Excess Votes in 2009-10
1. This Report is part of the framework of Parliamentary
control over government spending. Resource-based Supply requires
Departments to estimate and manage the financial resources needed
during each financial year; on an accruals basis for commitments
to provide services, and on a cash basis to meet commitments as
they mature. Parliament authorises Departments' proposed cash
spending and use of resources.
2. The resource-based Estimates reflect accruals
and non-cash consumption of resources, such as depreciation, and
a cash limit is also voted by Parliament. A breach of the total
resource-based Estimates, or of cash limits, results in an Excess
Vote. In 2009-10, Parliament granted total net resources of £502.4
billion and total cash of £518.1 billion in Supply Estimates
to 56 Departments, pension schemes and other vote-funded bodies.[1]
3. Under the House of Commons Standing Order number
55(3)(c)[2], the Committee
of Public Accounts scrutinises the reasons behind any individual
Departments exceeding their allocated resources, and reports to
the House of Commons on whether it has any objection to making
good the reported excesses. Once the Committee has reported, HM
Treasury presents the Statement of Excesses to Parliament, to
be voted into the Appropriation Act in March. The passing of this
Act authorises the additional grant by Parliament to regularise
the excesses incurred by Departments.
4. Figure 1 shows the excesses incurred in
2009-10 by two Departments. In both cases, as neither Department
has savings elsewhere that can be applied to the excess, Parliament
is being asked to approve the additional resource.
Figure 1:
Summary of 2009-10 Excess Votes required
| Department
| Resources
| Cash
|
| Excess
£
| Amount to
be voted
£
| Excess
£
| Amount to
be voted
£
|
The Statistics Board
Excess Cash
| | |
251,000
|
251,000
|
Government Actuary's Department
Request for Resources 1: (Providing an Actuarial Consultancy service)
Excess Resources (with resulting breach to Administration Budget) [3]
Excess Cash
|
747,000
|
747,000
|
67,000
|
67,000
|
Total |
| 747,000
|
|
318,000
|
The Statistics Board: Excess on Net Cash Requirement
5. As a Supply financed Department, the Statistics Board should
draw down resources from the Consolidated Fund and use these to
finance its activities. All payments made, whether or not the
payments have cleared through the Board's Bank account during
the period, are included in reporting the Board's Net Cash Requirement
for the year.
6. On 31 March 2010, the Statistics Board processed
a payment run of £251,000, despite having already spent the
voted cash resource. This occurred due to the Statistics Board
failing to adjust the available cash balance for payments which
had been made but had not cleared the bank account. This resulted
in a breach of the Net Cash Requirement by £251,000.[4]
7. A number of factors led to the payment run being
authorised when it should not have been: weaknesses in the processes
for the calculation of cash available; unfamiliarity with the
Supply process; and a lack of timely review by management. Another
contributory factor was changes to payment performance targets.
In March 2010, the Government amended the target payment terms
to suppliers from ten days to five days. As a result, the Board
worked to pay as many creditors as possible before the year end.
8. Although the specific cash breach was caused by
a failure of year end financial controls, there is also an ongoing
risk around the management of Supply limits throughout the period.
The cash management processes operating throughout the year meant
that there was a real risk of exceeding the approved limits at
year end. This risk materialised in 2009-10 and the management
review processes failed to prevent the cash excess.
9. The Board has undertaken a number of actions to
ensure that a similar event does not occur including increased
awareness of the cash limit within the finance team, enhanced
controls procedures and documentation, and an Internal Audit report
to identify any further improvements. Management of financial
resources will become even more important in 2010-11, particularly
as the Statistics Board receives significant additional funding
for the 2011 Census.
Government Actuary's Department (GAD): Excess
on Request for Resource, Administration Budget and Net Cash Requirement
10. During autumn 2009, GAD became aware of an unexpected
liability to an employee who has been on long-term sick leave
since 2005-06. The former employee had been assessed as eligible
for lifetime injury benefit payments, backdated to the start of
his sickness absence, due to events that occurred prior to this
date. Amounts paid out by the Department during 2009-10 as a result
of this award totalled £186,510.
11. In accounting for future costs relating to this
liability, GAD concluded that, at the balance sheet date, it had
a "present obligation" arising from a "past event"
under accounting standards to make future payments. GAD had estimated
the future cost of the benefit payments to be £571,000, and
created a provision in the accounts for this amount.[5]
12. It is the need to account for the costs relating
to this one-off event that has led to the Resource Excess of £747,000,
and the administrative nature of the provision also means that
GAD breached its Administration Budget by £741,000. It was
not possible for the Department to seek additional funds to cover
this provision in the Spring Supplementary Estimates, as, at the
date that the Estimate had to be submitted, uncertainties surrounding
the timing and amount of the provision still existed.
13. GAD also breached its Net Cash Requirement by
£67,000 as cash flow at the year end was insufficient to
meet the Department's obligations and repay an advance from the
Contingencies Fund in full.
14. As noted above, GAD incurred unexpected expenditure
in relation to the injury benefit award. Although the Department
knew that £176,185 had been paid out in respect of this liability
prior to 1 January 2010, the opportunity to request extra cash
to cover these payments as part of the Spring Supplementary Estimates
was not taken. A further factor contributing to the excess was
that the cash forecasting and budgeting process had not been fully
realigned with the increased level of business and the corresponding
need for increased levels of working capital.
15. To help improve the working capital levels, the
Comptroller and Auditor General has indicated that GAD should
not only seek to secure extra cash through the Estimates process
but also review its credit control policies to ensure debts, especially
from other Government Departments, can be collected in a timely
manner. Invoices overdue at year-end from other Government Departments
totalled £206,000 (11% of total debtors). If these amounts
had been collected, GAD would not have exceeded its Net Cash Requirement.
16. The breach of the resource, administration and
cash limits was due to a one-off event outside of GAD's control.
Going forward, the Comptroller and Auditor General has indicated
that GAD needs to enhance its working capital management procedure
to account for its increased levels of business and to seek additional
cash in periods of growth where needed.
1 Central Government Supply Estimates 2009-10,
February 2010, HC 257 Back
2
Standing Orders of the House of Commons Public Business,
April 2010 (New Parliament), HC 539 Back
3
The amount of £747,000 is required to be voted to meet the
Government Actuary's Department's excess resource consumption
and so no additional resources are required for the £741,000
breach of the Administration Budget. Back
4
The Statistics Board Resource Accounts 2009-10, HC 305 Back
5
Government Actuary's Department Resource Accounts 2009-10,
HC 116 Back
| 
