Select Committee on Public Accounts Second Report


The Committee of Public Accounts has agreed to the following Report:—



1. The Public Trust Office (the Agency) carries out the functions of the Court of Protection to protect and control the administration of the financial affairs of persons in England and Wales who, usually through mental incapacity, are incapable of managing their own affairs. The Agency was established as an Executive Agency of the Lord Chancellor's Department (the Department) on 1 July 1994. It employs around 550 staff and its gross cash budget for 1998-99 was £19.4 million. Its activities comprise those of the Public Trustee, the Protection and Receivership Divisions of the Court of Protection together with the Court Funds Office.

2. In 1994 this Committee raised serious concerns about the Agency's performance in looking after the financial affairs of its clients.[1] In February 1999 we reviewed the Agency's progress and reiterated many of our earlier concerns. We also noted further weaknesses in financial management at the Agency, including a failure to produce audited accounts.[2] The Agency's first audited accounts since its formation in 1994 were published in April 2000, and the Comptroller and Auditor General reported on the actions taken by the Agency to improve its financial reporting.[3]

3. The Court Funds Office manages and handles the investments of Funds in Court. Amounts can be lodged in Court by parties pursuing litigation, and funds can also be deposited on behalf of people whose financial affairs are under the control of the Court of Protection. The Court Funds Office prepares accounts of monies paid into and out of Court, known as the Funds in Court Part A Accounts. Sterling cash balances held in Court at 28 February 1998 exceeded £1.9 billion, and annual transactions exceeded £2.8 billion. The accounts for 1996-97 and 1997-98 were qualified by the Comptroller and Auditor General in November 1999 because of uncertainties surrounding the composition of amounts held as unclaimed balances,[4] and the Comptroller and Auditor General published a report in November 1999.[5]

4. We took evidence on the Comptroller and Auditor General's reports on the Public Trust Office Accounts 1998-99 and Funds in Court: Unclaimed Balances,[6] and on a memorandum from the Department.[7] We examined the adequacy of the Agency's handling of the funds entrusted to it; the Department's oversight of the Agency; and arrangements for remunerating former Chief Executive of the Agency.

5. Our main conclusions are as follows:

  • Public bodies that manage or regulate their clients' money, especially for people disadvantaged through mental incapacity, must meet the highest professional standards. The Public Trust Office fell below those standards. Besides the Agency's lax supervision of patients' investments and of receivers appointed by the Court of Protection, on which we commented in our previous report,[8] it should not have had to institute a special exercise to establish the correct amount of fees due from clients. In respect of funds held in Court, the Agency could neither readily identify all cases of unclaimed balances and reconcile them to the total amounts held, nor offer an adequate search facility for use by potential claimants of those funds.

  • Departments should have effective mechanisms for overseeing the work of Agencies for which they are responsible. The Lord Chancellor's Department acknowledged that its oversight of the Public Trust Office should have been better. In particular it should have shown greater interest in whether the range of professional skills available within the Agency and the resources available for investment in information technology were sufficient. It should also have ensured that this Committee's key concerns, such as the need to collect and review receivers' accounts promptly, were reflected in the Agency's performance targets.

  • The bonus pay arrangements for the Agency's former Chief Executive did not in our view take adequate account of acknowledged weaknesses in the Agency's performance. Bonus arrangements should not confer entitlement to the maximum unless a deduction can be justified, but should reflect the principle that bonuses have to be earned. The level of bonus should reflect performance across the full responsibilities of the person concerned, including weaker areas, and should not be assessed mechanically against a restricted range of performance indicators.

6. In November 1999 the Lord Chancellor announced the outcome of a Quinquennial Review of the Agency.[9] The review recommended that the delivery of the Agency's key services should be carried out by other public sector organisations such as the Court Service Agency, the Benefits Agency and local authorities, and by voluntary organisations and private sector suppliers. It also recommended that other functions should be performed within the Department, and that the Agency should cease to exist from April 2001. We expect our recommendations to be carried forward by those taking over the Agency's activities.

7. Our main recommendations are:

The Agency's stewardship of funds

  (i)  In its 35th report of 1998-99 (HC 278) the Committee drew attention to the Agency's failure to collect and review receivers' accounts on a timely basis. Prompt receipt of receivers' accounts was critical to the Agency recovering the correct fee from its clients. Whilst we acknowledge the actions taken by the Agency's current management to improve performance, for example the more robust procedures established with the Court of Protection for chasing outstanding receivers' accounts, there is still scope to reduce further the number of accounts more than two months overdue. (Paragraph 24)

  (ii)  The Agency had to establish a separate taskforce to calculate fees and review past fees, which secured an increase in fee income of £1.25 million for 1998-99 and £800,000 for earlier years. The accurate calculation and prompt recording and collection of fees should have been an integral part of the Agency's business processes. (Paragraph 25)

  (iii)  As custodians of monies paid into Court, the Court Funds Office should have established systems which permitted the ready identification of balances owed on individual unclaimed cases, and the regular agreement of these balances in aggregate to the total of unclaimed funds held by the Office. The latter is an important financial control over the completeness of funds and a deterrent to misappropriation. (Paragraph 26)

  (iv)  Current legislation effectively requires the perpetual accumulation of unclaimed balances. We support the Department's proposal to recommend to Ministers a review of this legislation which might allow payment into the Exchequer or to suitable causes of sums never likely to be reclaimed. (Paragraph 27)

  (v)  Most of the sums held on the Unclaimed Balances Account have been transferred to the Account in the last 15 years or so. The Agency acknowledged that its procedures to identify potential claimants before transferring sums to the Account should have been better, and it is now pursuing owners or solicitors more actively. A list of unclaimed balances is required by statute to be available for public inspection, but the Department and the Agency acknowledged that it was far from user friendly. The Agency is now addressing these issues. The Court Funds Office will need to give higher priority to improving customer service in these respects. (Paragraph 28)

  (vi)  The Agency indicated that it did not consider tracing owners of sums held on the Unclaimed Balances Account to be a proper use of its resources. The Agency had tried to make it easy for claimants to find their money, and believed that it was the responsibility of solicitors to look after their clients' funds. The Agency acknowledged, however, that more could have been done to trace the owners before transferring sums to the Account and to provide a more acceptable search facility for potential claimants to use. In our view it should consider reopening at least the larger cases where owners might still be found. (Paragraph 29)

  (vii)  County Court balances paid into the Account often had no details at all about the source of the funds. Although the Agency no longer accepts sums from County Courts without supporting details, the Department should consider whether County Courts' procedures for accepting monies into Court, and their record keeping, are adequate. (Paragraph 30)

On the lack of oversight by the Department

  (viii)  The Lord Chancellor's Department acknowledged that it should have done more to review the Agency's actions in response to our recommendations dating from 1994. The key performance indicator regime provides an opportunity for monitoring an Agency's actions, particularly on key aspects of service to the public. The Agency has confirmed that recommendations from our 1999 report are now reflected in its performance targets. (Paragraph 35)

  (ix)  Parent departments should exercise effective oversight of the operations of their Agencies. Supervision of the Public Trust Office by the Lord Chancellor's Department should have been more rigorous. In particular the Department allowed the Agency to operate without an adequate range of senior management skills, and failed to make available sufficient resources for investment in information technology. The Department could have shown greater leadership in helping the Agency think more imaginatively about the management of its operations. (Paragraph 36)

On the former Chief Executive's bonus

  (x)  When the Chief Executive left her post early, in December 1999, she was paid the maximum performance bonus for 1999-2000 and for the three month period to the end of her contract term in June 2000, despite the Agency's serious failings in key areas. The Department considered it inappropriate to prejudge whether the Agency's key performance targets would be achieved for these periods, and they were advised that the Chief Executive was entitled to the bonuses. In our view the presumption should instead be that a bonus is payable only to the extent that there is clear evidence of achievement. (Paragraph 44)

  (xi)  The Department felt that it was mutually beneficial for the Agency Chief Executive to leave her position early, to allow her successor to see through important changes affecting the Agency. Despite the serious problems at the Agency, the Department did not consider that there were sufficient grounds for removal on the basis of poor performance. In their desire to obtain a mutually agreed departure, the Department made no attempt to negotiate a smaller severance settlement. (Paragraph 45)

  (xii)  The former Chief Executive's severance agreement included a confidentiality clause preventing disclosure of the settlement terms by either side. The Committee has made clear in the past that the use of public money must be open and accountable, and that such confidentiality agreements are inappropriate. The Department should refrain from entering into such agreements in future, in line with government responses to previous recommendations from this Committee. (Paragraph 46)

1  39th Report from the Committee of Public Accounts, Session 1993-94 (HC 308) Back

2  35th Report from the Committee of Public Accounts, Session 1998-99 (HC 278) Back

3  Public Trust Office Annual Report and Accounts for 1998-99, including the C&AG's report on the accounts, HC 416 of 1999-2000 Back

4  Account of Funds in Court for 1996-97, England and Wales, HC 874 of 1998-99; and for 1997-98, HC 875 of 1998-99 Back

5  C&AG's Report "Funds in Court: Unclaimed Balances", HC 833 of 1998-99 Back

6  Public Trust Office Annual Report and Accounts for 1998-99, including the C&AG's report on the accounts, HC 416 of 1999-2000; and the C&AG's Report "Funds in Court: Unclaimed Balances", HC 833 of 1998-99 Back

7  Evidence, pp 1-3 Back

8  35th Report from the Committee of Public Accounts, Session 1998-99 (HC 278) Back

9  The Lord Chancellor's Department: Quinquennial review of the Public Trust Office "Making Changes: The future of the Public Trust Office" Back

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Prepared 31 January 2001