House of Commons - Public Accounts

Select Committee on Public Accounts Minutes of Evidence

RESOURCE ACCOUNTING AND BUDGETING (PAC 97-98/55)

Copy of a Letter and a Memorandum from the Comptroller and Auditor General

On 30 July the Treasury provided the Committee with a memorandum[3] setting out progress on resource accounting and budgeting and their more detailed proposals. The memorandum was also sent to the Select Committee on Procedure and the Treasury Committee. In order to assist the Committee's consideration I enclose a revision of the C&AG's Memorandum to the Procedure Committee on 25 July which incorporates our views on the proposals.

In the accompanying memorandum it was noted that in their Ninth Report of Session 1996-97, "Resource Accounting and Proposals for a Resource Based System of Supply", (HC 167) the Committee of Public Accounts had requested further information or clarification on various points about resource-based Supply. He also noted that these points were addressed in the Treasury response to the Committee's report (Treasury Minute, Cm 3577) and that the Treasury's latest memorandum seeks to provide further information and assurance on them.

The letter addresses a number of these points, identifying where they are dealt with in the Treasury's memorandum and summarising the responses. With one exception, conclusion xiii, the points relate only to the Committee's conclusions on resource-based Supply, rather than on resource accounting. Understandably they do not include those Supply issues where the Treasury have already made the position clear in the Treasury Minute—on retaining procedures for Excess Votes and on annuality. Much of the focus of the memorandum is on resource-based Supply and on the use of resource accounts as the means of accounting to Parliament for the use of Supply. The Treasury have provided the Committee with a separate memorandum on the report of the Financial Reporting Advisory Board which addresses some of the broader issues of resource accounting, rather than Supply, and I have written to you separately about that.

It may be helpful therefore for me to summarise our views on the Supply proposals in the same way.

CONCLUSION (XIII)

The principle of whether resource accounts should replace Appropriation Accounts with effect from the year 2001-02 depends upon the resolution of important points of detail identified in our memorandum, to ensure the maintenance of Parliamentary control and accountability. Although the Treasury's proposals for testing are welcome they cannot wholly alleviate the problems inherent in the proposed timetable. In our view it will first be essential to consider the outcome of testing and desirable to have shadow resource based Estimates for real departments.

CONCLUSION (XV)

The examples of resource accounts provided by the Treasury confirm the greater potential such accounts have for Parliament's review of departmental performance. But we also note the complexity of the accounts, partly caused by being designed also to serve the Treasury's control purposes. Only experience will tell whether Parliament's needs are fully met. If Parliament were to adopt resource accounts it would be prudent to do so with a proviso to review their form in the light of experience.

CONCLUSION (XVI)

There is no additional information in the Treasury memorandum on the operation of the Contingencies Fund and there are thus no proposals to show how the Fund, which operates wholly in cash terms, would handle demands for resources in advance of Parliamentary approval. At present there is a statutory limit to the overall cash amounts that may be advanced from the Fund, thereby limiting the sums available to departments in advance of such approval.

CONCLUSION (XIX)

The Treasury have provided for separate voting of "sub-totals" for current expenditure ("requests for resource") in the single Estimate for each department. It would be essential for there to be broadly as many "request for resource" votes as there are votes at present if the present level of Parliamentary control over current expenditure were to be maintained. In addition the Treasury have not made clear the extent of detail that would underpin each request for resource. In the present system this detail is the basis for reporting the outturn of expenditure and the explanation of variances. Assurances will need to be obtained from the Treasury on these points.

CONCLUSION (XXII)

The Treasury have now asked the Committee to note the basic structures and broad functioning of resource-based Estimates as the basis for the further piloting work between Treasury and departments and to endorse the Government's plans "which are designed to ensure that, when it is fully introduced, the resource accounting and budgeting system will have been carefully tested". We consider, however, that the Treasury need to provide further information on the detail to be included in Estimates and reported in resource accounts. The Treasury also need to explain their proposals for virement controls and provide the Committee with examples of dry run resource-based Estimates.

CONCLUSION (XXIII)