APPENDIX 4
Supplementary memorandum submitted by
HM Treasury
COMMITTEE OF PUBLIC ACCOUNTS TWENTY NINTH
REPORT 1999-2000: MEMORANDUM ON DEPARTMENTAL ACTION PLANS
In its 29th Report of Session 1999-2000, Progress
on Resource Accounting and the Adoption of Resource-Based Supply,
the Committee asked the Treasury to provide a summary and
analysis of the resource accounting action plans put in place
by those departments that did not receive an unqualified audit
opinion in respect of their "dry run" resource accounts
for 1998-99.
A memorandum is attached in response to this
request. The Treasury Departments are of course willing to provide
additional information on request.
RESOURCE ACCOUNTING: DEPARTMENTAL ACTION
PLANS
INTRODUCTION
The PAC's 29th Report, Session 1999-2000: Progress
on Resource Accounting and the Adoption of Resource-Based Supply[28]
requested that the Treasury provide the Committee with a summary
and analysis of the action plans prepared by those Departments
that had not received an unqualified audit opinion on their "Trigger
Point 3" accounts—the dry run resource accounts for
1998-99. In its response[29],
the Government undertook to do so. The appendix to this memorandum
contains a summary of the action plans for all 26 bodies, [30]including
three public service pension schemes.
"TRIGGER POINT
3"
From an early stage in the project to introduce
resource accounting and budgeting (RAB), the Committee sought
and received an assurance that the existing cash based system
would not be discontinued without its consent. To provide Parliament
with information and assurance to Parliament about RAB implementation,
the Government announced four "Trigger Points" against
which progress in implementing RAB would be monitored and reported
to Parliament.
"Trigger Point 3" involved the preparation
of the first set of departmental resource accounts, and their
audit by the National Audit Office (NAO), on a "dry run"
basis. The results were reported to the Committee by the Treasury
in two successive memoranda in January and May 2000.
Despite the number of qualifications of Trigger
Point 3 accounts, and, in a very few cases adverse opinions or
disclaimers, the Government's view—contained in its May
2000 memorandum was that by 2001-02 the level of qualifications
is expected to be no higher than the rate of qualification of
cash-based appropriation accounts. This expectation of sufficient
progress in time for 2001-02 was based on a case by case assessment
of progress and the agreement of a programme of work between individual
Departments and the Treasury. This was designed specifically to
resolve issues still outstanding in time for "live"
running in 2001-02.
IMPLEMENTING RESOURCE
ACCOUNTING AND
MOVING TO
RESOURCE BASED
SUPPLY
Following the evaluation of Trigger Point 3,
and the successful completion of Trigger Point 4 (making available
to Parliament a set of "dry run" resource based estimates
for 2000-01, the Government recommended the discontinuation of
cash based appropriation accounts and the introduction of resource
Estimates in 2001-02, in line with the original project timetable.
In its Report, the Committee agreed that the
Government should proceed to this timetable. The Committee nonetheless
concluded that risks remained, and looked to the Treasury to retain
a monitoring role to see that the risks and issues identified
at Trigger Point 3 were dealt with in a timely and appropriate
way. As part of this, the Committee asked the Treasury to provide
a summary and analysis of the agreed action plans in respect of
those Departments that did not receive a clear audit opinion at
Trigger Point 3. The Treasury accepted this recommendation.
Since then, Sir Andrew Turnbull, the Permanent
Secretary to the Treasury, has written to all Accounting Officers
informing them of the Committee's decision and emphasising the
importance the Treasury attaches to addressing successfully all
the remaining difficulties. The Treasury has been liaising closely
with Departments in the course of the production of their 1999-2000
accounts, with the aim of ensuring that departments maintain the
progress set out in their action plans. The Treasury is continuing
actively to support Departments in implementing all aspects of
resource accounting and budgeting (RAB), through the provision
of advice and guidance and the dissemination of good practice.
Guidance on the preparation of the first set of statutory resource
based Estimates in spring 2001 has already been issued.
DEPARTMENTAL ACTION
PLANS
The Committee asked that the Treasury should
set out the steps Departments are taking to address the issues
raised during the Trigger Point 3 process in respect of systems
and processes, staffing and training.
SYSTEMS AND
PROCESSES
Many departments have adapted, refined and improved
their systems and processes to tackle the problems raised at Trigger
Point 3. The action plans set out in the appendix show that a
number of Departments that received qualified TP3 accounts have
acquired or are about to acquire new accounting systems aimed
at, for example, integrating processes for data collection, or
recording fixed asset information more accurately. Many others
have undertaken reviews of their processes for, for example, gathering
information on working capital or the allocation of resources
to objectives.
Further information about Departments financial
and accounting systems, and the use that they are making of them,
is contained in the Treasury's parallel memorandum on management
information systems. This memorandum shows that across Departments,
sound management systems are in place or are being put in place.
The Treasury recognises that progress has not been uniform across
Departments, and will continue to monitor departments' progress
in developing suitable management information systems as part
of its Modernising Government agenda.
STAFFING
Both the Treasury and the Committee have long
emphasised to Departments the importance of having an adequate
complement of fully qualified and competent staff to support the
implementation of resource accounting. The action plans demonstrate
that Departments have taken and are continuing to take significant
steps to improve the level of financial expertise within their
organisations. Many Departments have recruited qualified accountants
externally and/or engaged private sector expertise to support
the preparation of resource accounts. Many Departments are also
sponsoring existing members of staff who are pursuing professional
financial and accountancy qualifications.
TRAINING
During the Trigger Point 3 process, Departments
were required to provide a detailed assurance to the Treasury
that adequate RAB training programmes were in place and underway,
to ensure that staff had the necessary skills to interpret, analyse
and use the information generated by RAB. The Treasury continues
to monitor the implementation of training plans in Departments,
and is in regular contact with individual Departments to ascertain
what support and assistance can be given in respect of training.
An interdepartmental Finance Training Committee meets regularly
to review progress and consider future training needs. A number
of Departments have also formed Finance Training Committees within
their own organisations.
As a result of this action, Departments across
Government have developed training programmes on RAB and financial
awareness for both financial and non-financial staff at all levels.
The action plans demonstrate that many Departments are continuing
and enhancing the provision of such training.
The introduction of resource accounting and
budgeting has raised the profile of general finance awareness
skills in departments. Departments have reported a good uptake
of non-mandatory finance training, and the number of people at
all levels in the Civil Service expressing an interest in pursuing
professional accountancy qualifications is on the increase.
ACCOUNTING POLICY
ISSUES
For completeness, the action plans set out those
instances where unresolved accounting policy issues led to or
contributed to the qualification of a resource account, as was
the case for a number of Departments. These issues have been the
subject of further discussion between Departments, the NAO and
the Treasury throughout the course of this year. Most have been
resolved in time for the preparation of the 1999-2000 resource
accounts. The remainder should be settled in time for the 2000-01
accounts.
CONCLUSION
As a result of the action being taken by Departments
to address the issues raised at Trigger Point 3 and set out in
the action plans, the Treasury expects that significant improvements
will be evident in the audited resource accounts for 1999-2000.
There should be further improvements in 2000-01.
The Treasury acknowledges that the risks identified
by the Committee in its report remain. Fully implemented, the
action plans point the way to addressing these risks. Consequently,
the Treasury accepts that it needs to keep track of developments
in respect of, for example, progress made by Departments in adapting
their systems or recruiting and retaining qualified staff. The
Treasury will continue to monitor progress against all aspects
of action plans, and to liaise with Departments and with the NAO
to maintain the required level of progress. For a very few the
action plans state that some problems might not be resolved in
time for the 2001-02 accounts, and the Treasury will watch developments
in these Departments particularly closely.
The Committee has asked the Treasury to produce
an analysis of the quality of Departments' 1999-2000 resource
accounts, and we will do so as soon as possible after their publication.
The individual action plans are summarised in
Annex A. Further information in respect of individual departments
can of course be provided on request.
Ciaran Martin
General Expenditure Policy
HM Treasury
December 2000
28 29th Report of the Committee of Public Accounts
(HC 556, Session 1999-2000). Back
29
Treasury minute on the 27th-29th and 37th Reports of the Committee
of Public Accounts, session 1999-2000 (Cm 4901). Back
30
This is slightly fewer than the list of bodies previously provided
to the Committee. The Health and Safety Commission is now included
within the resource account for DETR (the accounts are also separately
published). OFFER and OFGAS have been amalgamated into the Office
for Gas and Electricity Markets (OFGEM). The Treasury did not
seek an action plan from the Central Office of Information, having
received a copy of a letter from the National Audit Office confirming
their ability to produce the required standard of accounts. Nor
was one sought from the Export Credits Guarantee Department, where
issues giving rise to a minor scope limitation were resolved after
further clarification and explanation. Back
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