Conclusions and Recommendations
1. The Teachers' Pension Scheme (England &
Wales) breached its Resource Annually Managed Expenditure limit
by £398 million. The £398 million breach of the
authorised limit arose due to an error in the forecast interest
charge incurred on the pension liability. In calculating its submission
for the 2013-14 Supplementary Estimate, the Scheme failed to update
the 2012-13 closing liability balance for the final Government
Actuary's Department (GAD) valuation of the pension scheme, which
meant that the opening balance for 2013-14 did not include a £17
billion actuarial adjustment included in GAD's 2012-13 end of
year report. As the liability was understated in the model used
to prepare the Supplementary Estimate, the forecast interest on
the liability was too low, resulting in excess expenditure of
£398 million. Following an internal audit investigation,
the Accounting Officer of the Department for Education, who is
responsible for the Teachers' Pension Scheme, has undertaken that
the Department will develop a new, fit for purpose, forecasting
model; as well as a more robust and consistent approach to reviewing
its accuracy. Under the terms of the Standing Order of the
House of Commons number 55(2)(d), we recommend that Parliament
provides the additional resources by means of an Excess Vote,
as set out in Figure 1 on Page 7.
2. Given the size of this excess, we expect the
Department for Education, as managers of the Teachers' Pension
Scheme, to write to us setting out the progress it has made on
developing a new forecasting model.
3. The Department for Education breached its
Resource Annually Managed Expenditure limit by £166 million.
The Department underestimated by £104 million the increases
to pension costs for staff in academies and in the Children and
Family Court Advisory and Support Service. In addition, depreciation
and impairment costs incurred by academies were £50 million
higher than anticipated and expected releases of provisions of
£12 million within the Group did not arise, bringing the
total overspend to £166 million. The £104 million underestimation
of pension costs and the £50 million underestimation of depreciation
and impairment costs arose primarily due to the financial
management and accountability challenges faced by the Department
as a result of the requirement to consolidate academy trusts into
its financial statements. This is a continuation of issues arising
with the previous year's financial statements, on which we reported
and made recommendations in June 2014.[1]
Under the terms of the Standing Order of the House of Commons
number 55(2)(d), we recommend that Parliament provides the additional
resources by means of an Excess Vote, as set out in Figure 1 on
Page 7.
4. The Charity Commission exceeded its Capital
Departmental Expenditure limit by £153,000. The £153,000
breach was due to the Commission not including some project management
costs for the replacement of its case management system within
its supplementary estimate of its Capital Departmental Expenditure
Limit. It classified these costs as revenue, when they should
have been treated as capital. In his Governance Statement, the
Accounting Officer undertook to review the Commission's processes
for identifying and monitoring capital expenditure; and to maintain
regular dialogue with the NAO on technical accounting treatments
to avoid a re-occurrence of the mis-classification error. Under
the terms of the Standing Order of the House of Commons number
55(2)(d), we recommend that Parliament provides the additional
resources by means of an Excess Vote, as set out in Figure 1 on
Page 7.
5. The Wales Office breached its Resource
Annually Managed Expenditure limit by £723. The Wales
Office breached its provision to meet the costs of early retirements
that had been agreed in previous years. All control totals are
absolute limits and so, even when exceeded by small amounts, result
in an excess vote. The Accounting Officer has reviewed the circumstances
surrounding the small breach, and made appropriate disclosures
in his Governance statement. Under the terms of the Standing
Order of the House of Commons number 55(2)(d), we recommend that
Parliament provides the additional resources by means of an Excess
Vote, as set out in Figure 1 on Page 7.
6. HM Treasury should continue to regularly monitor
the progress departments are making against their Estimates during
the year and, where possible, take appropriate action to prevent
bodies exceeding their provision. HM Treasury should also take
stock on an annual basis of what lessons can be learnt from the
prior year's excesses, the effectiveness of the spending controls
in place and whether or not these need to be strengthened, and
where necessary issue revised guidance to supply financed entities.
1 Committee of Public Accounts, Education Funding Agency and Department for Education financial statements 2012-13, HC 1063, 10 June 2014 Back
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