Letter to the Committee from Mr Peter
Freeman, Principal Finance Officer, Department for International
Development
DRY RUN 1998-99 RESOURCE ACCOUNTS
1. DFID has now, along with other departments,
reached a key stage in the implementation of Resource Accounting,
involving the preparation of dry run 1998-99 Resource Accounts
as part of Trigger Point 3.
2. As you may be aware, the Government has
announced four "trigger" points against which progress
in implementing Resource Accounting and Budgeting (RAB) in central
government is being monitored during the period leading up to
full RAB implementation, planned for 2001-02. In summary these
are:
Trigger Point 1
Stage 1 approval (April to December 1998) requiring
departments to have satisfactory accounting systems and policies
in place to enable them to produce resource accounts—completed
for all departments.
Trigger Point 2
Assessment of departments' opening balance sheets
for 1999-00 (April to June 1999)—completed for all departments.
Trigger Point 3
NAO's audit of departments' dry-run 1998-99
Resource Accounts (autumn 1999).
Trigger Point 4
Departments submit dry-run resource-based Estimates
for 200-01 to their Select Committees (spring 2000).
3. At Trigger Point 3, the DFID Accounting
Officer sent the Treasury a letter which:
— addressed any issues arising from
the NAO's dry run audit, and gave assurances that the department
remains on track to produce resource accounts for 1999-00 capable
of withstanding audit;
— gave assurances that the department
remains on track to produce robust resource budgeting data for
use in the 2000 Spending Review and in "shadow" resource-based
Estimates for 2000-01; and
— provided confirmation that suitable
and robust RAB training arrangements are in place.
4. I am happy to confirm to the Committee
that DFID remains on track to fully implement RAB in accordance
with the planned timetable.
5. As requested by the Procedure Committee
in its First Special Report Session 1997-98 on Resource Accounting
and Budgeting (HC773), departments are now sending copies
of their dry run 1998-99 resource accounts to their departmental
select committees. Accordingly, I am enclosing with this letter
a copy of the dry run Resource Accounts for DFID.[14]
The aim of the exercise is to give committee members the opportunity
to familiarise themselves with the format and "feel"
of Resource Accounts, rather than to scrutinise the dry run numbers.
6. As noted above, the NAO has been fully
involved in the TP3 process and has scrutinised the dry run Resource
Accounts prepared by each department. The outcome of this scrutiny
is an NAO audit opinion which will not, however, be formally signed
off by the Comptroller and Auditor General because of the non-statutory
dry run nature of the process. For this reason the dry run Resource
Accounts should be regarded as "unaudited financial statements",
although they have undergone the same level of scrutiny that would
be expected had the NAO been conducting a formal audit.
7. The dry run NAO audit opinion concluded
that only one substantive issue of concern arose. This is a technical
issue regarding the interpretation and application of the Financial
Reporting Standards (12) that provides guidance on accounting
for provisions and contingent liabilities. We expect to resolve
this shortly. The NAO have acknowledged that this issue does not
affect DFID's ability to produce resource accounts. A number of
minor issues were also identified by the NAO during their audit
work, which similarly will not have a significant impact on the
department's introduction of RAB in accordance with the planned
timetable, and which are being addressed by the department. Where
appropriate, changes to procedures and/or systems are being put
in place which will ensure further improvements leading to better
quality dry run accounts in 1999-00 and clean opinion accounts
from 2000-01.
8. Since the preparation of the 1998-99
dry run resource accounts, DFID has continued to make progress
on the implementation of RAB. I am confident that issues which
have arisen out of the Trigger Point 3 process will be successfully
resolved, and I look forward to sending you a copy of the department's
shadow Resource Estimate for 2000-01 in accordance with the Treasury
timetable, as part of Trigger Point 4. In due course, I also look
forward to sending you a copy of the department's 1999-00 resource
accounts, which are to be subject to a full NAO audit and Comptroller
and Auditor General opinion prior to publication.
9. If there are questions or points about
the enclosed accounts, or about the implementation by DFID of
RAB more generally, on which you would like clarification, please
let me know.
Mr Peter Freeman, Principal Finance Officer, Department
for International Development
April 2000
14 Not printed. Back
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