1 Establishing new entities—getting
it right from the start
1. The Revenue and Customs Prosecutions Office (the
Department) was set up on 1 April 2005 to prosecute offences for
the former HM Customs and Excise and the former Inland Revenue
(now HM Revenue and Customs), and from April 2006, for the Serious
Organised Crime Agency. It is headed by a Director and is one
of the Law Officers' Departments.
2. The Director readily accepted the National Audit
Office's advice on the shortcomings in the internal control system
in November 2006 and has addressed all the shortcomings identified.[2]
This was the Director's first appointment as Accounting Officer
and he was unfamiliar with the standards of the public sector.[3]
The Director acknowledged that as the Department's Accounting
Officer, he ought to have responded more quickly to the shortcomings
in its internal control system.[4]
3. The Director has brought strategic direction and
operational success to the Revenue and Customs Prosecutions Office
since his appointment in December 2004. From the outset, his priorities
were to restore public and judicial confidence in Customs prosecutions,
to rebuild low staff morale arising from a series of unsuccessful
HM Customs & Excise prosecutions, to forge a new relationship
with the newly created HM Revenue and Customs and to provide leadership.[5]
Under his direction, the organisation has achieved a conviction
rate of 92%, has confiscated assets of some £45.5 million
since April 2006, and appears to have no difficulty attracting
appropriately qualified legal staff.[6]
4. The Revenue and Customs Prosecutions Office's
legal teams were in place and ready to begin work in April 2005,
but its finance and human resources function and internal controls
were not fully developed. By his own admission, the Accounting
Officer had not been "on the ball" on finance or accounts
issues, and the organisation had seriously underestimated the
task of producing its first set of financial statements.[7]
He acknowledged that, in retrospect, insufficient thought had
been given to the selection and matching of corporate function
staff to the needs of a small, new Government department. The
financial controls and procedures inherited from HM Customs and
Excise and the Inland Revenue may have been appropriate for a
very large department, but they required modification and development
to adapt them to meet the needs of a smaller one.[8]
5. Staffing levels in the finance function were inadequate
from the outset. Just one of the two accounts staff in the finance
department was professionally qualified.[9]
The finance team had a limited understanding of routine financial
accounting procedures and a poor appreciation of how to prepare
a set of resource accounts. Eight months after its first financial
year end, the Department could not present a reliable set of accounts
for audit.[10] The Department
subsequently engaged temporary staff to help resolve errors and
inconsistencies in the financial statements.[11]
It took time, however, for the organisation to put robust internal
controls in place. During its first year of operation, the Department
had no proper financial control system in place and no month end
processes to help establish the accuracy and completeness of its
financial information. The internal audit function was not in
place until 1 June 2006, some 18 months after the Department was
launched and the Director took up post.[12]
These shortcomings impacted on the completeness of the organisation's
accounting records. In January 2007, the Comptroller and Auditor
General qualified his audit opinion on the organisation's financial
statements for 200-06 because of significant uncertainty over
the value of the Department's expenditure on, and outstanding
liabilities in respect of, legal counsel fee expenditure.[13]
6. The Department's corporate governance system was
in place from the outset. It was led by a Management Board, chaired
by the Director as Accounting Officer, together with three Heads
of Division, the Head of Finance and two non-executive directors,
and, from September 2005, the Chief Operating Officer, with responsibility
for oversight of finance and human resources issues. The Chief
Operating Officer had almost 40 years of experience in the Civil
Service. The Management Board met ten times in 2005-06, and routinely
examined operational matters, risk and finance. The Accounting
Officer's statement on internal control for 2005-06 indicated
that the Department had a strategic risk register in place by
the end of its first year, but work had not yet been completed
on operational risk registers.[14]
7. The Director told us that, by September 2005,
he was extremely concerned that the organisation's human resources
policies and procedures were not fit for purpose. Of the Department's
seven human resources staff at the time, one of the two professionally
qualified staff was just back from long term sick leave and was
not fully recovered, and the other was inexperienced. In line
with the expectations of the Gershon Review, the Department had
planned from the outset to buy in corporate services from HM Customs
and Excise. Following the O'Donnell Report,[15]
however, provision of services to the Revenue and Customs Prosecutions
Office in 2004-05 proved to be a lower corporate priority for
HM Customs and Excise than its merger with the Inland Revenue.[16]
8. The Director attended the standard training course
for Accounting Officers run by the National School of Government
and found it useful. HM Treasury acknowledged that while most
first time Accounting Officers were new to their departments,
they were not usually as new to the public service as this Director.
With no previous public sector leadership experience, he faced
a steep learning curve to gain the practical experience needed
to manage the new department and discharge his duties as Accounting
Officer.[17] HM Treasury
told us it was unusual to have a new department headed by someone
unfamiliar with the standards of the public sector. It attributed
the start up problems experienced by the Revenue and Customs Prosecutions
Office to a lack of customised day-to-day support for the Accounting
Officer, which it considered should have been the primary responsibility
of the new body's sponsor department. HM Treasury is in discussion
with the National School of Government to arrange bespoke training
facilities for new Accounting Officers.[18]
2 Qq 12-13, 54-55 Back
3
Ev 16 Back
4
Q 130 Back
5
Q 2 Back
6
Qq 87, 118, 123-124 Back
7
Qq 13, 136 Back
8
C&AG's Report, Revenue and Customs Prosecutions Office
Resource Accounts 2005-06, HC (2006-07) 273, para 6 Back
9
Q 2 Back
10
Qq 12-13 Back
11
C&AG's Report, paras 29-30; Ev 13, para 15 Back
12
Qq 81, 86, 127 Back
13
C&AG's Report, p 21 Back
14
C&AG's Report, pp 15-19 Back
15
Cm 6163, Session 2003-04 Back
16
Q 134 Back
17
Q 131-133 Back
18
Ev 16 Back
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