Examination of witnesses (Questions 200
- 219)
WEDNESDAY 1 APRIL 1998
MR J MORTIMER,
Treasury Officer of Accounts, further examined.
200. Could you give us an indication of
what you feel those words mean?
(Mr Le Marechal) May I ask the audit manager in
charge of the audit to say in what respects those accounts were
regarded as misleading?
(Mr Bull) When the agency account was submitted
to us, there were several areas within that account, in addition
to the suspense account and control account problems, where we
could not obtain sufficient information to carry out an audit.
These included the debtors' area within the agency account, the
creditors' area, the cash securities were affected. At the moment
that is all I have here because I did not bring with me an informative
document on the agency account. What I can do is to provide a
note which would summarise our initial audit findings which we
discussed with the senior staff members of the Intervention Board
and which led to the decision to withdraw the account.
201. My understanding was that you submitted
a letter with your Appropriation Account[10]
and you went into some detail about that. Yet, as I understand
it, similar errors are occurring in the agency account, yet you
submitted that without any of these worries and only took it back
when these were raised with you. Why did you submit the account
then?
(Mr Trevelyan) That is a misunderstanding. We
wrote a letter of representation with the agency account as well
and indicated those areas of concern. The problem may have been,
given that the accruals accounts are technically a different operation,
that it was more difficult to set out a meaningful set of accounts
when those issues were in fact outstanding. That is one of the
reasons why we have adopted the route we have, that until we have
completed the reconciliations that are now in hand we prefer to
withdraw and resubmit. Even when we do resubmit, the debtor side
and the cash securities are likely to remain unresolved and we
are well aware that those problems will recur and it is likely
that the C&AG will have difficulty in avoiding their qualification.
202. When you submitted the agency account
with the appropriate letter had you not consulted either with
the NAO or the Treasury beforehand to see whether that was the
appropriate thing to do rather than find yourself in the embarrassing
position of having to take back those accounts?
(Mr Bryant) No, we did not consult with the Treasury
or the NAO.
203. You submitted them with the letter.
With hindsight would it not have been sensible to do that and
not find yourself in this position?
(Mr Bryant) With hindsight it would perhaps have
been better to have explained that we would miss the statutory
deadline in order to resolve the difficulties .
204. It says you are going to resubmit them
at some point but there will still be some errors within them.
(Mr Trevelyan) Unless we delay until the end of
this year, when we assume that all the issues that will arise
in the next account will have been resolved, it seems to us at
this time it is better to resubmit them with further explanation
and anticipating qualification, but that is a subject on which
I am prepared to take more advice.
205. May I turn to the Treasury and ask
what advice they would provide in relation to what we have just
heard?
(Mr Mortimer) My advice would be that they should
talk to the NAO. I am not trying to duck the question. Obviously
the onus is to produce good accounts which will not be qualified.
If it is clear that the agency is not in a position to do that,
then they have to do the best possible in the circumstances. In
such a situation I would suggest they talk to the NAO to see whether
the best thing is to produce accounts which give quite a full
picture but not the total picture and which may then be qualified,
or whether the better course would be to delay the accounts further.
I am not sure that I have a view on which of these would be preferable.
(Mr Le Marechal) If I may say so, I would agree
entirely with the Treasury Officer of Accounts' advice.
Chairman
206. What? That they should take your advice?
(Mr Le Marechal) Yes.
Mr Love: May I say
in conclusion that this is a subject of some concern and a very
serious situation which confronts this Committee? I would certainly
ask that we be kept informed about where we are going in relation
to those discussions and what information eventually emerges in
relation to those accounts.
Chairman
207. Will one of you take that on board?
(Mr Trevelyan) Yes. One of my concerns clearly
is that we have not reported to Parliament on the agency's activities
never mind its accounts for the year in question. We are not able
to submit our annual report and accounts for 1996-97 and therefore
there is an information gap before Parliament, independent of
the accounts, and that concerns me.
208. I understand your concern but you will
notify us of what you plan to do.
(Mr Trevelyan) Yes.
Mr Williams
209. It has all been trampled over. I just
want to clarify one or two points. How much easier do you think
the hearing would have been for you today if Oracle's software
had worked?
(Mr Trevelyan) We would not be here.
210. That is what I thought. How could an
off-the-shelf programme be so terribly wrong? What went wrong
with the modifications they had to make to it?
(Mr Trevelyan) I am not a sufficient expert to
establish fully the reasons but it appears to have been the interaction
between the accounts payable side, the accounts receivable, the
ledger and the localisation to central government standards for
the accruals accounts. The particular way in which we were using
it seemed to put it under stresses which were ones which it was
not able to respond to.
211. Perhaps I should put it to the C&AG.
You have had to look at many disasters in the computer field over
the years. This does not seem one of the most complex of the software
problems which you will have come across. Are you surprised that
the system went so badly wrong?
(Mr Le Marechal) I can see that the difficulties
facing the agency were peculiar to the agency in that they had
the problem of producing three sets of accounts in three separate
ways. It does not surprise me.
212. I assume you consulted with Oracle,
explained the nature of your problem. You had to do that for them
to modify it. Would it seem that the problems were that insuperable?
They seem to have made a right mess of it.
(Mr Le Marechal) They should not have been insuperable
of course. It is because of the very great difficulties in forecasting
how the systems will work in advance of going live that our general
line is to advise parallel running or at least if you do not do
that to maintain for longer the option of reverting to the original
system.
213. You have admitted to what you call
managerial failure in not identifying that it was not working
as early as you should have, but what have Oracle said to you
about the fact that it was not working in the first place? Surely
they accepted considerable responsibility for the mess you were
landed in?
(Mr Trevelyan) Yes, they have and they have done
what we would expect under the standard commercial contract, which
is they have offered us options and workarounds and patches so
that the accounts deliver. They have done that within the terms
of the original contract.
214. How far should these problems have
been identified in the modification process? What I am getting
at is this. I suspect that like myself you are no expert on computers
but is there any suggestion of negligence on their part as opposed
to just failing to meet the contract, actual negligence?
(Mr Trevelyan) No.
215. None at all.
(Mr Trevelyan) Not that I am aware of.
216. May I put a point to Treasury which
arises out of the discussion about accountants. You have five
accountants in the agency. I seem to remember when we were looking
at the Benefits Agency we were astonished to find they had something
like three fully professionally qualified accountants—you
remember the episode—to look after a much bigger budget.
What sort of advice and guidance do you give, if any, to accounting
officers in relation to the employment of professional accountants?
Is it something you address at all?
(Mr Mortimer) I am not sure that we do address
this question specifically. Obviously we want people who are performing
finance functions to be properly trained. For many of these finance
functions I am not sure that staff need formal accountancy qualifications
but they do need appropriate training. It is quite clear that
within all these organisations good quality accountancy advice
does need to be available. Whether that is three or half a dozen
or however many accountants it is very difficult to say from the
centre.
217. We are in the situation where on the
one hand you say it does not need professionally qualified people
for much of its work and at the same time we get these astronomic
sums for accountants and consultants to be brought in from outside
to do what departments are not capable of doing inside. To save
time—and say if it is not possible to do this—could
you let us have a note for each department and the major agencies
on the number of professionally qualified accountants in each
of them and the turnover of each of them at your leisure?
(Mr Mortimer) I will see whether we can provide
that. If we can, we will provide that.1[11]
218. One point in the accounts, and nothing
as grand as we have been discussing but just as a matter of curiosity,
on page 29, out of the mainstream issue now, there are losses
and special payments. There is a special payment of over £500,000
in damages for negligence brought against ADAS arising out of
advice given by ADAS in 1992. How did that arise. What was it
all about?
(Mr Trevelyan) I am afraid there is some confusion
here. These accounts contain the Ministry of Agriculture and the
Intervention Board so there is another accounting officer for
this.
219. If it is not your responsibility, it
is not.
(Mr Trevelyan) No.
Chairman: You have
a number of notes to send to us. One is in response to Mr Phil
Hope's question on the question of the role and relationship of
the agency and the various consultants.2[12]
It was apparent from listening to you that we were getting rather
contradictory responses on various aspects of that. Can you make
sure that note includes a number of things? Firstly, the specification
of what it was you were supposed to be being advised on at each
stage. A number of colleagues in this Committee have obviously
thought that the level of advice did not match up to what ought
to have been provided so I want you to be very specific on what
advice you were supposed to have been given. Secondly, on the
pricing we heard comments on the one hand that it was a fixed
price contract and on the other hand that there were additional
works. How was that done? What did it cost? On what basis was
it? Thirdly, you have said a number of times in this process that
you implicitly did not hold the advisers responsible for an erroneous
decision—let us put it as broadly as that at the moment—an
erroneous decision in terms of how to design, implement and proceed
with this software system. I think the Committee would find it
very helpful if you would put in this note a comment on your view
of the quality of each stage of that advice against the money
you spent on it. Other than that, at least today, your nightmare
has come to an end. I do hope it does not prove to be recurrent
because I suspect that if it is recurrent it will get worse. Thank
you very much for your time. I know it has been a difficult session
for you. Thank you for the evidence you have given.
10 Note: See Evidence, Appendices 1 & 2,
pp. 23-25 (PAC 289). Back
11
Note: See Evidence, Appendix 4, p. 28 (PAC 260). Back
12
Note: See Evidence, Appendix 3, p. 25 (PAC 268). Back
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