Select Committee on Treasury Appendices to the Minutes of Evidence


Letter from the National Audit Office to the Clerk of the Committee

  Thank you for your letter of 9 July addressed to the Comptroller and Auditor General.

  You ask the C&AG for his opinion as to the extent to which it is realistic to expect departmental resource accounts for 2001-02 generally to be published in the Autumn of this year. To put this in context, about 40 per cent of departments last year were unable to render signed accounts to the C&AG for audit by 30 November—the statutory deadline. And the final audit processes then had to be carried out. So a very sharp acceleration is required by many departments if their accounts are to be published by the Treasury's administrative timetable of the end of October or—less specifically—by "Autumn".

  The parallel running of resource accounts with appropriation accounts has been cited in the past as one of the reasons for the delays on the part of departments in submitting signed accounts for audit. The cessation of appropriation accounts from 2001-02 should therefore help bring about improvements in timeliness. Realistically, however, such a degree of improvement in the space of a year is unlikely to be achieved by all.

  We would therefore expect to see some improvements this year; and, indeed, some of the signs at present are encouraging. However, it is too early in the processes of account preparation and audit to have a firm view yet of the likely outcome. There are some—mainly larger, more complex departments—for whom even at this stage the prospect of autumn publication seems unlikely or impossible. For a few, the timetable for account preparation and audit is already based on publication later than Autumn. For others, given previous experience, there may be slippage notwithstanding that they have set an Autumn target.

  In sum, it is highly unlikely that all the 2001-02 accounts will be published by this Autumn. We fully expect that there will be some improvement compared with last year (just as there was improvement last year compared with the year before). But we cannot say with any certainty how much that will be.

  You also ask what steps we envisage will need to be taken if this target is to be more widely achieved. Part of the problem is unfamiliarity with resource accounts and with the detailed accounting guidance. This should reduce with time. Part of the problem is that resource accounts are more complex than appropriation accounts and require staff who are far more professionally skilled and knowledgeable.

  So existing staff (not only within the finance function) may need additional training; and there may need to be more staff—and more professionally qualified staff—in the finance function itself. Some departments are still operating systems that remain essentially "cash based", designed for the simple "receipts and payments" approach for appropriation accounts. Such departments have to sped more time after the end of the financial year to translate this into the "accruals based" information for resource accounts, leading to delay. They therefore need to implement true "accruals based" accounting systems. These are needed not only for preparation of the financial statements but for managing their business on a basis that recognises all the resources consumed—and not just cash. And the complex nature of some departments, including those that have many executive agencies or other entities to consolidate into their accounts, requires sophisticated accounting and consolidation systems if all the strands are to be pulled together quickly. These are not always in place. Moreover, such departments are vulnerable to the slowest or weakest link (and in some cases, to third parties). They also need to focus on that.

  Some or all these elements may be present in "slow" departments and will need to be attended to if they are to achieve an Autumn publication date.

  Your enquiry was in the context of a report you propose to make on the new departmental reporting arrangements agreed last year. Perhaps we might say that, notwithstanding the present delays in publishing departmental resource accounts, we continue to feel that in due course such accounts should be accompanied, in the same publication, by a report on performance, such as the model adopted for Executive Agencies' Report and Accounts. This would replace the separate reporting envisaged under the new arrangements.

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