Department of Health and Social Care 2021–22 Annual Report and Accounts

This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.

Sixty-Second Report of Session 2022–23

Author: Committee of Public Accounts

Related inquiry: DHSC Annual Report and Accounts 2021-22

Date Published: 5 July 2023

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Contents

Introduction

The Department of Health and Social Care leads the health and care system in England. The Comptroller and Auditor General (C&AG) qualified his audit opinion on the Department’s 2021–22 accounts for several reasons. There was insufficient evidence to support; the Core Department & Agencies’ and Group’s consumables inventory balance of £1.36 billion at 31 March 2022 and £3.6 billion at 31 March 2021; £1.56 billion of inventory impairments in 2021–22 and £9.0 billion in 2020–21; inventory consumed during 2021–22 of £8.0 billion and £6.1 billion in 2020–21; and the £1.2 billion onerous contract provision recognised by the Department for inventory purchased but not received as at 31 March 2021.

UKHSA was created on 1 April 2021, becoming fully operational on 1 October 2021 when it became responsible for the health protection functions of Public Health England, NHS Test and Trace and the Joint Biosecurity Centre. The C&AG disclaimed his opinion on the 2021–22 UKHSA Accounts, and this led to him to qualifying the transactions and balances relating to UKHSA in the Department’s Group Accounts as insufficient evidence was provided. This also led to a regularity qualification as there was not sufficient evidence to demonstrate that the spend incurred was applied to the purposes intended by Parliament and conformed with the authorities which govern it. In addition, Parliament authorised a Resource Non-Budget Expenditure limit of £Nil for the Department in 2021–22. Against this limit, the Department incurred an outturn of £2.457 billion, exceeding the authorised limit by £2.457 billion and causing an Excess Vote and a qualification of the C&AG’s opinion on regularity.

Conclusions and recommendations

1. Three years after the start of the pandemic, the Department still does not have adequate controls over its PPE and there continue to be high ongoing storage and disposal costs for unusable items. In the past two years, the Department has written off £14.9 billion of inventory, which included PPE (£9.9 billion), COVID-19 medicines (£2.6 billion) and COVID-19 vaccines (£1.9 billion). This write off was due to the Department overpaying for items at the height of the pandemic and over ordering of significant quantities of PPE that cannot or will not be used. The Department also purchased excess levels of COVID-19 medicines and vaccines which in hindsight are unlikely to be used. The Department has vast quantities of unusable and unneeded PPE in storage waiting for disposal by recycling or burning for energy. It continues to have very high storage and disposal costs for PPE, which it estimates will cost £319 million over the next few years. It is three years since the start of the pandemic and the Department still does not have controls over its PPE. It is still unable to perform proper stocktakes to confirm what items of PPE it is holding and the condition of these items at 31 March 2023. Large quantities of PPE remain in inaccessible piles of storage containers which the Department estimates would cost £70 million to move and open to perform the necessary stock counts. The Department continues to review its PPE contracts to identify if money can be recovered for the taxpayer, with at least a quarter of PPE contracts entered into being investigated by the Department.

Recommendation 1: The Department should set out in its Treasury Minute response how it will ensure that:

  • it puts in place adequate inventory controls over its PPE;
  • its disposal plan for unusable inventory is carried out in the most appropriate and cost-effective way; and
  • it recovers maximum value from suppliers which failed to deliver against their contractual terms.

We expect the Department to be able to report its progress on these matters to the Committee at a future evidence session.

2. The Department does not yet have a clear plan in place for a national emergency stockpile for any future pandemic. The stockpile held by the Department was invaluable for the first few months of the COVID-19 pandemic but it does not currently have a plan for the level or composition of the desired stockpile for any future pandemics. The Department was limited in its response to COVID-19 by the lack of domestic production of PPE and it has advised that it is working on strengthening domestic PPE supply chains. As well as the significant volumes of PPE it purchased, and is now disposing of, the Department has entered into contracts for both COVID-19 vaccines and COVID-19 medicines which commit it to procure future stock. It recognised impairments in 2021–22 of £1.7 billion for COVID-19 vaccines and £1.8 billion for COVID-19 medicines with a limited shelf life which it now does not expect to use.

Recommendation 2: The Department should develop and implement a clear, cost-effective plan for a national emergency stockpile to respond to any future pandemic.

3. There was a fundamental absence of formal governance arrangements at UKHSA and the Department failed to respond to the heightened risks of setting up a new and complex organisation at pace. UKHSA was created on 1 April 2021 with unsatisfactory governance arrangements. Although the Non-executive Chair and Chief Executive were in post from 1 April 2021, no more non-executive directors were appointed until April 2022, one month after its first year-end. The lack of governance resulted in inadequate scrutiny and assurance of UKHSA’s operations. The Chief Executive was appointed into a role, as Accounting Officer and Chief Executive, of which she had no previous experience and relied heavily on the Non-executive Chair for support stepping into this position. The Non-executive Chair’s role therefore shifted from one which should have been scrutinising management to one of an executive member of the organisation. The Department failed to support UKHSA, taking a light touch approach to the governance arrangements in place, identifying risks but failing to make any arrangements to mitigate these issues. In addition, the Department did not provide UKHSA with a budget until after the year end. UKHSA’s Non-executive Chair told us that this meant that the function of the new organisation remained uncertain and that the mandate of any non-executives would not have been sufficiently clear.

Recommendation 3: The Department must work with UKHSA to ensure that the governance arrangements at UKHSA are assessed, rectified and that the remaining vacancies within its governance structure are resolved as a matter of urgency.

4. UKHSA had a fundamental weakness in financial controls and processes which resulted in it being unable to prepare auditable accounts. On 1 October 2021, the day that it became operational, UKHSA implemented a new IT accounting system and transferred the operations of its three predecessors onto this new system. At the same time, it was responding to the COVID-19 pandemic and managing rapid large-scale changes in spending and headcount. Implementing a new IT system is always a challenge, but these circumstances brought significant additional risks and shortcomings in the quality and timeliness of financial management of the organisation. UKHSA did not have effective control over its cash management process and did not even perform bank reconciliations, one of the most basic financial controls for an organisation. It also made an operational decision to not perform stocktakes on the emergency stockpile items transferred to it; even though weaknesses in controls resulted in no effective stock counts having being undertaken on the Test and Trace inventory transferred to UKHSA or at the year end. These were just three of the many issues which meant there was a fundamental absence of financial control within the organisation, which resulted in the C&AG taking the very unusual step of disclaiming his opinion on the financial statements.

Recommendation 4: UKHSA should urgently ensure robust financial controls and processes are put in place and that there is a clear plan in place to deliver unqualified accounts.

5. The Department has not yet developed a clear plan to remove the audit qualifications and deliver its accounts to a pre-summer recess timetable. The Department has prepared its accounts in exceptional circumstances for the past two years. It laid its 2021–22 Annual Report and Accounts on 26 January 2022, five days ahead of the statutory deadline, and as in 2020–21, they were heavily qualified by the C&AG. For 2022–23, it plans to bring forward its laying of its Annual Report and Accounts in Parliament before the 2023 Christmas recess but there are a number of challenges in doing this. It is imperative that the Departments accounts delivery gets back on track to enable it to lay its Annual Report and Accounts ahead of the summer recess. Disappointingly, it does not yet have a credible plan to do this. The Department faces challenges from gaps in its finance function and significant problems in timely delivery in the local audit market which are required for its group accounts, which will impact on its ability to prepare more timely accounts. We have reported separately on the challenges of timeliness of local auditor reporting, which includes the audit of local NHS bodies that form part of the Departmental group.

Recommendation 5: The Department must develop and implement a plan to remove the qualifications from the Departmental Group accounts and work with NHS England to restore timely financial reporting and local audit across the NHS, to support laying of the Departmental Group accounts to a pre-summer recess timetable.

6. There have been repeated and unacceptable governance and accounting failures within the Departmental Group which has led to poor financial control, undermined Parliamentary accountability, and money being spent without Parliamentary approval. The Department has failed to implement adequate financial control across the Group which has resulted in numerous qualifications of both ‘true and fair’ and ‘regularity’ opinions. The Department’s own Core and/or Group accounts have had multiple qualifications over the last three years. The UKHSA accounts were disclaimed in 2021–22, the year it was established. NHS Property Services accounts were qualified in 2021–22, NHS England had regularity qualifications in 2020–21 and in 2021–22, and issues within University Hospitals of Leicester NHS Trust resulted in a disclaimer in 2019–20 and a delayed adverse opinion in 2020–21.

Recommendation 6: The Department must set out how it will establish sufficient capability to deliver effective oversight across its Group to manage emerging and developing issues and ensure it avoids future financial and governance failings.

1 Inventory procurement in response to COVID-19

1. On the basis of a report by the Comptroller and Auditor General (C&AG), we took evidence from the Department of Health and Social Care (the Department) and the UK Health Security Agency (UKHSA) on the Department’s Annual Report and Accounts for 2021–22.1

2. The Department leads the health and care system in England. The Department has reported that COVID-19 continued to be the most significant challenge faced by both the country and public sector in a lifetime. In this context the Department has acknowledged “2021–22 continued to prove a challenging backdrop against which the Annual Report and Accounts were produced”.2

3. The C&AG qualified the Department’s 2021–22 Annual Report and Accounts in several respects. This included the C&AG’s ‘true and fair’ opinion over the year-end inventory balance in the Core Department & Agencies’ and Group’s Statement of Financial Position, £1.36 billion at 31 March 2022 (and £3.6 billion at 31 March 2021). There was also insufficient evidence to support the completeness and accuracy of the associated transactions in the Core Department & Agencies’ and Group’s Statement of Comprehensive Net Expenditure including impairments and write downs recognised of £1.56 billion and inventory consumption of £8.0 billion for 2021–22 (and impairments and write downs recognised of £9.0 billion and inventory consumption of £6.1bn for 2020–21). The £1.2 billion onerous contract provision recognised by the Department for inventory purchased but not received as at 31 March 2021 was also inadequately supported by appropriate evidence.3

Personal Protective Equipment - write offs, storage, and disposal

4. The Department reported £14.9 billion of PPE and other inventory write offs over two years, 2020–21 and 2021–22,4 including £9.9 billion relating to PPE, £2.6 billion relating to COVID-19 medicines, and £2.0 billion relating to COVID-19 vaccines. An £8.9 billion write off in respect of the PPE and other inventory was recognised in the 2020–21 accounts, and the Department estimates that there was a further £6 billion write off of PPE and other inventory in 2021–22. These write offs have arisen from reductions in market prices since the goods were purchased5, items the Department no longer expects to use, and onerous costs relating to PPE, vaccines and medicines for items it had agreed to purchase before 31 March 2022, but which it now does not expect to use.6

5. The Department reported, as at 31 March 2022, it estimated it would cost £319 million over the next few years for future storage and disposal costs for the excess and unusable PPE.7 The cost of storage and associated charges for its PPE from 1 April 2022- 31 December 2022 was £199.5 million.8 We questioned the Department on its progress in disposing of the PPE it had identified as either unusable within the NHS or that it had excess quantities of. The Department told us that it is disposing of 20,000 pallets a month enabling it to reduce the number of storage sites it is using.9 It stated that this has resulted in spending £25.7 million per year less in storage costs. In the period March-December 2022 the Department disposed of 208,000 pallets, 109,000 pallets were recycled, and 99,000 pallets were burned.10 We questioned the Department on the environmental impact of burning PPE. The Department stated that it was more environmentally friendly than burning coal and that it was value for money to burn PPE as storage costs are being reduced more rapidly.11 We asked the Department whether it was taking appropriate action to recover as much value as possible from the PPE it holds and it confirmed that there is a strategy in place to reduce what is held by the Department in line with a hierarchy of recycle, burn for energy and then landfill.12

6. The Department does not have adequate controls in place over its inventory, including PPE. The C&AG qualified his ‘true and fair’ opinion in 2021–22, for the second year, on the Departments financial statements as the Department was unable to perform complete effective physical stock-counts at the 31 March 2022 year-end to verify the quantity and quality of the consumables inventory (which includes PPE) that it held, despite this being two years after the start of the pandemic.13 The Department confirmed that it would not be performing a full stock take as at 31 March 2023, and stated that it would cost £70 million to count all of the stock it held in warehouses and containers.14

7. The Department continues to review the PPE contracts it entered into to identify suppliers that did not deliver against their contractual terms. By February 2022, the Department had negotiated the cancellation or variation of contracts to reduce the original supply of PPE by 1.21 billion items with an associated reduction in value of £572 million.15 There have been 60 contracts identified by the Department where there was dissatisfaction due to required standards, quality control or due to contractual breach. The value of these contracts is £1.77 billion. In addition, there were twelve contracts held by the Department’s subsidiary Supply Chain Coordination Ltd which were in dispute as at 31 December 2022, where suppliers were under investigation as they were in breach of their obligations.16 The Department confirmed that on resolution of the disputes the appropriate information will be released to the public.17

Stockpiling for a future emergency

8. As well as the significant volumes of PPE it purchased, and is now disposing of, the Department entered into contracts for both COVID-19 vaccines and COVID-19 medicines which commit it to procure future stock. It recognised impairments on these contracts in 2021–22 of £1.7 billion for COVID-19 vaccines and £1.8 billion for COVID-19 medicines with a limited shelf life which it now does not expect to use.18 We questioned the Department on why the impairments of COVID-19 vaccines and medicines were required and it confirmed that medicines were purchased as an ‘insurance policy’ at the beginning of the Omicron wave as there were concerns that it would be a vaccine-escaping variant and this would be protection for the most vulnerable. The Department however continued to explain that it would not expect to have such impairments in the future as there is no expectation that it would have to sign ‘onerous’ contracts again.19

9. In our June 2022 report on the Department’s 2020–21 Annual Report and Accounts we noted the lack of planning for how big a PPE stockpile needed to be, and also the need to build greater resilience into the supply chain.20 We asked the Department again about the need and its future plans for stockpiling items that may be required in the event of a future pandemic. The Department stated there are a number of decisions yet to be made regarding what is included in a stockpile for future pandemics.21 It said that the stockpile held was invaluable for the first few months of the COVID-19 pandemic.22 However, one of its big limitations was the ability to create domestic supply and it advised us that it is working on strengthening domestic PPE supply chains.23 The Department confirmed that, at the time we took evidence in March, it had at least four months’ worth of PPE, particularly inventory, in its stockpiles.24

2 UKHSA

10. On 18 August 2020, the Department announced a reorganisation of public health in England. The UK Health Security Agency (UKHSA) was subsequently established as an Executive Agency of the Department on 1 April 2021 with its Chair and Chief Executive appointed on the same day. It became fully operational on 1 October 2021, when it became responsible for the health protection functions of the former Public Health England (‘PHE’) and became responsible for NHS Test and Trace and the Joint Biosecurity Centre, both of which had previously been divisions of the Department.25

Establishment of UKHSA

11. The Department told us that there was an operational imperative to establish UKHSA before the winter of 2021–22, which was driven by the state of the pandemic and the need to create a single source of advice for Ministers and a single operational response.26 The establishment of UKHSA was a complex task. The Chair of UKHSA compared it to creating a FTSE 50 sized company through a merger of three entities, with different systems and cultures, in six months.27

12. The complexity was compounded by the changing remit for UKHSA and by policy decisions which had significant implications for UKHSA’s size and structure. For example, in March 2022 with the implementation of the ‘living with covid’ strategy, UKHSA began a restructure which resulted in it decreasing its workforce from 18,000 to 6,700 full-time equivalents.

13. On 1 October 2021, UKHSA had a Chief Executive and a non-executive Chair, both of whom had been appointed on 1 April 2021. UKHSA told us that the Chief Executive, despite her expertise in the science of public health, did not have experience in the other elements of running a complex organisation. The Chair of UKHSA therefore saw his role during the first 12 months as providing the Chief Executive with support in some of the functions where she had less experience, such as technology operations and procurement. This resulted in his role departing from the traditional Chair’s role of challenging and scrutinising management to taking more of an executive role.28

14. No additional non-executive directors were appointed until after the 2021–22 financial year. As a result, UKHSA did not comply with the principles of HM Treasury and the Cabinet Office’s Corporate governance in central government departments: code of good practice and UKHSA’s Head of Internal Audit concluded that, in their opinion, UKHSA’s corporate governance arrangements were unsatisfactory.29 The Department acknowledged that this was not normal and that in more ordinary circumstances it would have tried to establish a new entity at the beginning of the financial year with all necessary governance arrangements in place. In the Department’s view, the circumstances of mid-2021 meant this was not possible.30

15. We asked the Department whether, given the risks associated with the establishment of UKHSA, it had considered an alternative timing for establishing the new organisation to ensure that an appropriate governance framework could have been put in place. The Department said that its priority was ensuring that it had the most effective system in place for managing the pandemic during the winter of 2021–22.31

16. The absence of governance arrangements at UKHSA, during a time of significant change and operational challenge, meant that there was inadequate scrutiny and oversight over UKHSA. We asked the Department what it had done to support UKHSA to help mitigate the risks associated with the absence of governance arrangements. The Department said that it has done this in a very light-tough way.32 When we asked for detail on this light touch involvement, the Department said that its own Audit and Risk Committee had discussions on two occasions about the risks facing UKHSA in its establishment.33

Financial management and control

17. The C&AG’s audit of UKHSA’s first set of accounts resulted in him disclaiming his opinions.34 This means that he was unable to give an opinion on whether the accounts were ‘true and fair’ or on whether the transactions recorded in the accounts were applied to the purposes intended by Parliament (‘regularity’).

18. The UKHSA accounts were ‘disclaimed’ as: the inventory transferred from Public Health England (£254 million) and the Department (£794 million) to UKHSA on 1 October 2021 was not subject to stock counts, £3.3 billion of consumption of Test and Trace inventory was not supported by records and the inventory held as at 31 March 2022 was not subject to stock counts until several months after the year end; UKHSA was unable to provide sufficient evidence to support the £1.9 billion accruals balance as at 31 March 2022 and £3.0 billion expenditure on the purchase of goods and services during 2021–22; and UKHSA was unable to provide sufficient evidence to support journal adjustments made to the accounts.35

19. It is very unusual for an auditor to disclaim their opinion. No C&AG has disclaimed an audit opinion since January 2006, concerning the Home Office resource accounts 2004–05.36 UKHSA confirmed that they do not anticipate being able to produce accounts which will be unqualified until 2023–24 at the earliest.37

20. There were multiple root causes of UKHSA’s inability to produce auditable accounts. One of the key causes was the accounting system that UKHSA implemented on 1 October 2021. Implementing a new accounting system is a significant challenge, even more so half-way through the financial reporting period when merging three entities and managing a large-scale change in spending and headcount. The C&AG reported that UKHSA struggled to provide records and populations from the accounting system which reconciled back to UKHSA’s accounts and that this implied shortcomings with how the system had been configured.38 The issues with the system resulted in UKHSA failing to perform monthly bank reconciliations, one of the most basic financial controls for any organisation and a critical component of cash management.39

21. We asked UKHSA whether it would have been better to use one of the systems used by its predecessor entities rather than implementing the new system on the day it became operational. UKHSA said that it had inherited the decision to implement the new system from Public Health England and acknowledged that, in hindsight, it may have been preferable to run existing systems side by side.40

22. UKHSA also experienced significant difficulties with staffing which compromised its ability to provide evidence and explanations to support the figures reflected in the accounts. The C&AG reported that one barrier to his ability to obtain evidence to allow him to give an audit opinion was the transitory nature of UKHSA’s workforce. This meant that officials who had prepared figures for the financial statements had left the organisation by the time of the audit and were not able to provide explanations and evidence to support those figures.41 During our evidence session, UKHSA echoed this, noting that from April to August 2022 it reduced its headcount by almost two thirds resulting in a loss of continuity of knowledge to help address the NAO’s audit queries.42 UKHSA also stated that two of the predecessor entities to UKHSA, NHS Test and Trace and the Joint Biosecurity Centre, did not have a history of budget and accounting discipline which further contributed to the difficulties in providing evidence and explanations.43

23. There were also operational decisions which UKHSA and the Department took which meant that some form of accounts qualification was always likely. The Department decided not to count the stockpile of emergency goods transferred from Public Health England to the UK Health Security Agency on 1 October 2022. The Department’s view was that counting these stocks on the date of transfer would have compromised the autumn 2021 vaccine roll-out because it would have required the closure of warehouses.44 However, there were other inventories transferred to UKHSA, for example the NHS Test and Trace inventories transferred from the Department, where no stock counts were performed because the Department’s inventory management systems were not adequate.45

3 Departmental group oversight

Timely publication of the Annual Report and Accounts

24. To ensure timely accountability for the spending of public funds, Treasury set an administrative deadline of 30 June after the end of the financial year for Departments to publish their Annual Report and Accounts, and no later than parliamentary summer recess in July. The Department has a statutory deadline of 31 January to publish its annual report and accounts.46 The Department laid its 2020–21 Annual Report and Accounts on the statutory deadline of 31 January 2022, and it acknowledged that this was a “incredibly challenging year to produce the Annual Report and Accounts”47. The Department told us in a previous session held on 07 March 2022 that it was working hard to bring the publication of its 2021–22 Annual Report and Accounts forward, with an aim to publish these in November 2022.48 The 2021–22 Annual Report and Accounts were however laid on 26 January 2023, only five days earlier than the prior year.

25. We asked the Department about the timing of the 2022–23 annual report and accounts, the Department confirmed that it was aiming to lay its Accounts before the 2023 Christmas recess and then to gradually improve the timeliness in future years.49 The Department is currently working on a multi-year plan to enable the Annual Report and Accounts to be laid pre summer recess in line with Treasurys expectation, with its aim being to bring forward the laying date by a couple of months each year.50

26. The Department faces two main challenges to bring the audit timetable forward, issues within the Department’s control and issues within the local audit market. The Department acknowledges that it is always looking to build its finance capability and identified three areas where more expertise is needed: financial, commercial and digital. The Department however confirmed it had enough people within the finance team but that its focus was on the financial expertise of non-finance staff.51 There are expected issues in 2022–23 with the introduction of a new accounting standard, IFRS 16, which fundamentally changes the way entities account for leases.52 The written evidence submitted by the Institute of Chartered Accountants in England and Wales (ICAEW) also raises concern with regards to the staffing levels within the finance function.53

27. We questioned the Department on the capacity of other bodies in its Group to prepare their Accounts to the required timescales, as we were aware that a number of bodies did not yet have auditors appointed for 2022–23, and this could have a significant impact on the Department being able to bring the laying date of the Group Annual Report and Accounts forward. The Department confirmed that there will be significantly more accounts preparation and audit issues in 2022–23 as Integrated Care Boards (ICBs) were formed mid-year meaning there are audits to be undertaken of both ICBs and also the former Clinical Commissioning Groups that ICBs replaced. The Department said it was working with the Department for Levelling Up Homes and Communities (DLUHC) to remove barriers to entry for more audit firms to enter the local audit market.54

Financial control across the departmental group

28. The Department and bodies within its Group have had a number of financial governance and accounting failures in recent years. The Department Core and Group accounts have been qualified by the C&AG for the past two years. In both 2020–21 and 2021–22 there was a ‘true and fair’ qualification arising in respect of inventory, this arose as the Department was unable to perform stock takes to evidence the existence, completeness and valuation of inventory.55 The Department acknowledged that the inventory qualification will remain until the Department has disposed of all of the excess and unusable PPE it has.56

29. The C&AG also qualified the Groups ‘other accruals’ in 2020–21 as there was insufficient assurance in respect of existence and valuation of £17.3 billion, the Department accrues expenditure it has incurred but has not yet been invoiced for and therefore a liability which will need to be paid in future. In 2019–20 the C&AG qualified his ‘true and fair’ opinion on the Core Departments ‘other financial assets’ due to a disagreement in the application of financial reporting standard IFRS 9. The Department did not impair the value of the loans to NHS Trusts and Foundation Trusts, resulting in assets being overstated by an estimated £2.2 billion.57

30. Furthermore, the C&AG has qualified his ‘regularity’ opinion on the DHSC Group accounts for the past two years: the Department exceeded its budgetary limit for Resource Non-Budget Expenditure as authorised by Parliament in 2021–22 as a budget of £nil was authorised and the Department incurred an outturn of £2.457 billion; and in 2020–21, the Department spent £1.3 billion on projects they were required to but did not have the appropriate approval from Treasury for, and therefore was irregular, and also in 2020–21 there was insufficient evidence to demonstrate that the expenditure incurred by the Department, particularly on COVID-19 was regular, with the assessment of potential fraud losses being inadequate.58

31. The C&AG being unable to provide an opinion on the UKHSA 2021–22 Annual Report and Accounts59 (see above) resulted in further ‘true and fair’ and ‘regularity’ qualifications on the Departmental Group accounts.60 . We questioned the Department on when it realised that the difficulties inherited by UKHSA would impact on the Group accounts. The Department said that ‘the precise issues’ and the amount of evidence not available to support the audit only became apparent to it in late 2022 and in January 2023, and that it was the NAO’s audit which had revealed these scale of these issues.61

32. There have been other qualifications across the Departmental Group. The NHS Property Services (NHSPS) accounts were qualified in 2021–22 as NHSPS were unable to demonstrate compliance with the Financial Reporting Framework and account for the expenditure, assets and liabilities arising from certain contracts in accordance with IFRS16 Leases. There were 182 rental arrangements with approximate annual payments of £7.7 million, and NHSPS was unable to provide documentation to determine the substance of arrangements.62 The NHS England 2021–22 Annual Report and Accounts ‘regularity’ opinion was qualified by the C&AG as ineligible payments were made to suspended medical practitioners; two suspended medical practitioners received suspension payments, over a number of years, with a combined total of £1 million to which they were not entitled.63 In addition, the C&AG qualified his ‘regularity’ opinion on the NHS England 2020–21 Annual Report and Accounts, also as NHS England failed to comply with Managing Public Money and made payment without Treasury approval for a special severance payment.64

33. At the time of our evidence session, University Hospitals of Leicester NHS Trust (UHL) had yet to publish its 2021–22 Annual Report and Accounts. UHL’s auditor was not able to obtain sufficient, appropriate evidence upon which to form an opinion for 2019–20, and issued an adverse audit opinion for 2020–21, due to system and control weaknesses resulting in material misstatements.65 We asked the Department what oversight it had of other hospitals which may be having similar issues to UHL. The Department advised us that the NHS has a financial oversight framework that looks at financial and performance measures. The Department also advised that it has regular meetings with the NHS, at which it had not been alerted to similar concerns about any other specific trusts.66

Formal minutes

Thursday 22 June 2023

Members present:

Dame Meg Hillier

Sir Geoffrey Clifton-Brown

Mr Jonathan Djanogly

Mr Louie French

Peter Grant

Anne Marie Morris

Sarah Olney

Nick Smith

Declaration of interests

Mr Jonathan Djanogly declared that he is a non-executive director in an investing company which has a minority stake in a company that won covid testing contracts.

Department of Health and Social Care 2021–22 Annual Report and Accounts

Draft Report (Department of Health and Social Care 2021–22 Annual Report and Accounts), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 33 read and agreed to.

Summary agreed to.

Introduction agreed to.

Conclusions and recommendations agreed to.

Resolved, That the Report be the Sixty-second of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Adjournment

Adjourned till Monday 26 June at 4.00pm.


Witnesses

The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.

Monday 20 March 2023

Sir Chris Wormald, Permanent Secretary, Department of Health and Social Care; Shona Dunn, Second Permanent Secretary, Department of Health and Social Care; Andy Brittain, Director General for Finance, Department of Health and Social Care; Ian Peters, Chair, UK Health Security Agency; Professor Dame Jenny Harries, Chief Executive, UK Health Security Agency (UKHSA)Q1–151


Published written evidence

The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.

DRA numbers are generated by the evidence processing system and so may not be complete.

1 Crohn’s and Colitis UK (DRA0003)

2 HFMA Ltd (DRA0004)

3 Institute of Chartered Accountants in England and Wales (DRA0002)

4 Moderna Biotech UK Limited (DRA0005)

5 Smith, Chris (Procurement Consultant at CAS Procurement Consulting Ltd) (DRA0001)


List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2022–23

Number

Title

Reference

1st

Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21

HC 59

2nd

Lessons from implementing IR35 reforms

HC 60

3rd

The future of the Advanced Gas-cooled Reactors

HC 118

4th

Use of evaluation and modelling in government

HC 254

5th

Local economic growth

HC 252

6th

Department of Health and Social Care 2020–21 Annual Report and Accounts

HC 253

7th

Armoured Vehicles: the Ajax programme

HC 259

8th

Financial sustainability of the higher education sector in England

HC 257

9th

Child Maintenance

HC 255

10th

Restoration and Renewal of Parliament

HC 49

11th

The rollout of the COVID-19 vaccine programme in England

HC 258

12th

Management of PPE contracts

HC 260

13th

Secure training centres and secure schools

HC 30

14th

Investigation into the British Steel Pension Scheme

HC 251

15th

The Police Uplift Programme

HC 261

16th

Managing cross-border travel during the COVID-19 pandemic

HC 29

17th

Government’s contracts with Randox Laboratories Ltd

HC 28

18th

Government actions to combat waste crime

HC 33

19th

Regulating after EU Exit

HC 32

20th

Whole of Government Accounts 2019–20

HC 31

21st

Transforming electronic monitoring services

HC 34

22nd

Tackling local air quality breaches

HC 37

23rd

Measuring and reporting public sector greenhouse gas emissions

HC 39

24th

Redevelopment of Defra’s animal health infrastructure

HC 42

25th

Regulation of energy suppliers

HC 41

26th

The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system

HC 44

27th

Evaluating innovation projects in children’s social care

HC 38

28th

Improving the Accounting Officer Assessment process

HC 43

29th

The Affordable Homes Programme since 2015

HC 684

30th

Developing workforce skills for a strong economy

HC 685

31st

Managing central government property

HC 48

32nd

Grassroots participation in sport and physical activity

HC 46

33rd

HMRC performance in 2021–22

HC 686

34th

The Creation of the UK Infrastructure Bank

HC 45

35th

Introducing Integrated Care Systems

HC 47

36th

The Defence digital strategy

HC 727

37th

Support for vulnerable adolescents

HC 730

38th

Managing NHS backlogs and waiting times in England

HC 729

39th

Excess Votes 2021–22

HC 1132

40th

COVID employment support schemes

HC 810

41st

Driving licence backlogs at the DVLA

HC 735

42nd

The Restart Scheme for long-term unemployed people

HC 733

43rd

Progress combatting fraud

HC 40

44th

The Digital Services Tax

HC 732

45th

Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2021–22

HC 1254

46th

BBC Digital

HC 736

47th

Investigation into the UK Passport Office

HC 738

48th

MoD Equipment Plan 2022–2032

HC 731

49th

Managing tax compliance following the pandemic

HC 739

50th

Government Shared Services

HC 734

51st

Tackling Defra’s ageing digital services

HC 737

52nd

Restoration & Renewal of the Palace of Westminster – 2023 Recall

HC 1021

53rd

The performance of UK Security Vetting

HC 994

54th

Alcohol treatment services

HC 1001

55th

Education recovery in schools in England

HC 998

56th

Supporting investment into the UK

HC 996

57th

AEA Technology Pension Case

HC 1005

58th

Energy bills support

HC 1074

59th

Decarbonising the power sector

HC 1003

60th

Timeliness of local auditor reporting

HC 995

61st

Progress on the courts and tribunals reform programme

HC 1002

1st Special Report

Sixth Annual Report of the Chair of the Committee of Public Accounts

HC 50

2nd Special Report

Seventh Annual Report of the Chair of the Committee of Public Accounts

HC 1055

Session 2021–22

Number

Title

Reference

1st

Low emission cars

HC 186

2nd

BBC strategic financial management

HC 187

3rd

COVID-19: Support for children’s education

HC 240

4th

COVID-19: Local government finance

HC 239

5th

COVID-19: Government Support for Charities

HC 250

6th

Public Sector Pensions

HC 289

7th

Adult Social Care Markets

HC 252

8th

COVID 19: Culture Recovery Fund

HC 340

9th

Fraud and Error

HC 253

10th

Overview of the English rail system

HC 170

11th

Local auditor reporting on local government in England

HC 171

12th

COVID 19: Cost Tracker Update

HC 173

13th

Initial lessons from the government’s response to the COVID-19 pandemic

HC 175

14th

Windrush Compensation Scheme

HC 174

15th

DWP Employment support

HC 177

16th

Principles of effective regulation

HC 176

17th

High Speed 2: Progress at Summer 2021

HC 329

18th

Government’s delivery through arm’s-length bodies

HC 181

19th

Protecting consumers from unsafe products

HC 180

20th

Optimising the defence estate

HC 179

21st

School Funding

HC 183

22nd

Improving the performance of major defence equipment contracts

HC 185

23rd

Test and Trace update

HC 182

24th

Crossrail: A progress update

HC 184

25th

The Department for Work and Pensions’ Accounts 2020–21 – Fraud and error in the benefits system

HC 633

26th

Lessons from Greensill Capital: accreditation to business support schemes

HC 169

27th

Green Homes Grant Voucher Scheme

HC 635

28th

Efficiency in government

HC 636

29th

The National Law Enforcement Data Programme

HC 638

30th

Challenges in implementing digital change

HC 637

31st

Environmental Land Management Scheme

HC 639

32nd

Delivering gigabitcapable broadband

HC 743

33rd

Underpayments of the State Pension

HC 654

34th

Local Government Finance System: Overview and Challenges

HC 646

35th

The pharmacy early payment and salary advance schemes in the NHS

HC 745

36th

EU Exit: UK Border post transition

HC 746

37th

HMRC Performance in 2020–21

HC 641

38th

COVID-19 cost tracker update

HC 640

39th

DWP Employment Support: Kickstart Scheme

HC 655

40th

Excess votes 2020–21: Serious Fraud Office

HC 1099

41st

Achieving Net Zero: Follow up

HC 642

42nd

Financial sustainability of schools in England

HC 650

43rd

Reducing the backlog in criminal courts

HC 643

44th

NHS backlogs and waiting times in England

HC 747

45th

Progress with trade negotiations

HC 993

46th

Government preparedness for the COVID-19 pandemic: lessons for government on risk

HC 952

47th

Academies Sector Annual Report and Accounts 2019/20

HC 994

48th

HMRC’s management of tax debt

HC 953

49th

Regulation of private renting

HC 996

50th

Bounce Back Loans Scheme: Follow-up

HC 951

51st

Improving outcomes for women in the criminal justice system

HC 997

52nd

Ministry of Defence Equipment Plan 2021–31

HC 1164

1st Special Report

Fifth Annual Report of the Chair of the Committee of Public Accounts

HC 222

Session 2019–21

Number

Title

Reference

1st

Support for children with special educational needs and disabilities

HC 85

2nd

Defence Nuclear Infrastructure

HC 86

3rd

High Speed 2: Spring 2020 Update

HC 84

4th

EU Exit: Get ready for Brexit Campaign

HC 131

5th

University technical colleges

HC 87

6th

Excess votes 2018–19

HC 243

7th

Gambling regulation: problem gambling and protecting vulnerable people

HC 134

8th

NHS capital expenditure and financial management

HC 344

9th

Water supply and demand management

HC 378

10th

Defence capability and the Equipment Plan

HC 247

11th

Local authority investment in commercial property

HC 312

12th

Management of tax reliefs

HC 379

13th

Whole of Government Response to COVID-19

HC 404

14th

Readying the NHS and social care for the COVID-19 peak

HC 405

15th

Improving the prison estate

HC 244

16th

Progress in remediating dangerous cladding

HC 406

17th

Immigration enforcement

HC 407

18th

NHS nursing workforce

HC 408

19th

Restoration and renewal of the Palace of Westminster

HC 549

20th

Tackling the tax gap

HC 650

21st

Government support for UK exporters

HC 679

22nd

Digital transformation in the NHS

HC 680

23rd

Delivering carrier strike

HC 684

24th

Selecting towns for the Towns Fund

HC 651

25th

Asylum accommodation and support transformation programme

HC 683

26th

Department of Work and Pensions Accounts 2019–20

HC 681

27th

Covid-19: Supply of ventilators

HC 685

28th

The Nuclear Decommissioning Authority’s management of the Magnox contract

HC 653

29th

Whitehall preparations for EU Exit

HC 682

30th

The production and distribution of cash

HC 654

31st

Starter Homes

HC 88

32nd

Specialist Skills in the civil service

HC 686

33rd

Covid-19: Bounce Back Loan Scheme

HC 687

34th

Covid-19: Support for jobs

HC 920

35th

Improving Broadband

HC 688

36th

HMRC performance 2019–20

HC 690

37th

Whole of Government Accounts 2018–19

HC 655

38th

Managing colleges’ financial sustainability

HC 692

39th

Lessons from major projects and programmes

HC 694

40th

Achieving government’s long-term environmental goals

HC 927

41st

COVID 19: the free school meals voucher scheme

HC 689

42nd

COVID-19: Government procurement and supply of Personal Protective Equipment

HC 928

43rd

COVID-19: Planning for a vaccine Part 1

HC 930

44th

Excess Votes 2019–20

HC 1205

45th

Managing flood risk

HC 931

46th

Achieving Net Zero

HC 935

47th

COVID-19: Test, track and trace (part 1)

HC 932

48th

Digital Services at the Border

HC 936

49th

COVID-19: housing people sleeping rough

HC 934

50th

Defence Equipment Plan 2020–2030

HC 693

51st

Managing the expiry of PFI contracts

HC 1114

52nd

Key challenges facing the Ministry of Justice

HC 1190

53rd

Covid 19: supporting the vulnerable during lockdown

HC 938

54th

Improving single living accommodation for service personnel

HC 940

55th

Environmental tax measures

HC 937

56th

Industrial Strategy Challenge Fund

HC 941


Footnotes

1 Report by the Comptroller and Auditor General, Department of Health and Social Care Annual Report and Accounts 2021–22, HC1043,26 January 2023 (pages 261–267)

2 Department of Health and Social Care Annual Report and Accounts 2021–22,HC1043, 26 January 2023, page 2

3 DHSC 2021–22 ARA, page 252

4 C&AG’s Report, para 3

5 C&AG’s Report, para 4

6 C&AG’s Report para 3

7 C&AG’s Report, para 4

8 Letter from DHSC to PAC, dated 16 March 2023

9 Q 84

10 Letter from DHSC to PAC, dated 16 March 2023

11 Qq 96, 100

12 Qq 98, 99

13 C&AG’s Report, para 5

14 Q 90

15 DHSC 2021–22 ARA, page 57

16 Letter from DHSC to PAC, dated 16 March 2023

17 Q 107

18 DHSC 2021–22 ARA, page 364

19 Q 82

20 Committee of Public Accounts, Department of Health and Social Care 2020–21 Annual Report and Accounts, Sixth Report of Session 2022–23, HC 253, 10 June 2022

21 Q 101

22 Q 117

23 Q 117

24 Q 80

25 Report by the Comptroller and Auditor General, UK Health Security Agency Annual Report and Accounts 2021/22, HC 1086, 26 January 2023, p. 91.

26 Qq 14, 27

27 Q 17

28 Q 50

29 C&AG’s Report on UKHSA, p. 92.

30 Q 14

31 Q 25

32 Q 20

33 Q 35

34 Q 36

35 UKHSA ARA 2021–22 pages 86–87

36 Report of the Comptroller and Auditor General, Home Office Resource Accounts 2004–05, HC 826, 31 January 2006, pp. 24–29.

37 Q 64

38 C&AG’s Report on UKHSA, p. 94.

39 C&AG’s Report on UKHSA, p. 94.

40 Q 21

41 C&AG’s Report on UKHSA, p. 93.

42 Q 22

43 Q 17

44 Qq 38, 51

45 C&AG’s Report on UKHSA, p. 94.

46 HM Treasury ‘Dear Accounting Officer Letter’, DAO 08/21, 16 December 2021

47 Department of Health and Social Care Annual Report and Accounts 2020–21,HC 1053, 31 January 2022, page 2

48 Committee of Public Accounts, Department of Health and Social Care 2020–21 Annual Report and Accounts, Sixth Report of Session 2022–23, HC 253, 10 June 2022, para 31

49 Q 3

50 Q 4

51 Qq 140–142

52 Q 6

53 Q 138

54 Q 6

55 DHSC 2021–22 ARA, page 252

56 Qq 79, 90

57 DHSC 2021–22 ARA, page 253

58 DHSC 2020–21 ARA, p. 192

59 UKHSA ARA 2021–22 pages 86–87

60 DHSC 2021–22 ARA, pages 252–256

61 Q 36

62 NHS Property Services Limited, NHS Property Services Limited Annual Report and Accounts 2021/22, 17 February 2023

63 NHS Commissioning Board, NHS Commissioning Board Annual Report and Accounts 2021–22, HC 1011, 30 January 2023

64 NHS Commissioning Board, NHS Commissioning Board Annual Report and Accounts 2020–21, HC 1027, 3 February 2022

65 C&AG‘s Report, para 17

66 Qq 136–137