Letter to the Clerk of the Committee from
the Permanent Secretary, Lord Chancellor's Department
I am writing to bring you up to date on the
progress we have made to address the concerns raised by the National
Audit Office (NAO) in their report on "Funds in Court: Unclaimed
Balances". This is to be the subject of a hearing before
the PAC on 17 April 2000.
One of the major criticisms in the report is
an accounting issue which relates to the method of recording information
on the unclaimed balances account, particularly since the introduction
of computerised records in 1976. The NAO recommended that the
Court Funds Office (CFO) establish a proper ledger to record individual
balances which have arisen since then, and reconcile this on a
regular basis to the total liability shown in the CFO accounting
It may help in what follows if I set out the
different categories of balances which we have now analysed. They
can be divided by dates and by amounts, as follows:
(i) sums paid in and out between 1726 (when
the Office of Accountant General was created) and 1923, when all
balances (over £50) were published in The London Gazette;
(ii) sums paid in and out between 1923 and
1976 (when records were computerised). For this period, records
were kept on a series of ledgers; and
(iii) sums paid in and out since 1976.
It will also help to bear in mind a distinction
between amounts of less than £400, and those of £400
Taking each of categories (i)-(iii) above, I
now summarise the position on the balances, reflecting the substantial
progress made since the publication of the NAO Report on the Unclaimed
We have been able to confirm that the overall
amount of unclaimed balances quoted in The London Gazette
in 1923 is correct, and that the publication thus constitutes
an authenticated list of all balances (both for cash and securities)
for this early period. (The financial limit used by the Gazette
was for amounts over £50, rather than the £400 limit
to which I refer for the later listings).
Since the NAO Report was published, we have
located a continuous series of ledgers which has enabled us to
list cash and securities balances for this period. We have selected
£400 as the cut-off point, and we have not attempted to list
(iii) Since 1976
We had already, at the time of the NAO Report,
listed all cash balances of over £1,000 on a separate database.
Further work since the Report has enabled us to list all sums
of over £400 as well and add these to the database. But we
have gone further in respect of these more recent records, and
analysed all the remaining smaller sums. We have not, however,
produced a separate list of every balance for these (approximately
12,000) balances, which average about £100 each. We have,
though, matched every single payment out against the corresponding
payment in, thus providing an audit trail for all these cash balances.
All the security holdings brought into the account since 1976
(and ultimately sold in 1987) have been listed.
The net result, then, is as follows:
we now have a list of unclaimed balances
from 1726 to the present day, for sums over £50 (up to 1923)
and for sums over £400 (from 1923 to the present);
in addition, we have verified all
payments out against the respective payment in, in a way which
is auditable, for all remaining items (ie less than £400)
This means that, of the current total balance
in the Unclaimed Balances Fund of £32.3 million, only £2.1
million remains unlisted. This represents many thousands of small
items which have accumulated between 1726 and 1976.
A further exercise to create a separate list
of the small balances accumulated since 1976 would be, at best,
of historical interest, rather than something which addresses
current accounting problems. The real accounting problems, as
identified by the NAO, related to the inability to reconcile the
sum of the individual balances since 1976 with the total liability.
I now believe that we are in a position to satisfy the NAO accounting
requirements, enabling them to issue the CFO with unqualified
accounts in the future.
There are some further points from the NAO Report,
on which I will now report progress.
The inappropriate sums transferred to the Unclaimed
Balances Account by the Public Trust Office which were highlighted
by the NAO, have now been surrendered to the Consolidated Fund
as suggested. A sum of £87,372 constituting interest erroneously
credited to the Unclaimed Balances Fund has also been surrendered
to the Consolidated Fund. The CFO is now rigidly adhering to procedures
for determining whether or not to accept lodgements of forfeited
suitor's cash from county courts. Deposits are accepted only where
the court provides sufficient information to enable the CFO to
identify a claimant.
The NAO suggested that procedures for identifying
persons entitled to funds held in Court, particularly for amounts
over £1,000, be reviewed and revised to reduce the extent
to which such balances are transferred to the Unclaimed Balances
Account only to be subsequently paid out. The current Standard
Operating Procedure, which applies different criteria for tracing
those entitled to funds depending on the size of the sum, is being
enhanced so that larger amounts are now being more actively pursued.
The CFO is statutorily obliged to maintain an
index of cases where money is held on the Unclaimed Balances Fund
for public inspection. Currently, a paper index is available for
inspection and the NAO raised concerns over the number and nature
of secondary search keys contained in the index. To address this,
the index will shortly be transferred onto a modern database and
members of the public will be able to use a computerised search
facility. Furthermore, consideration will be given to putting
the index on the Internet now that this has become technically
feasible. In an attempt to increase the profile of the Unclaimed
Balances Index, an explanatory leaflet has been put onto the Public
Trust Office's Website.
We have sought Counsel's opinion on the surrender
of de minimis balances to the Treasury, and on whether
there is a need for revisions to the legislation underlying the
Account, better to reflect the likelihood that amounts will be
reclaimed. Existing legislation prevents the Accountant General
from surrendering any balances to the Treasury, but proposals
for dealing with this are to be put to Ministers shortly.
The 1987 Rules require the CFO to consider the
carry-over of money to the Unclaimed Balances Account, after an
account has been dormant for five years. Before 1987, the dormancy
period was fifteen years. The nature of the unclaimed balances
account changed following the introducton of the 1987 Rules. There
was an increase both of carry-overs into the account and of payments
out from the account. It became more of a suspense account, rather
than an unclaimed balance account it its truest sense. To address
this, we will be discussing with Ministers whether to change the
Court Funds Rules to lengthen the time limit for transferring
dormant sums to the unclaimed balances account from five years
to 10 years, which we feel is a more appropriate period of dormancy
for this account.
I hope that this information is helpful to the
Committee and that the Chairman can be made aware of the substantial
progress which has been made to address and resolve the accounting
issues highlighted by the NAO.
I am copying this letter to the Comptroller
& Auditor General.
Lord Chancellor's Department
17 March 2000