5 Letter to the Cabinet Office from the
Clerk of the Committee to the Cabinet Office
The Committee has some further questions arising
from your letter of 19 October 2005 and the Cabinet Office Annual
Report and Resource Accounts 2004-05, presented to Parliament
in July 2005 (HC 372).
E -GOVERNMENT
The reporting of e-Government expenditure within
Note 5 to the Resource Accounts raises a number of queries. At
over £24 million, e-Government "other expenditure"
accounts for 10% of the Cabinet Office's total resource outturn,
an increase of £17 million when compared to 2003-04. There
is insufficient detail in the Resource Accounts to explain what
the expenditure comprises or why it has increased so significantly.
Could you therefore supply the Committee with a detailed breakdown
of e-Government "other expenditure" both by project
and by category for 2003-04 and 2004-05?
The e-Government staff costs are reported in
Note 5 to the Resource Accounts as only £360,000. The Cabinet
Office Departmental Annual Report 2005 (Fig 3, page 32) shows
the e-Government unit to have a complement of 96 full time equivalent
staff. Is the Committee to understand that Cabinet Office has
recruited IT experts at a cost of just £3,750 per annum?
In your letter of 19 October you say that only
one payment was made to ITNet UK for assets amounting to £5
million which have subsequently been impaired. How does this fit
with your statement that "the Cabinet Office has taken on
some leased hardware with payment streams totalling £5.9
million and is actively considering how this can be put to best
use across the public sector"? Do the two statements refer
to the same transaction, or was the £5.9 million an additional
payment? Has the Cabinet Office established a use for the hardware
yet?
In the Cabinet Office balance sheet as at 31
March 2005 e-Government projects are valued at over £90 million.
They represent 80% of the tangible fixed assets recognised by
the Cabinet Office, although they are stated as being owned by
the whole of government. Could you provide the Committee with
a breakdown of e-Government assets by project, by supplier or
IT consultant and by cost element, eg hardware, software, capitalised
internal staff costs, capitalised consultancy staff costs, and
explain the contributions that the rest of government are making
to their upkeep?
According to your letter of 19 October the dispute
with ITNet over the True North project was amicably resolved in
July 2005. The Resource Accounts were signed on 19 July and yet
there is no mention of the deal being settled, or even being close
to settlement. Could you specify for the Committee the exact date
on which the dispute was settled and explain why there was no
mention of the settlement in the Resource Accounts?
We understand that the original contract value
for the True North project was £83 million. Note 29 to the
Resource Accounts on contingent liabilities suggests a potential
liability of up to £24 million. Can you explain the terms
against which ITNet UK agreed to settle the dispute in the absence
of any compensation?
Has the contract for the True North project
since been re-awarded? If so, to whom has it been awarded and
can you verify that the proper Office of Government Commerce Gateway
Process and that EU procurement rules for public bodies have been
adhered to?
Litigation costs of £4.7 million have been
incurred in resolving the dispute with ITNet UK. The Committee
would like you to expand on the breakdown of litigation costs
provided in your letter of 19 October and identify the bodies
to which these payments were made. Where are these costs brought
to account in the Resource Accounts and why are they not separately
identifiable as exceptional items?
OTHER COMMENTS
ON THE
RESOURCE ACCOUNTS
We note that there have been a number of minor
restatements to the figures for 2003-04 which have been used as
comparatives in the 2004-05 Resource Accounts. It is not usual
practice to make restatements unless significant errors are discovered
and, without adequate justification, the restatements would cause
a reader of the accounts to question the quality of other information
provided. The Committee would like an explanation for the restatements
and assurances that the restatements do not represent significant
errors.
One of the explanations given for the Department's
underspend in 2004-05 is the rescheduling of the SCOPE programme
of work. This is exactly the same explanation as was provided
for the majority of the underspend in 2003-04. The Committee has
some obvious concerns over the management of the programme, which
appears to be subject to major slippage, and the poor financial
profiling of the programme. What are the reasons for the slippage
to date on the SCOPE programme and how are the risks to further
slippage being managed? What will be the impact of further delays
to the programme?
In the footnote to Note 13 to the Resource Accounts
on tangible fixed assets there is a list of properties owned by
the Cabinet Office and included in the valuation. Does this represent
a complete list of all properties owned by the Cabinet Office?
The Committee would also like details on other properties occupied
by the Cabinet Office, the annual rents paid on those properties
and who they are paid to.
One of the properties listed as owned by the
Cabinet Office in Note 13 to the Resource Accounts is the Civil
Service Club. What is the relationship between the Cabinet Office
and the Civil Service Club? How much rent do they pay on the building
annually and how was it "discovered' that the Club was actually
donated?
In paragraph 48 of the Annual Report which accompanies
the Resource Accounts the office costs of the Rt Hon Alan Milburn
MP, as the Duchy of Lancaster, during the period 9 September 2004
to 31 March 2005 were £210,000. No such comparative figure
was published in 2003-04. Where are these costs brought to account
in the Resource Accounts and have such costs ever been incurred
by a previous Duchy of Lancaster?
EFFICIENCIES AND
FINANCIAL MANAGEMENT
On the matter of efficiencies you state in your
letter of 19 October that a revised Efficiency Technical Note
(ETN) is due to be published following comments made by the National
Audit Office. The Committee is still awaiting notification of
the revised ETN as promised. In the meantime, could you provide
an update of the efficiency savings achieved in 2004-05 against
those forecast in the extant ETN, dated 22 October 2004.
We understand that HM Treasury is currently
conducting a Financial Management Review at the Cabinet Office.
The Committee is obviously interested in the findings and recommendations
of the Review and requests that you make the report available
for our further consideration.
The Committee would also be grateful for an
organogram of the Cabinet Office, including the management units
set out on p 32 of the Annual Report.
The Committee would appreciate a response to
this letter by Monday 12 December.
16 November 2005
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