Examination of witnesses (Questions 60
- 79)
TUESDAY 11 JULY 2000
SIR DAVID
OMAND, KCB, MR
ROBERT FULTON
and MR STEPHEN
BOYS SMITH
Mr Winnick
60. Do you think having a Minister of State—virtually
the Deputy Home Secretary—who comes from the ethnic minority
is an indication of encouragement to people in the Civil Service
of the positions that they can reach?
(Sir David Omand) I would not particularise it to
an individual. I think I would say that every time we see a very
senior position in British society being held by someone who comes
from an ethnic minority background we are sending a signal that
we are, indeed, open to all the talents.
Chairman: Can I send a signal to Ian Cawsey,
please?
Mr Cawsey
61. Thank you, Chairman. It has been received.
You have just talked about recruitment being not without its difficulties,
and I want to move on to Resource Accounting and Budgeting, which
probably comes into the same category as well. Clearly, it is
the incoming thing and has been introduced in this financial year.
You, as a department, have done your two years of dry run accounts
as part of that process. However, in relation to your first dry
run for 98/99, which has now gone through the National Audit Office
for scrutiny, they said they would have issued an adverse opinion
on that account had it been live at that stage, and for three
really quite serious reasons: some substantial items like grants
to the police not being treated properly in the accounts; some
figures in the accounts not having proper audit evidence and some
disclosures that are required under Resource Accounting not made
at all. That seems to me a very worrying position. Why do you
think that actually happened in your department? Do you think
that budget managers who have to deal with this new system are
familiar with what resource accounting practice means now, and
do you have an accounting system in the Home Office which is capable
of dealing with it?
(Sir David Omand) I will ask Mr Fulton to comment,
if I may, since he has been very closely involved in the development
of Resource Accounting and Budgeting. Just to set the context,
the purpose of having the dry run was to uncover what needed to
be done. It would have been extraordinary had there not been all
sorts of things that needed fixing as a result of the first ever
attempt to put together a complete set of resource accounts. So
I am not at all surprised that we have a quite long list of things
to be put right.
62. Some of these are quite substantial.
(Sir David Omand) Some of them were government-wide
lessons. The treatment of grants, for example, and how far they
should be carried forward into the accounts themselves or regarded
as a single transfer of resourcing outside the system, raises
quite major questions of principle which affect a number of departments.
We will all, clearly, need to adopt whatever is agreed as the
procedure now. I think, for me, the most concerning area is about
the introduction of systematic, computer based ledgers and accounts.
We compiled much of the accounts to which you have referred manually
by putting together information alongside the existing ledgers
which are fed by the department's accounting, bill-paying and
salary systems. There was, therefore, quite a lot of reconciliation
to be done by hand. That is not the basis on which you could,
year-in, year-out, produce auditable accounts, but it was the
way in which we could put something together to learn the lessons
and see what it looked like. So the next stage—and I hope
Mr Fulton can comment on that—is taking that to a swept-up
system where all our databases are able to integrate.
(Mr Fulton) Before I do that, perhaps my quick on
the draw calculation of my senior ethnic minority staff was not
quite right. The base is 90, not 190, so two out of 90 gives you
the proportion of 1.8 per cent I think.
Mr Cawsey: So now you do not have to do anything
to meet your target because you have already met it. It has gone
from being ambitious to being achieved in about half an hour,
that is remarkable progress.
Mr Howarth: That statistic does not add up.
Two out of 90 is not 1.8 per cent, it is 3.2 per cent, is it not?
It is in excess of two per cent. It cannot be less than two per
cent. It is not 1.8 per cent.
Chairman
63. This is numeracy hour.
(Mr Fulton) We were very disappointed at the way trigger
point three came out. We felt that we were making reasonable progress
but I think that a lot of the difficulty stems from the fact that
we are running in parallel two different accounting systems. We
are running the appropriation accounts on the one hand, which
are still our primary vehicle for reporting our financial affairs
to Parliament, and in parallel with that we are developing the
resource accounts. What has been happening is that we have had
two databases running in parallel. The primary one, as I say,
is the cash one because that is the currency in which we are still
reporting to Parliament and this has required certain manual transfers
and updating from the cash to get to the resource accounts. The
difficulties that have been identified by the NAO I certainly
do not want to minimise, we do take them extremely seriously,
but, on the other hand, I do not think they go to the heart of
the fundamental soundness of the systems we have put in place
to support the resource accounting. Back in 1996 we put in a completely
new accounting system which we call BASS which was specifically
designed to support resource accounting and, to the best of our
knowledge, that system works and will produce sound resource accounts.
Of course, having said that, we must address those problems that
the NAO have identified and we are working very closely with them
on that. I like to think we have very good liaison and co-operation
with the NAO. We have a good dialogue with them. My colleague,
who has recently been appointed as Principal Finance Officer,
is today in our accounts branch in Liverpool working through some
of the very issues that have been identified by the NAO. We are,
if I may say so, very confident that we will come back on track
and be able to produce unqualified resource accounts for the financial
year that we are now in and for future financial years.
64. So as you are trying to remedy these problems
that the NAO have identified in your practices, how are you involving
your budget managers and your senior management teams to ensure
this is not just happening at the highest level of the Home Office
but is actually spreading throughout the Department and giving
you a rigorous set of accounts?
(Mr Fulton) We have had a very major training programme.
I have not got the figures with me of how many people we have
put through that training programme but several hundred people
in the Home Office have been put through a programme of training.
That has gone from senior managers, because we want the senior
heads of unit, the top managers, to understand the principles
so that they know how to look at the resource information that
is provided for them through the budgetary process, but it has
also included the technicians, as it were, the people at working
level who have to input data and interpret data, both in our central
accounting functions and out in directorates and units. We do
rely very heavily on budget support groups in the directorates
to do the business, to understand what it is all about and to
enter these things correctly. Of course there is a learning curve.
Some of them are financial specialists. For example, we are encouraging
people to take the accounting technician's qualification and we
certainly want to increase the level of professional competence
in our financial cadres. Others are-non-specialists but they will
be taken through appropriate training and given the support and
guidance that they need to enable them to operate the resource
accounting system properly.
65. I agree it is a learning curve and to a
certain extent that is what I am trying to tease out from you,
how you are going to cope with that in as much as it is obviously
going to be crucial to the success of this that you are able to
monitor the progress as the financial year goes on and not just
end up with a set of accounts that are no good to anybody. How
is that being handled within the Department and what have you
put in place to ensure that the quality of the work is actually
rigorous at all levels of the Department?
(Mr Fulton) We have qualified accountants in the Department
and a qualified accountant who heads our accounts branch, another
who has succeeded me as Principal Finance Officer. We are actually
putting the qualified resource into making sure that the systems
are right and that the people who are operating are getting the
appropriate guidance and the support in doing so.
66. When I asked Sir David at the start of this
batch of questions he said that it would have been remarkable
if there had not been some problems in the first dry run and I
think that is fair comment, you would expect that, and clearly
there have been problems. If this was almost predicted, if you
like, and there was going to be this learning curve that you have
spoken about, why did the Department feel that the project team
had to be disbanded and effectively re-set up if this was what
was going to happen in the natural process of things anyway? It
does rather sound like it was coming seriously off the rails and
you needed to start again.
(Mr Fulton) With the benefit of hindsight that was
a premature step to disband the project team. Knowing what we
know now I would not have taken that decision but at the time
on the information we had and on the advice of the people who
were in the project team, and that team was led by a qualified
accountant, the indications at that point were that we were on
course, we were on track, and we did not need to maintain the
project team in order to stay on track. With the benefit of hindsight
it would have been better if we had maintained the project team
but that is where we are at.
(Sir David Omand) One comment I would add to that,
if I may, is it has been important that we make the transition
from this being a rather specialised activity with a project team
who are the people who actually know about it to one where everyone
who is engaged with finance in the Department recognises that
they have to understand, they have to be able to read the accounts
in a new way. Mainstreaming this is clearly very important. I
think we jumped too quickly in putting the onus from the project
team on to the Department. We have still got to make that transition
and get the project team out of the driving seat and get the departmental
financial staff throughout the Department running this.
67. Just one final question from me on this
and I suppose this is of the greatest interest to us on this Committee.
At what stage can you assure the Committee that you will be giving
a complete and accurate picture of your Department's activities
through resource accounting? It was not in last year's dry run,
was it, because we understand there were still problems. When
are you going to be able to say this is the Home Office delivering
the Government policy on resource accounting?
(Mr Fulton) With confidence when we report on the
accounts for the year we are now in, 2000-01.
Chairman
68. How would you assess that the Department
has done compared with other Government departments in this matter?
If there was some sort of league table would you be at the top,
the bottom or in the middle?
(Sir David Omand) About the middle. I am disappointed,
I wanted to be right up at the top and for a while we thought
we were there.
Chairman: Rather like the England football side,
yes. Mr Fabricant.
Mr Fabricant
69. Our Chairman is right to raise this point
because, of course, it is not just your Department that is involved
in this, it is going right across the board. You mentioned earlier
on that you are bringing in an accounting system which I think
you called BASS. Is that being used by other Government departments
as well or is it tailor made just for the Home Office?
(Mr Fulton) This is simply a Home Office system. Maybe
other departments are using similar software but this particular
system is bespoke -bespoke is the wrong word—tailored for
the Home Office.
70. I wonder why you are doing it like that.
While Gerald was saying he was a PPS, I was a PPS in the Treasury
and when we were talking about beginning to implement this whole
thing it was to make it a more business like form of accounting
similar to that which happens in commerce and industry. Different
companies tend to operate the same software packages because at
the end of the day the information that has to be provided is
common between different companies whether they are making widgets
or whether they are an insurance company. Have you liaised with
other Government departments to try to find a package which will
meet all your requirements and which is proven and tested?
(Mr Fulton) I think the view has been taken that although
Government departments are similar in many ways they also vary
in a lot of ways. There was no central, as it were, programme
coming out from the Treasury to say "here is the recommended
system, would you all please use it." We were invited to
develop our own systems which would meet our own business needs
as well as satisfying the resource accounting requirements. The
general pattern has been for each Government department to find
its own way but keeping in close contact with the Treasury and
with the NAO to make sure that we are meeting the basic requirements.
It is very important to recognise that these accounting systems
are not simply a tool for reporting externally in a consistent
way, they are also an internal tool for managing the business
and there has to be some flexibility for each department or each
business to be able to develop a tool which suits its own business
purposes rather than having something very standardised imposed
from the centre which might not be the best for that particular
department.
71. You have said that any bespoke software
creates its own problems but this is compounded because Sir David
said that you are now bringing in new technology, you are bringing
in new hardware. I just wonder how you can be so confident with
new software, with new hardware. I know that any business that
I have been involved with in the past would not be quite so confident
as you are that come the dry run ending and you are actually having
to produce these accounts under statute, making sure they are
accurate under statute, that you will get it right and you are
not going to go back to your manual systems you were talking about
earlier.
(Sir David Omand) Can I just explain a little more
what is involved in our Private Finance Initiative, our IT2000
programme. We are bringing in a private sector consortium who
will take over ownership of our central infrastructure and run
it for us, and who will manage the development of the applications
that will sit on it. An important part of that is in the finance
function.
72. Just promise me it is not Siemens.
(Sir David Omand) Siemens are not a bidder in this
particular competition. At the moment I am not able to say who
will be selected but Siemens are not in this particular competition.
It is not a question of buying a new system or installing new
hardware. The existing network will be taken over by the contractor
and run and new applications will be developed progressively and
added at a pace at which the office can cope. This is completely
unlike a major turn-off/switch-on development.
Chairman
73. May we now get on to IT provision and e-government.
You have told us, Sir David, that you feel you can meet the targets
of delivering the 25 per cent of your service electronically by
2002 and 100 per cent by 2005. You have four major IT projects
on which you are working at the moment, including IT2000 and so
on. Can I just unkindly ask on the back of the experience of the
IND and the Passport Agency, how confident can we be that your
confidence is well placed? In other words, what lessons have you
learned from those two fiascos?
(Sir David Omand) We have learned many lessons and
most of those have been documented in the reports from the Public
Accounts Committee and from the National Audit Office, so they
are on public record. We have also had a Government wide review,
the McCartney review, which itself has also drawn out lessons.
There are many lessons. One of the most important ones is the
pacing of change in relation to the ability of the organisation
to support change. That is why the approach we are taking with
our IT2000 Private Finance Initiative is to see the delivery of
the proposals as firstly the running of a network that will support
all the central parts of the Department, give them connectivity
to the Internet, give them connectivity to other departments and
enable them to start doing e-business. That will help us develop
applications that will run on that network, whether for personnel
or for finance or for the delivery of information or for handling
communications from the public, a very important part of the e-business
agenda. All of that will be developed in partnership through the
Department and the private sector consortium. They will also provide
strategic business advice for us from one of the major consultancies
who will be part of the consortium. We are looking for some quick
wins where we can fairly quickly introduce technology to allow
services to be delivered electronically. Some of the changes are,
however, much more fundamental and will take many years to develop.
There are relatively few services that we give direct to the individual
citizen but very many services that we give to the Police Service,
the Fire Service and the Criminal Justice System where there is
ample opportunity for us to improve the timeliness and the quality
of the service through new technology.
74. Is it fair to make the comment, and I am
not just picking on the Home Office, that really across Government,
perhaps governments—plural -they have been slow to make
the investment necessary in new technology to more efficiently
deliver services and in many senses we are catching up now compared
with, say, other governments?
(Sir David Omand) I would characterise our present
position as catching up. Over the last two years we have put in
place a network connecting the staff of the Home Office together
for the first time. We are in the process of rolling that network
out towards the Immigration and Nationality Department and the
ports. There are still ports where the staff there do not have
on-line connectivity with the rest of the Department. There is
a certain amount of catching up to what one would regard as a
good business standard. We want to go beyond that to look to the
Government's targets for the delivery of services and see what
we can do in a new way. The Passport Agency has an ambitious programme
for developing its services. We want to see more web based work
in the Home Office, particularly for the delivery of information.
We have a great deal of information which is of value to the Police
Service and to the Probation Service. The days of sending out
circulars on paper or a few copies of a hard bound report are
rapidly coming to an end. We want that sort of service to be available
electronically.
75. But it is against a background, is it not,
where many of the police forces cannot speak directly one to the
other because of differences in the IT they have got?
(Sir David Omand) That position is improving.
76. This is a long and winding road.
(Sir David Omand) That position is improving with
the national strategy for police IT. The introduction of digital
communications in all police forces will, of course, transform
their capacity to handle data and information.
Mr Fabricant: You mentioned the Passport Agency
and web-based provision of information, so do you see in the future,
and if so when do you see it, that people will be able to make
passport applications through the Internet and pay for it at the
end of the day with their Mastercard or Visa card?
Chairman: My very next question, Mr Fabricant.
Mr Fabricant
77. Sorry.
(Sir David Omand) We will be able to introduce some
of these changes more quickly than others. The payment electronically
is relatively straight forward. The submission of the application
is much less so because of the problem of proving identity. Some
equivalent of a birth certificate is needed, some check is needed
of who actually is at the end of the electronic communication.
Downloading of the form electronically is relatively straight
forward and that can certainly be done. The filling in of the
form and telephoning a help desk who will guide you through the
filling in of the form, that can be done, but there are some bits
of paper that provide the identity trail with the photograph where
at the moment we are stuck with today's technology.
Chairman
78. Sir David, can you say what proportion of
electronically delivered services does the Home Office presently
provide via call centres rather than through the Internet?
(Sir David Omand) I could not give you a percentage
but we have call centre technology to handle enquiries coming
into the main Home Office. We have the Immigration and Nationality
Department with a big capability. We have the Passport Agency
and other non-departmental public bodies, such as the Criminal
Compensation Board, they too can handle enquiries by telephone
through call centre technology either in-house or, in some cases,
contracted out.
79. You will know that the Government keeps
talking about joined-up Government. What are your Department and
other departments doing to provide joined-up services, as it were,
through the Criminal Justice System? Do you work with other departments,
say the Lord Chancellor's Department and others, thinking of ways
of delivering information on the various bits of the system to
the public?
(Sir David Omand) Very closely. There are three main
areas I might pick. One would be the Criminal Justice System with
the Lord Chancellor's Department and the Attorney's Department.
One would be Immigration and Nationality with the joint entry
clearance operation at the Foreign Office and, indeed, the asylum
support system which works very closely with local government
and the social security departments. The other would be health
where we are increasingly working with health on areas such as
severe personality disorder and mental health in prisons. We have
very close liaison with the Department of Health. The Criminal
Justice System is now being run as a system and I regard myself
as jointly and severally responsible for the performance of that
system with my colleagues from the Lord Chancellor's Department
and the Director of Public Prosecutions. We now meet regularly
between the three departments and we produce a common plan, a
strategic plan. We have submitted and worked on our bids for the
current expenditure review together to make sure that our assumptions
are consistent.
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