Examination of witnesses (Questions 20
- 39)
WEDNESDAY 1 APRIL 1998
MR J MORTIMER,
Treasury Officer of Accounts, further examined.
20. In answer to the Chairman, when he was
asking you about the future, you said you hoped the next account
would not suffer the same disadvantages. That sounds like a nice
minor cosy little thing. Your account has been qualified. That
is not suffering a disadvantage. We have a fundamental failure
to reconcile the accounts here, have we not?
(Mr Trevelyan) Yes, we have.
21. Do you acknowledge that that is serious?
(Mr Trevelyan) Yes, I certainly do. I also acknowledge
Parliament's very strong interest in accounting officers being
able to bring their organisations to account and to do so on a
timely basis. This is why I stressed that it was clearly a major
objective for the agency that its next set of accounts did not
suffer disadvantages but perhaps I did not choose the word "disadvantages"
correctly.
22. It just seemed to me you were somewhat
underplaying the seriousness of this.
(Mr Trevelyan) Not at all. We are engaging a major
input of resource into the agency to ensure that the present reconciliations
are completed. I have just authorised a virtual doubling of the
contract accountant staff who are engaged by the agency to ensure
that not only are the accounts brought to book and therefore all
the reconciliations are complete, but that all the procedures
which we felt were adequate when we introduced the system in 1996
and clearly are not, are updated and that effectively the handover
of expertise from the consultants to our own staff is complete.
Those are three major tasks. We are fully engaged in those tasks.
I certainly do not under-estimate the difficulty. On my bar chart
of activities this is still identified as high risk: there is
a risk that we will not do so. It is my responsibility as accounting
officer to ensure that risk does not come to pass.
23. We look forward to following your progress.
Who is the accounting officer for the agency account.
(Mr Trevelyan) That is me as well.
24. That would be you as well.
(Mr Trevelyan) Yes.
25. When did you sign off the accounts and
send them to the National Audit Office for 1996-97?
(Mr Trevelyan) In November.
26. Is it correct that having signed those
accounts you had them sent back to you as fundamentally misleading?
(Mr Trevelyan) I withdrew those accounts myself.
27. Did you withdraw them before the National
Audit Office or the Comptroller and Auditor General suggested
that you should or was it after having had some advice?
(Mr Trevelyan) I took advice as to the best way
forward. It was quite clear they needed correction. There are
various ways technically of
correcting accounts: you can re-insert individual
pages or you can withdrawthe accounts as a whole and replace them.
It seemed to me, given the extensive nature of the problems, which
are virtually the same problems as we have in the Appropriation
Account and we have in the FEOGA account ... Because we have a
three-way reporting system, it is inevitable that a set of problems
which emerges in one account will emerge over the same period
in the other set.
28. I know you have a statutory obligation
to submit them to the C&AG by a certain date, but do you think
it is actually better if you cannot reconcile them to go along
with your hands in the air and say you cannot reconcile them,
you are sorry, or do you think it is better to make some hamfisted
effort at it and have to have them sent back as fundamentally
misleading? Do you think it is good to mislead the C&AG fundamentally
about a set of accounts for which you are responsible?
(Mr Trevelyan) No; certainly not.
29. Why did you do it then?
(Mr Trevelyan) When I sent the Appropriation Accounts
to the C&AG I made a letter of representation pointing out
all three areas which are the ones identified in the report. The
report is an agreed report between myself and the C&AG. There
is no question of attempting to mislead anybody. The audit, when
it came in on the back of my letter of representation, which pointed
out all three areas of difficulty, confirmed the difficulty and
in one or two areas found that our staff were still under-estimating
the difficulty. I acknowledge that but there is no question that
we attempted either to gloss over or conceal the areas of difficulty.
We knew very well we were heading for a qualified account as soon
as we knew we could not complete the reconciliations. That is
inevitable.
30. But you did not go along and say you
could not reconcile them and therefore you could not submit them
on time and it would not be right to attempt to do so.
(Mr Trevelyan) I would have to take advice on
this. I am not sure it would have been appropriate to seek to
avoid audit, which is what effectively, if I had not submitted
accounts, would have been the implication. It is correct for Parliament
to make an audit, the audit did reassure Parliament that both
the receipts and the expenditure have been allocated as Parliament
wished. If we had not submitted our accounts, the C&AG would
not have been able to make that statement. In other words, I do
not think it would have been desirable to have avoided the presentation
of the accounts. The tactic I chose, which I think was the appropriate
one, was to present them with a letter pointing out the areas
of difficulty.
31. We should certainly be interested in
seeing the letter in due course.[2]
It seems to me that the problems you have arise basically out
of your integrated accounting system which you have introduced.
I know that over many years the Committee has said to you that
it has been concerned about the way in which the Intervention
Board deals with its accounting. You have finally come up with
this system which you appear to have bought off the shelf. It
seems to me, reading through paragraphs 23 and 24 and the leadup
to your going live on this system, that this was an accident absolutely
waiting to happen. It seems to me absolutely clear that you were
going to run into these problems. Do you think that is fair?
(Mr Trevelyan) No, I do not. The problem with
introducing new technology is just this very fact that you cannot
anticipate exactly how it operates until you are in the real operating
environment. It is extremely difficult for example to test it
at full load.
32. Is that not an argument for parallel
running? The problem with introducing a system that then goes
wrong is that you are completely stuck, are you not?
(Mr Trevelyan) I am not sure about completely
stuck.
33. If we look at paragraph 24 we can see
the domino effect, can we not, of what has happened? You found
out that the daily transfer of transactions took over 40 hours
to complete as soon as you started live running. This meant you
could not post things to the relevant accounts in time. The integration
of the system absolutely requires that you can reconcile on a
regular basis because of the way in which you produce your report,
so if you cannot post onto the right account in time you cannot
then reconcile. This is just an absolutely predictable problem,
a massive problem resulting from one or two minor issues which
go wrong at the beginning. Even if all of these things which went
wrong had not gone wrong and only some of them had gone wrong
you would still have been in trouble, would you not? Is that not
an argument for parallel running?
(Mr Trevelyan) The technical advice we received
at the outset was that the parallel running would not work. The
concept of an integrated account where electronically you are
linking all transactions to your three different forms of accounting
and running that in parallel with an unlinked system, with a whole
series of manual systems which essentially you are wishing to
discard, that concept was inoperable. We felt that we would have
engaged to no benefit a large number of extra staff at extra cost
and we had very grave doubts that we would have achieved any interaction
between the two systems. The risk that was involved was essentially
in going ahead with an integrated system or not. You can argue
about whether it was right to say we would take a non-customised
package, we would take a standard package off the shelf and whether
we had fully understood the weaknesses in the so- called standardised
package. One of the things we have discovered since is that what
is known as a localisation, which is the variation of the package
to meet parliamentary requirements—known as the UK Government
localisation—does not work to satisfaction. It is easy to
say with hindsight we should have known, but we are the agency
which has gone furthest and put the greatest strain on that package.
Not many agencies are involved with that particular package.
34. Because they developed their own and
then they are in front of us because they normally develop them
badly. You could equally well have ended up in front of us if
you had designed your own package; I fully accept that. It does
seem to me that these were problems which were absolutely waiting
to happen and that you basically crossed your fingers and hoped
that you could get through it in time. Paragraph 30 has already
been referred to but it does indicate that the C&AG was also
of the view that there were management failures in respect of
this and you have acknowledged that. In reply to the Chairman
and looking to the future you said that you were going to train
your staff, you needed better organisation, management changes,
in other words you brought this system in and you are now changing
your entire organisation around it. Surely you should have had
your organisation and training ready before you went live with
the system. It is just common sense, is it not?
(Mr Trevelyan) Yes, there is an element of hindsight.
We believed that we had the right level of both technical advice
and training at the outset. Mr Jenkins was the manager in charge
of that and it may be more useful for the Committee to hear him
speak on it than to have my assertions.
(Mr Jenkins) You can rest assured that we did
not go live lightly. We had a very extensive system of testing,
user testing, what we call from cradle to grave. We volume tested
various claims and so on. We were also very anxious about the
change management and staffing. We did have a change manager appointed
for some months looking at the organisation of the division. We
made changes in the light of that, we introduced training in advance
of going live and before we actually made a decision to go live,
we looked at all the various aspects. We had a system of risk
analysis and we made a judgement in the light of known information
at that time that it would be satisfactory to go live. As the
report indicates, we did defer it for one month because in April
we were not satisfied.
35. But in May you were and then you immediately
ran into a whole host of problems which have led you to be here
today. How good was your testing if it did not tip you off to
these problems?
(Mr Jenkins) All I can say is that the testing
was extensive, it was considered to be adequate by both our technical
people and the consultants we employed at the time. It was vigorous
testing.
36. You were absolutely amazed when after
you went live you were hit with this catalogue of problems. It
was a shock to you.
(Mr Jenkins) That is right. These were obviously
not expected.
37. Not at all.
(Mr Jenkins) Not at all. We did not go live without
any fallback position. I was very anxious to have the maximum
fallback position possible.
38. What was the fallback position?
(Mr Jenkins) The fallback position was that if
in the first few days—and we could only manage five days—the
system did not work in that period we would close down the new
system and re-operate the old system.
39. But it worked for five days and then
went wrong, did it?
(Mr Jenkins) There were no problems in those first
five days.
2 Note: See Evidence, Appendices 1 & 2,
pp. 23-25 (PAC 267). Back
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