INTRODUCTION AND SUMMARY OF CONCLUSIONS
AND RECOMMENDATIONS
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)
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