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The Scrutiny Unit Annual Reports and Accounts Aruni Muthumala, House of Commons Scrutiny Unit 13 March 2012 Contents (1) Organisations involved in financial scrutiny (2) Characteristics of Annual Reports and Accounts (3) Why do select committees look at them? (4) How do select committees analyse them? Parliamentary Scrutiny of Government Finances Scrutiny Unit [6 staff in finance team] Departmental Select Committees Public Accounts Committee [On average 13 members supported by 5/6 staff ] [14 members supported by 4 staff] National Audit Office [880 staff] Government Departments Definition In the UK all Government Departments produce Annual Reports and Accounts: An Annual Report which includes a management commentary and information on past activity and future plans, and Resources Accounts audited by the National Audit Office which report on spending relating to the financial year and assets and liabilities as at year end Why are Annual Reports and Accounts of interest to Committees? Overview of Department’s financial performance - Did the department under spend - Changes in the composition of expenditure Highlight Department’s performance in meeting objectives - Management commentary highlights whether department is meeting objectives (structural reform priorities - Overall strategic direction of the Department Any weaknesses in financial management capability – reports submitted late/ qualified. [Poor financial management leads to poor policy implementation] Shows interesting information to Members that they not have been previously aware for Some numbers 2010-11 £bn Health Education 86.4 57.9 Work & Pensions 80.9 Business, Innovation and Skills 23.5 Defence 48.8 International Development 7.1 Foreign & Commonwealth Office 2.3 Energy and Climate Change 3.0 Environment, Forestry & Rural Affairs 4.7 Transport 10.1 Treasury 14.7 Communities & Local Government 37.7 Cabinet Office 0.4 Home Office 10.7 Ministry of Justice 49.1 How does scrutiny take place Most select committees hold oral evidence sessions on Departments’ Annual Reports and Accounts. A few write a report and recommendations on the basis of the oral evidence session. [Format: Members will ask questions on finances and department’s administration to the Permanent Secretary] Before the oral evidence session, the Scrutiny Unit provides analysis of relevant Annual Reports and Accounts and suggested questions to department to each select committee Select committees have different approach to SU Analysis of Annual Reports and Accounts Some will use suggested questions in oral evidence session to committee others will send written questions to department and will use the response by Department to ask more pointed questions to the committee What do we focus on Have the accounts been qualified? Have they been submitted in time? insufficient and appropriate audit evidence obtained the financial statements have not been prepared in accordance with accounting standards the financial statements are affected by significant uncertainties financial statements do not give a true and fair view irregular expenditure [In 2010-11, DWP, DEFRA and HMRC accounts were qualified] Department’s performance – structural reform plan [actions in business plan not completed in time/performance against input indicators highlighted] Staff costs Provisions – funds set aside for future Big changes Remuneration report – directors are paid Some examples of questions Justice Foreign & Commonwealth Office Environment, Forestry & Rural Affairs Transport Communities & Local Government This is the second successive year that you have missed the presummer recess deadline for laying your accounts. What went wrong this time? Which embassies and areas within the FCO have lost out the most due to cut-backs in the capital program? How much funds did the Department raise last year through selling buildings? How much will it raise this year? Has the Department delivered the £162m in-year savings that were announced for 2010-11 and where were the savings made? The Department under spent on its 2010-11 budget by £1 billion and you ended up giving £543 million back to the Treasury. Why were you unable to spend that money on transport projects? Why did the Department pay £428k for the ten months work of its interim Finance Director between 1 March 2010 and 4 January 2011?