Annex A
DEPARTMENTAL PROGRESS AGAINST TRIGGER POINT
3
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.
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