FINANCIAL MANAGEMENT
Letter to the Head of the Parliamentary
Relations and Devolution Team, FCO, from the Clerk of the Committee,
dated 22 March 2004
Dear Chris,
The Committee has considered the FCO's Spring
Supplementary Estimate, which was laid on 14 February. It requests
further information, as detailed below:
The FCO has drawn down a significant amount of
its Departmental Unallocated Provision and DEL reserve, which
has resulted in a 3.5% (£29.439 million) increase in the
administration budget limit. The FCO has a target to make year
on year efficiency savings of 2.5% over the 2004 Spending Review
period. The Committee requests a detailed explanation of the need
for such large increases in the FCO's administration budget. The
Committee also wants to know whether the Office will be able to
achieve its efficiency savings targets and whether it has robust
measures in place to control its administration costs.
The FCO's Estimates Memorandum seemed to indicate
that the Office was still waiting for Treasury approval for further
increases in its administration budget. This relates to £20
million of impairment costs and £12 million of core DUP not
initially identified as administration costs. The Committee wishes
to know whether Treasury approval has been sought, and if not,
what the implications are if the SSE does not include the increase
in administration budget.
There are expenditure increases for Visas and
Consular services which are offset by income increases of £39.1
million and £14.4 million respectively. In the Main Estimate,
the FCO predicted income from these sources as £143.876 million,
but the Spring Supplementary figures represent a further 37% increase.
This has happened in previous supplementary estimates, where the
Office has made large upwards adjustments to forecasts. The Committee
wishes to receive an explanation of the large increase in both
costs and income from the original plans set out at the start
of the year and would like to receive more information on the
difficulties of making accurate forecasts.
Estimates Memoranda were introduced from the
Winter Supplementary Estimates 2004-05 with the intention of providing
Select Committees with a more comprehensive explanation for the
key changes in resource. The Committee considers that the Memorandum
supporting the FCO's Spring Supplementary Estimate 2005-06 was
generally consistent with Treasury guidance and was an improvement
on the Memorandum supporting the Winter Supplementary Estimate.
However, there are three sections where the Memorandum was rather
weak in its explanations. The Committee draws the Office's attention
to the following areas:
— Impact on the Office's Public Service
Agreements (PSA). The FCO's Spring Supplementary Estimate includes
a number of significant resource movements yet makes no links
to the PSA targets. The Committee wishes to know whether the FCO
can explain the benefits arising from the additional resources
and the impact on specific PSA targets.
— DEL End Year Flexibility. According to
Treasury guidance, the Estimates Memorandum should explain how
the EYF has accumulated and whether it has been specifically earmarked
for future use. The Committee would like the FCO to provide this
information.
— Departmental Expenditure Limits and Administration
Budget Limit. The FCO's Estimates Memorandum did not provide prior
year comparatives for the last three years, only the planned figures
up until 2007-08. The Committee would like the FCO to provide
these figures, as they help relate changes in the Estimate to
previous years' expenditure.
— Detailed explanation of changes. Treasury
guidance requires departments to provide a more detailed analysis
than that provided in the Estimate itself. The Memorandum should
also explain changes to the net cash requirement where relevant.
I would welcome a response to this letter by
24 April.
Steve Priestley
Clerk of the Committee
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