Select Committee on Public Accounts Twenty-Fifth Report

3 The role of the Treasury in improving resource management

22. The Treasury has been the chief architect of the initiative to improve resource management and, to support its implementation, has provided practical guidance and training to departments. Just over a quarter of departments examined by the National Audit Office had made good progress in implementing accruals accounting and were using it effectively, a third were progressing towards accruals reporting while a further third still relied mainly on cash-based information.[48]

23. The Treasury has overriding responsibility for expenditure control and monitors departments' expenditure to identify problem areas, and has sanctions it can apply where departments demonstrate poor resource management.[49] In the event of overspending, for example, it can reduce the next year's budget by the amount of the excess. In 2000-01 the Foreign and Commonwealth Office overspent its budget which was then reduced by £5.7 million in 2001-02. Also in that year the Lord Chancellor's Department and the Charity Commission exceeded their budgets while the Serious Fraud Office exceeded its administration cost limit. On those occasions the Treasury imposed no reduction, preferring to work with them to avoid the problem recurring in later years.[50]

24. The Treasury said that it had placed two departments on 'special measures' following a number of occasions in recent years when the departments have needed to claim funds from the Reserve.[51] In 2002-03 the Department for Constitutional Affairs made a Reserve claim of £412 million and the Home Office had an Asylum Reserve claim of £825 million. Departments under 'special measures' provide the same routine financial and management information as other departments, but the level at which the reports are sent and discussed is escalated from official to either Ministerial or Permanent Secretary level.[52]

25. As part of Spending Review 2004 the Treasury will be advising Ministers where departments' financial management is poor, so that they can consider whether improvement should be one of the conditions of the settlement letter at the end of the Spending Review process.[53]

48   C&AG's Report, para 9 Back

49   Qq 167-168 Back

50   Ev 23 Back

51   Qq 179-184 Back

52   Ev 24 Back

53   Qq 122-126 Back

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