify principal
risks and develop an appropriate control strategy. It is expected
that risk management will have been incorporated fully into the
planning and decision-making processes of the Refreshment Department
by 31 March 2003.
J. M. Davies
Clerk of the Parliaments
18 July 2001
Income and Expenditure Account
for the year ended 31 March 2001
All amounts relate to continuing activities.
There are no other recognised gains and losses for the year other
that those shown in the Income and Expenditure Account.
The Notes on pages 82 to 87 form part of these Accounts.
as at 31 March 2001
|Chairman,||Clerk of the Parliaments
|18 July 2001|
The Notes on pages 82 to 87 form part of these Accounts.
for the year ended 31 March 2001
The Notes to the Cash£ow Statement appear on page 81.
Notes to the Cash£ow Statement
for the year ended 31 March 2001
Notes to the Accounts for the year ended 31 March 2001
1 ACCOUNTING POLICIES
Basis of Preparation
The House of Lords Refreshment Department operates under a policy
agreed between the House of Lords and HM Treasury in 1981. In
accordance with this policy, the cost of permanent staff, including
salaries and superannuation benefits, where these do not arise
solely from private function trading and retailing, are borne
on the House of Lords Administration Vote (Class XVIII, Vote 2).
The cost of certain services, including accommodation, heavy equipment
and utilities are borne on the House of Lords Works Services Vote
(Class XVIII, Vote 3).
The accounts are prepared under the historical cost convention.
Without limiting the information given, the accounts meet the
accounting and disclosure requirements of the Companies Act and
accounting standards issued or adopted by the Accounting Standards
Board so far as those requirements are appropriate.
Stocks are stated at the lower of cost and net realisable value.
A proportion of stock will not be sold within one year due to
the length of the ageing process for certain wines currently held
on reserve. In accordance with industry practice, these wines
are classified as a current asset.
Tangible Fixed Assets and Depreciation
The Refreshment Department maintains a capital reserve representing
the net book value of silver and light equipment. Both categories
are depreciated on a straight line basis. Rates are as follows:
|Silver||5 per cent per annum
|Light Equipment||20 per cent per annum
A full year's depreciation is charged in the first year in which
the asset is used. No depreciation is charged in the year of disposal.
Depreciation rates have been selected in order to allocate the
cost of these assets as fairly as possible to the periods expected
to benefit from their use.
Light and Heavy Equipment
Light and heavy equipment are distinguished by reference to unit
costs. This distinction determines the source of finance and the
accounting treatment. Acquisitions of light equipment with a unit
cost of up to £1,000 are fully charged to the accounts as
an expense in the year of purchase. Light equipment with a unit
cost of between £1,000 to £5,000 is funded through the
Trading account, capitalised and depreciated over its expected
useful economic life. Heavy equipment has a unit cost exceeding
£5,000. These items are funded through the House of Lords
Works Services Vote and are not treated as fixed assets by the
Turnover represents the amount of goods sold and services provided
stated net of Value Added Tax and trade discounts. Non-discretionary
service charges for private functions are treated as other operating
2 TURNOVER AND COST OF SALES AND GROSS PROFIT
Cost of Sales represents the cost of goods sold and services provided
(net of Value Added Tax). It excludes wages and salaries which
are borne on the House of Lords Administration Vote, and function
and retailing staff costs, casual labour costs which are disclosed
under other operating costs and charges relating to the provision
of credit card payment facilities (note 3).
3 OTHER OPERATING COSTS
In accordance with arrangements agreed between the House of Lords
and the Treasury, certain costs, though relevant to the provision
of a catering service, are not included in the Trading Account.
(i) Salaries, wages and social security costs of permanent and
casual staff of the Refreshment Department, except those relating
to private function and retailing staff, are borne on the House
of Lords Administration Vote (Class XVIII, Vote 2). Other minor
expenditure items are also charged to the House of Lords Administration
(ii) In common with other departments of the House, the Refreshment
Department receives certain services, including accommodation,
gas, electricity, water and telecommunications, the costs of which
are borne on the House of Lords Works Service Vote (Class XVIII,
Vote 3). The costs for individual departments are not recorded
centrally and cannot be accurately determined except at disproportionate
4 OTHER OPERATING INCOME
Other operating income comprises the following:
|(i)||A non-discretionary service charge is levied on all private function accounts. The amounts collected are distributed to Refreshment Department staff four times annually.
|(ii)||The Department allows its facilities to be used for the sale of House of Lords Christmas Cards. Revenue from these items is not included in the turnover of the Refreshment Department. However, a small contribution on these sales is earned in order to offset related administration costs and selling expenses.
|(iii)||In October 1995, the Refreshment Department entered into a joint operation with the House of Commons Refreshment Department. This involves the selling of souvenirs and other merchandise from a kiosk in Westminster Hall. The House of Lords Refreshment Department receives 40% of the profit from this operation.
5 MOVEMENTS IN CAPITAL RESERVE
6 STAFF BONUS SCHEME
Following negotiations with the Treasury, the Refreshment Department
started a staff bonus scheme on 1 April 1993. At its inception,
the scheme provided for the distribution of up to 40 per cent
of the amount by which the Treasury target for the Department's
trading activities was exceeded. By agreement with the Trade Union,
this scheme was discontinued in 2000-01.
7 SURRENDER OF OUTSTANDING SURPLUS TO THE HOUSE OF LORDS ADMINISTRATION
VOTE (CLASS XVIII, VOTE 2)
Note a: Accurate cost information is not available
for some silverware purchased prior to 31 March 1993. Where this
applies, assets have been capitalised at independent valuation
as at that date. All assets purchased since 1
April 1993, including all items of light equipment, have been
capitalised at cost.
12 PENSION COMMITMENTS
Of the pension costs in note 3, £217 relates
to the liability remaining from pension arrangements in existence
prior to 1980. Since then, all permanent staff participate in
the House of Lords Staff Pension Scheme. The remaining £30,131
relates to pension contributions in respect of salaries and wages
which are borne on the Refreshment Department Trading Account.
The Refreshment Department assumed responsibility for the funding
of these contributions from 1 April 1996, but otherwise has no
liability for the funding of the House of Lords Staff Pension
In determining the extent of contributions payable
from the Refreshment Department trading account, rates of between
12 per cent and 13.5 per cent, as determined by the Government
Actuary, were applied to basic salaries.
13 RELATED PARTY TRANSACTIONS
The House of Lords is regarded as a related party.
During the year, the Refreshment Department has undertaken various
material transactions with the House of Lords as disclosed in
the accounts and notes. In addition, the House of Lords provides
personnel and payroll services for those staff borne on the Trading
Except as noted below, none of the members of the
House of Lords Offices Committee, the Finance and Staff and Refreshment
Sub-Committees, or key management staff nor any other related
party has undertaken any material transactions with the Department
during the year other than transactions occurring in the normal
course of the Refreshment Department's activities and on normal
The Superintendent is deemed to be a related party
of the Refreshment Department through the exercise of key managerial
control. In common with all other Refreshment Department staff,
the Superintendent is a beneficiary under the schemes for staff
bonus and service charge distribution. The aggregate benefit under
these schemes is £9,547 for 2000-01 (£7,924 in 1999-2000).
THE CERTIFICATE OF THE COMPTROLLER AND AUDITOR GENERAL
TO THE HOUSE OF LORDS OFFICES COMMITTEE
I have audited the financial statements on pages
78 to 87 which have been prepared under the historical cost convention
and the policies set out on page 82.
Respective responsibilities of the House of Lords
Offices Committee, The Accounting Officer and the Auditor
As described on page 75, the House of Lords Offices
Committee and the Accounting Officer are responsible for the preparation
of the financial statements. The House of Lords Offices Committee
and the Accounting Officer are also responsible for the preparation
of the Foreword. The Accounting Officer is responsible for the
preparation of the other contents of the Annual Report. My responsibilities,
as an independent auditor, are guided by the Auditing Practices
Board and the auditing profession's ethical guidance.
I report my opinion as to whether the financial statements
give a true and fair view and are properly prepared in accordance
with the determinations of the House of Lords Offices Committee.
I also report if, in my opinion, the Foreword is not consistent
with the financial statements, if the Refreshment Department have
not kept proper records, or if I have not received all the information
and explanations I require for my audit.
I read the other information contained in the Annual
Report and consider whether it is consistent with the audited
financial statements. I consider the implications for my certificate
if I become aware of any apparent misstatements or material inconsistencies
with the financial statements.
I review whether the statement on pages 76 and 77
re£ects the Refreshment Department's compliance with the
Treasury's guidance ``Corporate governance: statement on the system
of internal financial control''. I report if it does not meet
the requirements specified in that guidance, or if the statement
is misleading or inconsistent with other information I am aware
of from my audit of the financial statements.
Basis of Audit Opinion
I conducted my audit in accordance with United Kingdom
Auditing Standards issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures included in the financial statements.
It also includes an assessment of the significant estimates and
judgements made by the Accounting Officer in the preparation of
the financial statements, and of whether the accounting policies
are appropriate to the circumstances of the Refreshment Department
Trading Account, consistently applied and adequately disclosed.
As explained in Note 1 to the Account (page 82),
and in accordance with arrangements agreed with the Treasury,
not all costs related to the provision of refreshments in the
House of Lords are borne on the Refreshment Department Trading
Account. Other costs are funded by the House of Lords Votes and
accounted for in the relevant Appropriation Accounts, and the
main ones are referred to in Note 3b of the accounts.
I planned and performed my audit so as to obtain
all the information and explanations which I considered necessary
in order to provide me with sufficient evidence to give reasonable
assurance that the financial statements, constituted in accordance
with the arrangements agreed with the Treasury, are free from
material misstatement, whether caused by error, or by fraud or
other irregularity. In forming my opinion I also evaluated the
overall adequacy of the presentation of information in the financial
In my opinion the financial statements give a true
and fair view of the state of affairs of the House of Lords Refreshment
Department Trading Account at 31 March 2001 and of the surplus,
total recognised gains and losses and cash £ows for the year
then ended and have been properly prepared in accordance with
the determinations of the House of Lords Offices Committee.
|J. D. Thorpe||National Audit Office
|Director of Audit for the Comptroller
||157-197 Buckingham Palace Road
|and Auditor General
|London SW1W 9SP
18 July 2001