Conclusions and recommendations
1. Resource
excesses in 2008-09 totalled £23,893,853,000 across three
departments. This was an exceptional year due to late, and significant,
resource requirements for the financial stability measures introduced
by the Government.
2. The two excesses, at HM Treasury and the
Home Office occurred in 2008-09 as a result of significant events
crystallising late in the financial year.
- HM Treasury
incurred a resource excess of £23 billion as a result of
a provision in the balance sheet at 31 March 2009 for the potential
losses expected at that point for the support provided to two
banks under what has since been formalised as the Asset Protection
Scheme. As this Scheme was being developed at the year end, and
the extent of the support had not been finalised, it had not been
possible for HM Treasury to predict the resource requirements
in time for a Supplementary Estimate to be prepared. The scheme
was not formalised until November 2009, and it now seems that
a loss of this magnitude is unlikely. However, at the time the
accounts were prepared and audited, the potential exposure appeared
significantly higher, and so financial reporting standards required
recognition of a liability and, therefore, Supply financing was
required.
- The Home Office is required to make good
any deficit on the Police Pension Scheme in any given year. The
Department had provided for back payments to be made to police
pensioners as a result of new commutation factors retrospectively
applicable from 1 October 2007. However, in March 2009 a subsequent
Judicial Review determined that application of new commutation
factors should be backdated to 1 December 2006. This resulted
in the Department being liable for an additional £130 million.
- The Department conducted a review of risks and
the financial consequences, concluding that it was probable the
case would be won and so the provision made would be sufficient.
When the Judicial Review findings were made, it was too late for
the Department to request additional resources through the Supplementary
Estimates.
3. The excesses that occurred in 2008-09 at
the United Kingdom Atomic Energy Authority Pension Schemes (UKAEA)
were due to poor financial forecasting.
The UKAEA Pension Schemes Consolidated Accounts failed to budget
correctly for anticipated pension requirements due to dates of
pension transfer not being included in the forecasting process.
This resulted in a resource excess of £6 million. This Resource
Account was also qualified in 2007-08 for incurring an excess
vote, the accounts breached the Net Cash Requirement limit by
£5.8 million as the Authority retained receipts that should
have been paid to the Consolidated Fund and therefore under estimated
the Net Cash Requirement for the year.
4. In the case of
UKAEA Pension Schemes, the excess could have been avoided by more
thorough oversight and better reporting of the information necessary
to administer the resource requirements. This is the second successive
year this entity has breached a Parliamentary limit.
5. We are concerned
that a Resource Account has incurred an excess vote for two consecutive
years. In both years, failings have been identified in managing
the estimates process and communication between the relevant teams
within the organisation. Whilst improvements have been made, these
have not gone far enough to introduce robust resource budgeting.
It is essential that steps are taken at the UKAEA Pension Schemes
to minimise the risk of an excess vote occurring in future years.
6. With the introduction
of the Joint Personnel Administration system in 2007 and removal
of previous capability, the Ministry of Defence could not
provide sufficient evidence to demonstrate that the 'Votes A'
ceilings on the numbers of certain categories of service reservists
had not been breached. Parliament vote annually on the maximum
number of service personnel reservists that the Ministry can retain,
and the maximum numbers maintained are reported in the resource
accounts. If the Department exceed the levels voted by Parliament,
this excess would require retrospective Parliamentary approval
in a similar way to an overspend of resources.
7. We recommend that Parliament provides the
additional resources requested by means of an Excess Vote, as
set out in Figure 1.
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