Joint Committee on Statutory Instruments Nineteenth Report

S.I. 2003/533: second memorandum from the Office of the Deputy Prime Minister

86.  The Committee has asked for a memorandum to explain the various matters set down below arising from the Office of the Deputy Prime Minister's memorandum dated 31 March.

(1) The Department states that a relevant body commits an offence if it fails to comply with regulation 4(1). How is the relevant body able to determine whether or not it commits the offence, given the imprecise nature of the requirements which that provision imposes?

87.  The Department has considered carefully the concerns expressed by the Committee but nevertheless considers that the obligation imposed by regulation 4(1) is sufficiently clear in the context of the financial management of relevant bodies of the type covered by these Regulations. The issue of whether a system of financial management is adequate and effective is one which will in practice be clear, as will the soundness of its system of internal control and its arrangements for the management of risk. These are all matters in respect of which the relevant body can make provision by using the services of qualified professionals to establish and maintain financial systems to an acknowledged professional standard and by ensuring that it discharges its various functions in a manner compatible with this general obligation. If the systems are not adequate and effective, that will be apparent to a relevant body that is monitoring its financial management properly. The terms of regulation 4(1) reflect discussions with relevant accounting bodies such as the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Audit Commission.

(2) The Department states that regulation 10(3) requires a relevant body to arrange for the statement of accounts required by regulation 7 to be approved by resolution of a committee of the body or otherwise by a resolution of the members of the body meeting as a whole by the date set out in the regulation. But regulation 19(3) does not purport to impose an obligation on a body to arrange anything; and it seems doubtful whether it is the intention to require that the statement of accounts actually be approved, irrespective of the views of the body's members. Given that it appears from the Department's memorandum that the intention is to require a body to make arrangements, should the provision not have required it to do so so as to ensure that the statement is submitted for the approval of a committee or body with a view to that taking place within the intended timescale?

(3) A similar question arises in respect of regulation 10(4)(a).

88.  The provisions of regulation 10(3)(a) (we assume the reference to regulation 19(3) was a typographical error) and 10(4)(a) are expressed in terms similar to provisions contained in regulation 8 of the previous regulations (the Accounts and Audit Regulations 1996 (S.I.1996/590)). Breach of regulation 8 was also an offence. So far as the Department is aware those provisions did not give rise to any difficulties while the 1996 Regulations were in force. The 2003 Regulations underwent a consultation process and none of those consulted raised any concerns about the repeated use of the provision in this form.

89.  It is accepted that regulation 10(3)(a) and (4)(a) does not expressly impose an obligation on the relevant body to "arrange" for the approval of the statement of accounts etc within the required time limit. However, the obligation contained in regulation 10(3)(a) and (4)(a) is that the statement of accounts shall be approved, by the required time limit, by a committee of the relevant body (which would be acting in accordance with a function delegated to it by the relevant body) or by the relevant body itself. The Department believes that it is a necessary implication of this that the responsibility rests with the relevant body and that the obligation on the relevant body (acting through its committee or as a body as a whole) is to approve the accounts within the time limit. However, it is clear from the obligation imposed on the relevant body at regulation 4(1) to be responsible for the adequate and effective financial management of the body that it would not be expected to approve the statement of accounts etc irrespective of any concern it might have as to whether they reflect the true financial position.

(4) Regulation 10(3)(b) requires that, following approval of the statement of accounts in accordance with sub-paragraph (a), the statement shall be signed and dated by the person presiding at the committee or meeting at which that approval was given. The Department's response suggests that a failure to comply with this requirement does not constitute an offence. (The same applies to regulation 10(4)(b)). What is there in the Regulations to indicate that no offence is committed where the person presiding fails to comply?

90.  It is correct that the provisions of regulation 10(3)(b) and (4)(b) impose an obligation on the person presiding at the meeting to sign and date the statement etc and that failure to comply with this part of regulation 10 is also, by virtue of regulation 22, an offence. It is also accepted that the Department's memorandum of 31 March implied that failure to comply did not constitute an offence. However, that was an oversight in the listing, in the memorandum, of the various matters that constituted offences. It should have been included and its omission from the memorandum was an error for which the Department apologises.

Does the Department agree that, in the light of the matters raised above, it should amend these Regulations as a matter of urgency?

91.  In the light of the above the Department submits that there is no need to amend these Regulations in respect of any of the matters raised.

11th April 2003

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