Spending Review 2010
Further supplementary written evidence submitted by
Research Councils UK (SR 02a)
Q1: The Committee would like to know in detail what steps RCUK is taking to ensure that the SSC ceases to report losses in its accounts? Can RCUK provide an assurance that a break even position will be reached in 2010-11?
The RCUK SSC Ltd follows Treasury Fees and Charges Guidance in dealing with its public sector customers. As such it does not look to make a profit or loss from trading merely to recover costs. In the first two years of operations small losses accumulated, exacerbated by audit adjustments in 2009/10. In 2010/11 charges are being adjusted to bring the cumulative position back into balance
Q2: Can RCUK confirm that the control and assurance issues relating to the SSC reported in the 2009-10 accounts, specifically those in the Accounting Officer’s Statement of Internal Control, have now been resolved, and will not delay the 2010-11 annual accounts?
The SSC is still undergoing its roll-out phase, with major functionality releases and Research Councils taking up service in December 2010, January 2011 and even March 2011. This would put great stress on any organisation’s internal controls and capabilities.
As joint funders and owners of RCUK SSC Ltd the final accounts of all the Research Councils are interdependent with each other and those of RCUK SSC Ltd.
In the face of the challenges from last year and the continued roll-out, the Research Councils have been working together alongside Internal Audit, NAO and the SSC to rectify the control issues and to coordinate the final account timetables of the SSC and all individual Research Councils.
As part of this coordinated plan, RCUK SSC Ltd plans to deliver draft accounts to NAO on the 16th May, so that any information relating to its performance will be available in time to ensure that all Research Councils submit their 2010/11 accounts in line with the statutory timetables.
Q3: Can each Research Council confirm that it is now receiving appropriate financial and other management information from the SSC that fully meets its management and reporting needs, and that the arrangements put in place in 2009-10 for bespoke financial reporting and additional checks, have been discontinued?
The establishment of the SSC has been complex and demanding and there are some issues still being worked on. The Research Councils now receive information through automated processes that is adequate for the majority of purposes for most Councils. It is currently supplemented where necessary by bespoke financial reporting; this will be phased out as further reporting systems within the SSC are developed. For example, the reporting facilities currently available do not achieve all the level of detailed functionality that was required in the specification. Management information (MI) on finance and procurement activities and key performance indicators (KPIs) are directly available from the SSC, and progress is being made in extending the coverage of such routine MI on throughput and service delivery. The current range of KPIs being offered is not adequate but is also subject to further planned review and development with the SSC. The delivery of accurate and timely MI remains of critical importance and it is central to a successful year-end close of individual Research Councils and RCUK SSC Ltd.
Q4: Can each Research Council confirm that principal investigators for individual research council funded projects now have access to sufficient financial information from the SSC in order to carry out effectively their responsibilities?
The transition of processes to RCUK SSC Ltd does not impact directly on the ability of most Principal Investigators (PIs) to undertake Research Council funded research. Management Information (MI) available to PIs on grant-funded research projects is virtually unaffected by RCUK SSC Ltd changes, as they use the Research Councils Joint Electronic Submission (Je-S) or the Electronic Application and Assessment (EAA – the MRC equivalent) systems. However, for staff employed directly by Research Councils (in their Institutes/Units) who do not yet have access to full reporting functionality, local arrangements have been in place to provide some confidence in financial forecasts, but this is neither satisfactory nor sustainable. MI for grant and project financial reporting forms a significant component of the portfolio and the production of usable MI for this key function is still awaited in some areas.
Q5: Can each Research Council provide a figure for the additional expenditure each incurred in 2009-10, because of the need to compensate for the problems with the SSC’s assurance, control and information systems?
AHRC: Additional costs to the AHRC are estimated to have been £5k in additional external audit costs and 2.2 FTE in HR at a cost of £12k.
BBSRC: While BBSRC has committed resource where appropriate for working with the SSC, this is difficult to quantify overall.
EPSRC: Additional agency staff costs of c£12k were incurred in 2009/10 putting additional controls in place. In addition extra direct costs charged to that financial year relating to additional external spend amounted to £40k on additional external audit costs incurred by the NAO and their sub contractor KPMG.
ESRC: Additional direct staff costs incurred within ESRC during 2009/10 on these areas amounted to roughly £26k – primarily due to extra reporting, analysis and control activities. This figure is made up of:
(i)
£5.6k for Finance staff (0.45 FTE for 5 months post migration period in 09/10 after November 2009), and
(ii)
£20k in HR (0.8 FTE for 12 months period post migration in Feb 2009).
In addition extra direct costs charged to that financial year relating to additional external spend amounted to £20k on additional external audit costs incurred by the NAO and their sub contractor KPMG.
MRC: MRC was not part of the SSC in 2009/10.
NERC: NERC has not recorded any additional expenditure attributable to problems with SSC assurance, control and information systems. The costs are less tangible in that respect and include additional time worked (either as flexi or without recompense) or a reduction in support for more value-adding business development. However, NERC is considering an option to conduct Oracle and MI training independently of the SSC to address the shortfall in its professional user groups.
STFC: Only HR and payroll services were provided to STFC by the SSC in 2009/10 and the cost of validating these services is minimal.
Q6: Has the late payments of invoices by the STFC to scientific institutions and facilities resulted in any additional financial costs being incurred?
STFC is not aware that any financial costs have been incurred, except the reimbursement of a few non-employees for bank charges.
Q7: The Committee notes that the STFC’s 2009-10 accounts received a qualified opinion from the auditor, because of issues relating to the valuation of the investment in the Institut Laue-Langevin. Could STFC provide an assurance that the valuation issues will be resolved before the 2010-11 accounts are produced, and that there will be no delay in presenting those accounts?
A qualified opinion was received from the auditors due to two factors:
(i)
Institut Laue-Langevin (ILL) accounts were qualified as the fixed asset value included was not supported by a robust inventory; and
(ii)
ILL accounts were prepared in accordance with French accounting principles which provide a different accounting framework from International Financial Reporting Standards (IFRS).
ILL started to address the fixed asset recording issue in 2009 and work was expected to be completed by the end of December 2010. It is anticipated that the qualification on the ILL accounts will be lifted for the consolidation into the 2010-11 STFC accounts but we cannot give an assurance on this until the ILL external audit is completed in summer 2011. ILL has stated that it will not be converting to IFRS until 2011 so this element of the STFC qualification will remain in 2010-11 (and possibly beyond).
Research Councils UK
March 2011
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