Select Committee on Treasury Minutes of Evidence

Annex A


This Annex assesses progress made so far by departments who have not yet completed the Trigger Point 3 (TP3) process. It goes on to discuss the circumstances of a number of other departments where significant issues have arisen as part of the TP3 assessment.

Departments who have not yet completed Trigger Point 3

  2.  As explained in the Treasury's July 1999 Memorandum, while the Department of Health (DH) successfully completed the second trigger point in accordance with the timetable, and is on track to achieve TP3, this process is not expected to be finally completed until March 2000 due to the unique scale and nature of DH's consolidation exercise. The Treasury notes that significant progress has been made towards meeting this deadline. Looking to the future, DH, the NAO, the Audit Commission and health authorities are working towards achieving a publication date of 31 October for the resource accounts relating to financial year 2000-01.

  3.  The Office of the Rail Regulator (ORR) has encountered difficulties in respect of recording details of fixed assets. This issue has been resolved and the NAO audit is nearing completion. It is envisaged that the ORR will be in a position to complete TP3 by the end of January 2000.

  4.  The Northern Ireland Office (NIO) also expects to complete TP3 by the end of January 2000. The preparation of the accounts of one of the department's agencies was delayed through difficulties with information systems and staffing. This in turn created a delay in presentation for audit of the NIO's consolidated account. The audit has now been completed and the department and the agency are working to make the adjustments required before the dry run audit certificates are given.

  5.  The Office of Fair Trading (OFT) has made substantial progress towards completing TP3. However, difficulties have been encountered in the valuation of OFT software commissioned in 1988. These difficulties are being addressed and OFT should complete TP3 by the end of January 2000.

  6.  Completion of TP3 by the National Investments and Loans Office (NILO) has been delayed by difficulties in compiling the resource account within the dry run audit deadline. These difficulties, which were caused by the departure of key staff, have now been resolved and the NAO audit is well underway. It is expected that NILO will complete TP3 by the end of January 2000.

  7.  The Government Actuary's Departments (GAD) has encountered difficulties in the production of the cash flow statement relating to movements within suspense accounts at the year end. This issue is now being addressed and it is expected that GAD will be able to complete TP3 by mid-February 2000.

  8.  The Crown Prosecution Service has experienced difficulties in obtaining the necessary accruals information during a period of change and reorganisation within the department. There have also been difficulties in deploying sufficient adequately skilled finance personnel in the department. These difficulties are now being resolved and the TP3 dry run audit should be completed by mid-February 2000.

  9.  The Serious Fraud Office has yet to complete TP3. Accounts and full supporting material were submitted to the NAO and they have completed their work within agreed deadlines. However, issues have arisen which are in the process of being discussed centrally with the Treasury and the NAO. Once these issues are resolved it will be possible for the NAO dry run audit to be completed and for the Office to achieve TP3 by the end of February 2000.

  10.  The Home Office's dry run accounts are now with the NAO and, although the audit is nearing completion, the department will need to undertake further work to finalise the outstanding issues and complete the accounts. While there are a number of audit matters arising, none is expected to prevent the Home Office completing TP3 by the end of March 2000.

  11.  The Treasury did not complete the work for TP3 to the original timetable because the commencement of the preparation of the accounts was delayed by the resolution of accounting and policy issues, for example on the boundary of the accounts. The NAO dry run audit is now well underway and the audit opinion is expected during March. The necessary steps have already been taken for the timely start of the 1999-2000 accounts.

  12.  While the Cabinet Office has yet to complete TP3, substantial progress has been made towards doing so. However, difficulties have been encountered in establishing reliable figures for one of the Cabinet Office's former agencies, which has delayed completion of the account. These are being addressed and the Cabinet Office is on track to complete TP3 by the end of March 2000.

  13.  The Charity Commission has yet to complete TP3 as difficulties were encountered in recording details of early retirements and some aspects of fixed assets. The dry run accounts were submitted to the NAO on 21 December 1999. The NAO have indicated that they will undertake to commence an audit towards the end of January and it is expected that the NAO opinion letter will be forthcoming in time for the TP3 process to be completed by the end of March.

  14.  Two of the intelligence agencies within the Single Intelligence Vote have also yet to complete TP3. The SIS is, however, expected to do so by the end of January. No major problems have been identified by the NAO.

  15.  The NAO's investigation of GCHQ's resource accounts has revealed serious shortcomings in the agency's asset register and assets in the course of construction. GCHQ has drawn up an action plan to resolve the difficulties and discussions on this continue. The Treasury expects to take a view by the end of January.

  16.  Further reports on departments' progress in implementing RAB will be provided in the Treasury's next Memorandum planned for the spring.

Other issues which have arisen as part of the TP3 assessment

  17.  For the larger, more capital intensive departments, such as the Ministry of Defence (MoD), the task of achieving the TP3 criteria has been especially challenging and inevitably a number of issues have yet to be fully resolved. MoD, with its vast and varied asset base, has completed a major exercise to identify and register fixed assets, valued in excess of £85 billion. The NAO's examination of the 1998-99 Defence Resource Account found that major problems remain, however, in validating accounting information for stock from the department's existing supply systems, which form a significant proportion of the department's accounts. There are also difficulties with establishing full audit trails in some areas, and with valuations of certain categories of fighting equipment. MoD has put in place a comprehensive strategy to deal with these issues, and the Treasury considers the department's training plan to be appropriate for supporting this work. The Treasury believes that MoD has not yet met all of the TP3 criteria, and will keep the situation under review, in the light of progress made on the 1999-2000 accounts.

  18.  The Department of Environment, Transport and the Regions (DETR) also has significant asset holdings, particularly within the Highways Agency. While the TP3 process has been largely completed for the central department, there are a number of issues which have arisen on the Highways Agency element of the DETR dry run 1998-99 resource accounts. These issues include concerns about the correct recording of amounts owing in respect of compulsory purchase orders, stock, surplus properties and the buying of land for road schemes which were subsequently not progressed. DETR and the Highways Agency are working closely with the NAO to resolve these issues and improve the quality of the DETR resource accounts for future years.

  19.  The dry run audit for the Ministry of Agriculture, Fisheries and Food (MAFF) has identified a number of issues which will need to be resolved in order to ensure that the department's resource accounts for future years are sufficiently accurate. MAFF has encountered difficulties in correctly tracking fixed asset movement details and also in recording correct debtor and creditor information, particularly relating to European Agriculture Guarantee and Guidance Fund transactions, on a RAB basis. The Treasury notes that firm plans are now in place to rectify these difficulties for future years.

  20.  Although the Office of Gas Supply (OFGAS) dry run audit has been completed, the NAO has been unable to give an opinion on the dry run 1998-99 resource accounts as audit trails and records were considered inadequate in some areas. These difficulties stem from the introduction of a new financial system.

  21.  OFGAs has recently merged with the Office of Electricity Regulations (OFFER) to form the Office of Gas and Electricity Markets (OFGEM). OFGEM has taken steps to ensure that auditable, true and fair resource accounts can be produced for OFGAS. OFGEM will be presenting OFGAS' resource accounts for the period ending 31 December 1999 to the NAO for audit, with the aim of achieving a clear audit opinion on those accounts in March 2000.

  22.  Finally, the Treasury Solicitors Department (TSD) has not yet completed TP3 because of:

    (i)  a delay in preparing resource accounts for the Government Property Lawyers Agency (GPL) following its closure, which was announced to Parliament by the Attorney General on 11 November 1998;

    (ii)  the absence of a sufficiently robust system for recording accrual expenditure for legal services as at 31 March 1999; and

    (iii)  a lack of information on liabilities in respect of costs orders made against TSD clients in Court Judgements as at 31 March 1999.

  23.  The difficulty identified at (i) above has arisen purely due to the closure of the GPL. While there will continue to be some residual expenditure in respect of GPL for some years to come, the difficulties encountered in preparing the 1998-99 accounts are not expected to recur in future. The fundamental nature of (ii) and (iii) means that the likely outcome of TP3 is that TSD's dry run 1998-99 resource accounts will receive a disclaimer opinion from the NAO. Whilst improvements to systems and procedures have already been put in place to address the underlying problems, the NAO are unlikely to be able to give a formal opinion on these prior to the audit of TSD's 1999-2000 resource accounts.

  24.  The Treasury notes that although TSD has experienced difficulties in the dry run year, the action which they have taken in procuring a new accounting system in readiness for resource accounting; in strengthening their finance team by the recruitment of qualified accountancy staff; in establishing an Audit Committee whose terms of reference cover all financial matters; and the action which they are taking to spread awareness of the importance of financial issues throughout the department together represent a positive approach towards meeting the challenge of successfully implementing resource accounts and overcoming the difficulties experienced thus far.

Pension schemes

  25.  To complete the picture at TP3, the main unfunded pension schemes (NHS Pension Scheme, Teachers' Pension Scheme, Armed Forces Pension Scheme, Principal Civil Service Pension Scheme and the UKAEA superannuation scheme), which are producing separate pension scheme statements, have been working to a slightly slower implementation timetable than that adopted by the main departmental resource accounts. The UKAEA superannuation scheme and the Armed Forces Pension Scheme have already achieved TP3. The NHS Pension Scheme, the Teachers' Pension Scheme and the Principal Civil Service Pension Scheme are on course to complete the process by the end of February 2000.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2000
Prepared 5 June 2000