Memorandum submitted by the Northern Ireland
DRY RUN 1998-99 RESOURCE ACCOUNTS TRIGGER
POINT 4: SHADOW RESOURCE ESTIMATE FOR 2000-01
1998-99 RESOURCE ACCOUNTS
1. 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
Trigger Point 1: "Stage
1 Approval" (April-December 1998) requiring departments to
have satisfactory accounting systems and policies in place to
enable them to produce resource accountscompleted for all
Trigger Point 2: Assessment of
departments' opening balance sheets for 1999-2000 (April-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 2000-01 to their Select
Committees (Spring 2000).
2. The Northern Ireland Office reached,
along with other departments, 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. At Trigger Point
3, the Principal Accounting Officer of the Northern Ireland Office
wrote to HM Treasury:
(i) addressing concerns arising from the
NAO's dry-run audit, and giving assurances that the department
remained on track to produce resource accounts for 1999-2000 capable
of withstanding audit;
(ii) giving assurances that the department
remained 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
(iii) providing confirmation that suitable
and robust RAB training arrangements were in place.
3. I am happy to confirm to the Committee
that the Northern Ireland Office remains on track to fully implement
RAB in accordance with the planned timetable.
4. As requested by the Procedure Committee
in its First Special Report Session 1997-98 on Resource Accounting
and Budgeting (HC 773), departments were asked to send 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 the Northern Ireland
Office. As the accounts will not be made available publicly, I
would be grateful if you could restrict their circulation to members
of the Committee. The aim of the exercise is to give Committee
members the opportunity to familiarise themselves with the format
and "feel" of Resource Accounts.
5. 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
nature of the dry-run 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.
6. I am pleased to report that the dry run
NAO audit opinion concluded that no substantive issues of concern
arose. Any issues which were identified by the NAO during their
audit work do not have a significant impact on the department's
introduction of RAB in accordance with the planned timetable.
The issues identified are being addressed by the department and,
where appropriate, changes to procedures and/or systems are being
put in place and will ensure further improvements leading to better
quality dry-run accounts in 1999-2000 and a clear audit opinion
for the 2000-01 accounts.
4: SHADOW RESOURCE
7. I am enclosing with this letter a "shadow"
resource-based Estimate for 2000-01 for the Northern Ireland Office
together with an associated commentary.
8. As noted in the Treasury's January 2000
RAB Memorandum, the enclosed Estimate is being sent to the Committee
to fulfil an undertaking under Trigger Point 4 of the Government's
strategy for monitoring RAB implementation, whereby departments
are submitting "shadow" resource-based Estimates for
2000-01 to their select committees. Whilst the Estimate is being
sent to the Committee for information, I would be pleased to receive
any comments on the shadow Estimate in due course. In addition,
if you would like to receive a presentation explaining the Estimate,
and how it relates to the department's cash Estimate for 2000-01,
I would be happy to arrange it.
9. TP4 completes the trigger point process
and the Government is now seeking Parliament's approval to replace
cash based Estimates and Appropriation Accounts with Resource
Estimates and resource accounts from 2001-02.
10. The shadow Estimate enclosed with this
is accompanied by a commentary which
provides more detailed information about the Estimate;
Parts I, II and III of the Estimate;
associated forecast Operating
Cost Statement and Cashflow Statement and;
certain key accompanying notes.
A full list of the notes that it is envisaged will be included
with Resource Estimates from 2001-02 was set out in the Treasury's
July 1999 RAB Memorandum. If the Committee has any further specific
disclosure requirements which it would like to see included in
the notes accompanying the department's Estimate, it would be
helpful to have details as soon as possible so that they can be
included in the Estimate from 2001-02:
covers the same functions as
the cash Estimate for 2000-01 which has already been presented
to Parliament. A comparison between the net cash requirement in
the Resource Estimate and the net total cash sought in the cash
Estimate reveals that the amount of cash required by the department
under resource-based and cash-based Supply is the same. Under
RAB, Parliamentary control over cash continues alongside control
of resources, and Parliament will continue to vote cash in the
form of a net cash requirement for each department;
shows the format proposed for
resource based Estimates for the Northern Ireland Office with
five Requests for Resources (RfR) broken down into functional
lines. The format is expected to be unchanged under "live"
RAB from 2001-02;
includes data for a single prior
year in the Estimate and accompanying notes. For the purposes
of the shadow 2000-01 Resource Estimates only, estimated outturn
figures for the prior year (1999-2000) are being used as a proxy
for final provision. For the 2001-02 Estimates onwards, final
provision for the prior year will be shown, together with final
outturn for the preceding year.
11. As noted above, the Northern Ireland
Office has now successfully completed the TP4 process and has
demonstrated that it is capable of producing the data necessary
to produce a resource based Estimate.
12. The department continues to press ahead
with its implementation of RAB, and I look forward to sending
you in due course a copy of the department's 1999-2000 resource
account, which will be subject to full NAO audit and Comptroller
and Auditor General opinion prior to publication and presentation
13. If there are any questions or points
about the enclosed accounts, or about the implementation of RAB
by the department more generally, on which further clarification
would be helpful, please let me know.
14. The shadow Resource Estimate accompanying
this letter has also been sent to the National Audit Office for
19 May 2000
ILLUSTRATIVE COMMENTARY TO ACCOMPANY SHADOW
RESOURCE BASED ESTIMATE
This commentary is intended to provide the Committee
with a detailed explanation of the attached shadow resource-based
Estimate for the Northern Ireland Office for 2000-01 and the significance
of each of its component parts.
1. For the purposes of Trigger Point 4,
the attached "shadow" Resource Estimate comprises:
Parts I, II and III of the Estimate,
forecast Operating Cost Statement;
forecast Cashflow statement, and
a selection of accompanying notes
Explanation of Accounting Officer
Forecast reconciliation between
net operating cost; net resource outturn; and resource budgeting
Analysis of Appropriations in
Analysis of Consolidated Fund
Extra Receipts (CFERs).
PART I OF
2. As for cash Estimates, Part I of the
Estimate contains details of the net provision sought (on both
a resource and cash basis) and the Ambit, as well as confirmation
of the department that will account for the Estimate. It also
shows the amount of resources and cash which have already been
allocated to the department in the Vote on Account, and the balance
3. The Ambit covers resource expenditure,
capital expenditure and cash expenditure by the department during
the year to which the Estimate relates. The Ambit is on a functional
basis providing a direct read-across to the functional lines contained
in Part II of the Estimate
4. As explained in the Treasury's January
2000 Memorandum, transitional arrangements will apply in relation
to calculation of Vote on Account (VOA) figures until 2002-03.
Thus the VOA figures for both the attached "shadow"
Resource Estimates for 2000-01 and for the first "real"
Resource Estimates for 2001-02 will be calculated on the basis
of 45 per cent of the net total provision sought for resources
(at the level of the RfR) and the net cash required by the department.
From 2002-03, VOA figures will, as now, be calculated on the basis
of 45 per cent of provision for the current year up to and including
PART II OF
5. Part II of the Estimate provides a further
breakdown of the expenditure for which Parliamentary approval
is sought. The first section of Part II of the Estimate is in
a tabular or matrix format and has a broadly similar structure
to existing cash-based Estimates. Under RAB, Part II of the Estimate
will also contain a reconciliation between the net resource total
and the net cash requirement.
6. The following points are worth highlighting
in relation to the matrix:
Figures in columns 1 to 10 are on
an accruals basis (ie they relate to expenditure and income scored
at the point of the underlying activity).
RfR descriptors used in the matrix
are objective based to denote the broad purpose of the expenditure
covered by the RfR, eg maintaining a secure and humane prison
service and reducing the risk of re-offending.
The functional lines shown in the
matrix, taken together, provide a direct read-across to the wording
of the Ambit in Part I. Some functional line titles are repeated
within the Estimate, where appropriate, under both the DEL and
AME headings. This takes account of the decision for SR2000, to
include some large non-cash items in AME for a transitional period.
The reconciliation box beneath the
Part II matrix takes account of all accrued income and expenditure
of the department and then makes adjustments to take account of
non-cash items and working capital movements to establish the
net cash requirement for the department. The net cash requirement
in the department's Resource Estimate is the same as the cash
Votes for the department for 2000-01.
A single prior year column in Part
II has been populated for the "shadow" Resource Estimate.
This relates to 1999-2000 and, for the shadow Estimate only, represents
forecast outturn data for 1999-2000 since there is no Resource
Estimate provision for that year. From 2001-02, when it is intended
that resource-based Supply will be introduced, both prior year
columns in the Resource Estimates will be populated, with the
1999-2000 column showing final outturn for that year and the 2000-01
column showing final provision as reflected in the "shadow"
Main and Supplementary Resource Estimates for that year.
PART III OF
7. Part III of the Estimate shows Extra
Receipts payable to the Consolidated Fund (CFERs). Consistent
with cash based Estimates, this seeks to notify Parliament of
the department's forecast of income and receipts that will not
be appropriated in aid.
8. Key points to note in relation to Part
III tables in the attached Resource Estimate are as follows:
CFERs are shown on both an income
and a cash received basis. The income and cash receipts figures
for CFERs will be the same.
CFERs are analysed by the following:
Operating income not classified
Non-operating income not classified
Other income not classified as
9. "Operating income not classified
as AinA" represents operating income that flows through the
department's operating cost statement but which cannot be appropriated
in aid eg Police Pensions, excess Accrued Superannuation Liability
10 "Non-operating income not classified
as AinA" represents income which relates to the sale of capital
assets that cannot be appropriated in aid. The Northern Ireland
Office has no such CFERs.
11. "Other income not classified as
AinA" relates to income for which the department is merely
an agent and which is not scored in Schedules 2 to 5 of departmental
resource accounts. The Northern Ireland Office has no such CFERs.
12. The forecast Operating Cost Statement
(OCS) shows resources that are expected to be consumed during
the year in support of the department's administration and programme
expenditure net of departmental income. The OCS takes account
of both Supply and non-Supply expenditure and income within the
departmental accounting boundary as defined in the Resource Accounting
13. The three totals at the base of the
forecast OCS are:
Net Operating Costie all departmental
current expenditure and income within the OCS in respect of both
Administration and Programme costs.
Net Resource Outturnie the
sum of the Requests for Resources voted by Parliament and shown
in Part II of the Estimate.
Resource Budget Outturnie
all departmental expenditure within the resource budget allocated
in spending reviews.
14. The reconciliation between these three
aggregates is discussed further below.
15. The forecast cashflow statement shows
the cash inflows and outflows that are expected to occur during
the year. The cashflow statement takes account of cash related
to (both Supply and non-Supply) expenditure and income within
the departmental accounting boundary (and also takes account of
cash inflows and outflows in respect of CFERs which are received
and paid by the department but which do not form part of the department's
16. There are a number of features relating
to the production and coverage of the cashflow statement.
The "Net Cash outflow from operating
activities" figure is derived from the reconciliation of
operating cost to operating cash flows;
The "Capital expenditure and
financial investment" figure is derived from the analysis
of capital expenditure and financial investment;
The receipt of CFERs which flow through
the Operating Cost Statement will be included in the "Net
Cash Outflow from operating activities" figure. CFERs which
are received by the department but do not form part of their operating
activities will be shown against the "Inflows in respect
of activities outside the scope of the department's operations"
line shows in the attached illustrative cashflow. "Payment
to the Consolidated Fund" figures should take account of
all CFERs which are expected to have been paid across to the Consolidated
Fund by the department during the year;
The "Analysis of Financing"
section of the Cashflow reflects the points above and takes account
of any CFER cash which is received but not paid over during the
year and any CFERs which were received in prior years and are
expected to be paid over in the current year. The section reconciles
to the "Net Cash Requirement" which is also shown in
Part II of the Estimate as a result of the reconciliation from
accruals to cash.
17. This note explains the Accounting Officer
responsibilities for the Estimate. The explanatory note is consistent
with the more detailed Statement of Accounting Officer Responsibilities
(SAOR) which will appear in the department's resource accounts.
18. This note provides a reconciliation
between the three totals shown at the foot of the forecast Operating
Cost Statement and analyses the different coverage of resource
accounts, Resource Estimates and resource budgets for the department
19. This note builds on one of the core
requirements for cash based Estimates for analysis of AinA, taking
account of the introduction of income based AinA under RAB.
20. The table distinguishes, amongst other
things, between operating (ie resource) and non-operating (ie
21. An AinA footnote at the base of the
table in the note is provided to explain the sources of income
which may be treated as AinA under RAB for the year in question.
Items are ordered so that resource AinA items are listed first
followed by non-operating AinA items.
22. This note is also based on one of the
core requirements for cash based Estimates and provides an analysis
of CFERs, taking account of the fact that under RAB CFERs are
shown on both an accruals and a cash basis.