Memorandum by the Comptroller and Auditor
General updating his reports HC 273 of 2005-06 and HC870 of 2006-07
INTRODUCTION
1. The Comptroller and Auditor General (C&AG)
limited the scope of his opinion on the 2005-06 Resource Accounts[5]
of the Revenue and Customs Prosecutions Office (the Department)
because the Department was unable to provide sufficient evidence
that counsel fee expenditure and the liability for that expenditure
at the year end was not materially understated. The C&AG did
not qualify his audit opinion for the Department's 2006-07 Resource
Accounts,[6]
but issued a further Report on the actions taken by the Department
to address significant internal control weaknesses. Since this
report was laid on 26 July 2007, this memorandum is to update
the Committee on the Department's further progress in addressing
the following internal control issues:
— management of counsel fee expenditure;
— procurement practices; and
MANAGEMENT OF
COUNSEL FEE
EXPENDITURE
2. For its 2006-07 Resource Accounts, the
Department addressed the uncertainty over the correct level of
counsel fee expenditure which had given rise to qualification
of its 2005-06 accounts. In particular, the Department required
that relevant chambers certified, before the accounts were signed,
that they had submitted all invoices relating to the 2006-07 and
earlier to the Department. Following the certification of the
2006-07 financial statements, the NAO identified only £52,000
of invoices not captured within the counsel fee accruals, which
is not material in the context of in-year spending of £38
million. The Department will be undertaking the same exercise
for the 2007-08 accounts.
3. The Department has continued to liaise
closely with Chambers to further improve invoicing processes by
encouraging the timely submission of invoices, and checking that
Chambers are more compliant with the monthly billing cycle. A
fact sheet on counsel fees was sent out in early February 2008
to all counsel and their clerks reinforcing the Department's fee
regimes and the new billing process. The Department invited clerks
of the Chambers to a series of meetings, in February and March
2008 where the importance of timely billing, the year end process
and the fee rates were discussed.
4. To develop its internal controls over
counsel fee payments, the Department's Finance Team has published
clear guidance on the departmental intranet on the process of
nominating counsel and the payment of counsel fee notes. Compliance
with these procedures is improving. Standardised fee rates apply
to all cases where counsel was instructed after 1 September 2006.
Whilst cases that commenced before 1 September 2006 have hours
agreed in advance, there remains a difference in some cases between
the hourly rates paid to counsel and the Department's new standardised
rates.
5. All cases are dealt with under one of
three regimes: standard (in cases where the trial is expected
to last up to two days), pre-marked (where the trial is expected
to last from three to 15 days) and hourly rate (the Department's
largest and most complex cases where the trial is expected to
exceed fifteen days). Under the hourly rate regime, hours in respect
of each case are agreed for the forthcoming month by prosecutors
with counsel and communicated to the Department's Finance Team.
The Finance Team uses this information to calculate the month-end
estimates of accrued counsel fees. Compliance with this requirement,
by prosecutors, continues to improve and stands currently at around
85%.
6. From October 2007, the Department established
an Operational Business Support Team to oversee the appointment
of counsel and to monitor compliance of fee notes with the revised
regime. This could be an important element of the Department's
quality control framework, providing assurance to management on
counsel fee expenditure and the authorisation process. At present,
the reporting and follow up of findings is limited and should
be improved for this function to be fully effective.
PROCUREMENT PRACTICES
7. The C&AG reported on the poor procurement
practices within the Department, which included the lack of a
procurement policy during 2005-06. The Department published its
procurement policy in April 2007. The Department's Internal Audit
provider is currently undertaking a review to monitor compliance
with the procurement policy. A "pocket guide" to procurement
has also been prepared and distributed to all staff.
8. The C&AG's Report 2005-06 highlighted
the role of the Chief Operating Officer (Mr David Partridge) in
the appointment of his wife as an HR consultant. The Department's
Director (and Accounting Officer) appointed Mr Partridge as Chief
Operating Officer, on a three year contract commencing 26 September
2005. In October 2005, the Chief Operating Officer completed all
of the steps that led to the appointment (with the consent of
the Director) of his wife as a Human Resources consultant.
9. When the National Audit Office became
aware of the circumstances of this transaction they informed the
Department that they considered it to be "novel and contentious".
Under Government Accounting principles, departments have no delegated
authority to incur such expenditure without prior approval from
HM Treasury. The Department sought retrospective approval for
these payments in November 2006 and this was granted by HM Treasury
in December 2006.
10. The Department's initial contract with
Mr Partridge's wife was for six months. The Department extended
this contract on 31 July 2006, following a more independent tendering
exercise, which reported to the Accounting Officer. This contract
provided for a review on 31 October 2006, subject to two weeks
notice. At that date, a review was conducted by the newly appointed
permanent head of Human Resources. In the result, the contract
was brought to an end by decision of the Director on 13 November
2006. Payments made to Mrs Partridge or her company during 2005-06
and 2006-07 totalled £97,907 (including VAT).
11. In February 2007 the Department's internal
auditors informed the Director that Mr Partridge was listed as
the Company Secretary of his wife's company (People Business UK).
The date of incorporation of this company was 27 February 2006.
Mr Partridge became Company Secretary in October 2006, retrospective
to February 2006. Mr Partridge had not disclosed his position
as Company Secretary to the Department's Accounting Officer at
any stage. Once the Director was so informed by internal audit,
he suspended Mr Partridge on full pay on 5 February 2007 pending
an investigation.
12. The Director commissioned an independent
investigation of the case from the Head of HM Crown Prosecution
Service Inspectorate. Following the outcome of this investigation,
Mr Partridge was charged with six allegations of gross misconduct.
The Director invited a former senior civil servant (a retired
solicitor to the Department for Work and Pensions) to consider
these charges. Following a disciplinary hearing, she concluded
that Mr Partridge was guilty of three of the six charges of gross
misconduct. After the Director had considered the report of this
hearing, the Department's Head of Human Resources wrote to Mr
Partridge on 20 August 2007 informing him that his contract with
the Department was being terminated. As this was a summary dismissal,
the contract termination date was also 20 August 2007.
13. Prior to his appointment at the Department,
Mr Partridge was employed at the Serious Fraud Office as the Director
of Corporate Services from April 2002 until September 2005. During
his time at the Serious Fraud Office Mr Partridge engaged his
wife as a Human Resources consultant, with the approval of the
Director of the Serious Fraud Office. Payments made to Mr Partridge's
wife for work carried out between February 2004 and November 2005,
totalled £66,205 (including VAT). These payments were not
recorded as Related Party transactions in the accounts of the
Serious Fraud Office.
ACCOUNTS PREPARATION
AND FINANCIAL
MANAGEMENT
14. The C&AG's reports indicated that
the Department was heavily reliant on temporary staff to prepare
its annual Resource Accounts. To address this issue the Department
recruited an additional five staff to permanent positions within
the Finance Team during 2007-08, including a senior financial
accountant.
15. The Department's Finance Manual was
published on 1 May 2008 and is available to all staff. The Manual,
which has been reviewed by the Department's internal auditors,
consolidates existing guidance in one document and further clarifies
the roles and responsibilities of all staff members authorising
expenditure. Further month end payroll reconciliations have been
introduced to improve the robustness of the monthly reporting
to the board, and are intended to facilitate faster closing of
the year end accounts.
16. The Department's budget had been held
centrally and monitored solely by the Finance Team but, from April
2008 onwards, responsibility for managing the budgets has been
delegated to cost centre managers. The Department's objective
is to promote a greater sense of ownership of and responsibility
for financial management from operational areas of the business
and to increase the accuracy of financial information held at
cost centre level.
7 May 2008
5 Revenue and Customs Prosecutions Office Resource
Accounts 2005-06, HC 273 (Session 2006-07). Back
6
Revenue and Customs Prosecutions Office Resource Accounts 2006-07,
HC 870 (Session 2006-07). Back
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