Letter dated 17 December 2007 from Sir
Gus O'Donnell to the Clerk of the Committee
CABINET OFFICE
WINTER SUPPLEMENTARY
ESTIMATE 2007-08
Thank you for your letter of 28 November 2007
requesting further information on matters reported in the Annual
Report and Resource Accounts 2006-07 and in the Winter Supplementary
Estimate 2007 and accompanying Estimate Memorandum.
My responses are set out in the same order as
your questions are raised in your letter.
SCOPE PROJECT
The cause of the SCOPE project delay and operational
and financial consequences can be explained as follows.
SCOPE is a complex Programme and considerable
time had to be set aside to review the proposed design for Phase
2. Whilst this has caused some delay, the resulting position is
one whereby the total solution, including technology and working
practices, is far better understood by government and suppliers
significantly reducing the risk of an inappropriate solution being
delivered.
While necessary refinements to the supplier's
solution over the last 6-9 months contributed to the overall timetable
slippage for Phase 2, the contract price remains within the affordability
envelope agreed by the Programme Board and the costs of extending
the Programme have been absorbed without the requirement for additional
funding.
SCOPE funding is capped and ring fenced. Capital
funding is provided by the Capital Modernisation Fund, Cabinet
Office and the Foreign and Commonwealth Office. The contributions
are fixed. The Programme continues to be well run and managed
within its overall affordability envelope.
FUTUREBUILDERS
The 2006-07 underspend on the Futurebuilders
programme arises because the budget and outturn were calculated
based on different accounting treatments and because the rate
of take up of grants and loans by third sector organisations was
slower than expected.
When the Futurebuilders programme transferred
to the Cabinet Office, it followed the same accounting treatment
initially as that taken by the Home Office and therefore the Cabinet
Office budgeted for the Futurebuilders programme based on the
accounting treatment followed by the Home Office. The Home Office
had recognised grant expenditure at the point commitments to make
grants and loans were entered into by the delivery organisation,
Futurebuilders England Limited. Commitments were initially forecast
to use all funds allocated to the programme. In preparing Resource
Accounts 2006-07, the Cabinet Office, with the agreement of the
National Audit Office, changed the accounting treatment and now
recognises grant expenditure at the point of cash disbursement
to Futurebuilders England Limited. This accounting treatment more
closely reflects the rate of operational delivery of the programme
and consumption of resources.
The Cabinet Office segregates its End Year flexibility
by programme, so there is no danger that SCOPE may be funded by
monies meant for charity capacity building.
The Futurebuilders programme is not being downgraded
or curtailed. The initial grant agreement is due to expire on
31 March 2008. Ministers have decided to re-tender the Contract
for the management of the Futurebuilders Fund and it is anticipated
that the retendered Contract will commence on April 1 2008 for
a period of three years with an option to extend the Contract
for a further three years to coincide with the Government's spending
reviews.
As set out in the third sector review, the Government
will continue to invest in Futurebuilders, maintaining its commitment
to bring the total investment in the programme to £215 million
by 2011. Futurebuilders has so far made over £111 million
of commitments to over 245 third sector organisations, however
due to the innovative nature of the grant and loan finance available
under the Futurebuilders programme, the disbursement of funding
to the third sector organisations has been slower than expected.
The £46 million underspend has been re-profiled
and allocated to two new third sector programmes: the Community
Assets Fund announced in the Pre-Budget Report 2006 and a new
fund to stimulate risk capital investments in social enterprises
as set out in the Social Enterprise Action Plan published November
2006.
Government's overall strategy for the third
sector is that it remains highly committed to supporting the third
sector through the Futurebuilders Fund and other programmes.
RFR 1—B OFFICE
OF THE
THIRD SECTOR
The increase in gross resource provision of
£7.87 million comprises:
| | £ million
|
| Grant | Children in Need |
0.299 |
| V Matched Funding | 3.301
|
| Invest to Save | 0.399
|
| Reclassify to non budget Grant in Aid to executive NDPB Commission for the Compact Limited
| (1.430) |
| Red Cross | 1.000
|
| Total increase in Grants
| 3.569 |
| Other | Volunteering Health-offset by increase in AinA
| 0.065 |
| Current | Futurebuilders cost of capital-offset by increase in AinA*
| 5,000 |
| Total increase in Other Current
| 5.065 |
| Administration | Transfer to DCLG
| (0.764) |
| Net increase in gross resource provision
| 7.870 |
* The Charity Bank Limited maintains and manages a dedicated
interest bearing bank account at the Co-operative Bank to hold
the Fund—Futurebuilders Trust Account. Futurebuilders is
managed under a tri-partite agreement between the Minister for
the Cabinet Office, The Charity Bank Limited and Futurebuilders
England Limited. This Trust Account attracts cost of capital charges
of 3.5% on balances held. To cover this charge, balances are managed
in order to generate sufficient interest income to offset this
charge.
ADMINISTRATION BUDGET
| £ million | Outturn
| Tgovernment | Programme
| Underspend | Limit
|
| 2006-07 | 146.5 | 17.0
| 25.0 | 30.5 | 219.0
|
| 2005-06 | 158.2 | 28.6
| 3.0 | 6.0 | 195.8
|
| 2004-05 | 157.0 | 40.0
| 3.7 | 15.4 | 216.1
|
| Percent | Outturn
| Tgovernment | Programme
| Underspend | Limit
|
| 2006-07 | 67 | 8
| 11 | 14 | 100
|
| 2005-06 | 81 | 15
| 1 | 3 | 100 |
| 2004-05 | 73 | 19
| 1 | 7 | 100 |
The proportion of the administration limit accounted for
by Transformational Government depreciation and cost of capital
and other programme spend is shown in the table above.
Expenditure over the period 2004-05 to 2006-07 was subject
to the 2004 Spending Review settlement. The settlement included
headcount reductions, relocations and procurement savings targets.
These are reflected in the under-spends in the three years and
the Department's own efforts to create an appropriate departmental
unallocated provision (DUP).
In addition:
2006-07 £30.5 million includes re-scheduling
of accommodation and IT projects and various savings across the
Department; and
2005-06 £6 million income includes received
by the National School of Government.
BBC MONITORING
The Cabinet Office became the lead stakeholder for BBC Monitoring
from April 1, 2006 and budget holder from April 1, 2007 and its
forecast costs are in line with budget and have not been re-assessed
as higher for 2007-08.
When a decision was made to transfer responsibility to the
Cabinet Office, it was recognised there would be a funding shortfall
in 2006-07 and 2007-08 and HM Treasury agreed that the Cabinet
Office would have access to £2.5 million in 2006-07 and £2.5
million in 2007-08 from a Special Reserve; this agreement is documented
in a letter dated 5 April 2005, from Jonathan Stevens, Managing
Director, HM Treasury to Sir David Omand, Permanent Secretary,
Cabinet Office.
Cabinet Office did not draw down £2.5 million in 2006-07
but has a need to draw down the full £5 million in 2007-08.
The Chief Secretary to the Treasury has agreed to this claim and,
given the special circumstances, has agreed the draw down will
not carry implications for Cabinet Office End Year Flexibility
Entitlement.
I trust that this information provides the explanation you
require.
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