Session 2007/2008
Eighth Report
PUBLIC ACCOUNTS COMMITTEE
Report on Excess Votes
(Northern Ireland) 2006-07
Together with the Minutes of Proceedings
of the Committee relating to the Report
Ordered by The Public Accounts Committee to be printed 7 February 2007
Report: 20/07/08R Public Accounts Committee
Public Accounts Committee
Membership and Powers
The Public Accounts Committee is a Standing Committee established in accordance with Standing Orders under Section 60(3) of the Northern Ireland Act 1998. It is the statutory function of the Public Accounts Committee to consider the accounts and reports of the Comptroller and Auditor General laid before the Assembly.
The Public Accounts Committee is appointed under Assembly Standing Order No. 51 of the Standing Orders for the Northern Ireland Assembly. It has the power to send for persons, papers and records and to report from time to time. Neither the Chairperson nor Deputy Chairperson of the Committee shall be a member of the same political party as the Minister of Finance and Personnel or of any junior minister appointed to the Department of Finance and Personnel.
The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.
The membership of the Committee since 9 May 2007 has been as follows:
Mr John O’Dowd (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig Mr Ian McCrea*
Mr John Dallat Mr Patsy McGlone
Mr Simon Hamilton Mr Mitchel McLaughlin
Mr David Hilditch Ms Dawn Purvis
Mr Trevor Lunn
* Mr Mickey Brady replaced Mr Willie Clarke on 1 October 2007
* Mr Ian McCrea replaced Mr Mickey Brady on 21 January 2008
Table of Contents
Report
Summary
Conclusions and recommendations
Excess Vote in 2006-07
Appendix 1:
Minutes of Proceedings
Appendix 2:
List of Witnesses
Summary
The Report by the Public Accounts Committee on Excess Votes is part of the framework of Assembly control over government spending. Once the audited accounts of each department have been laid before the Northern Ireland Assembly, the Committee considers the reports by the Comptroller and Auditor General on the accounts of those departments that have exceeded the limits of expenditure authorised. The Committee’s Report recommends whether the Northern Ireland Assembly should approve further grants to the departments concerned, thereby regularising the excess expenditure. Where the Excesses are the results of failures in control within departments, the Committee may make recommendations for improvements.
Resource-based Supply, introduced in 2001-02, requires departments to estimate and manage the resources they will consume in delivering services on an accruals basis, as well as their cash spending. The Northern Ireland Assembly authorises both cash spending and the use of resource.
In 2006-07 one Pension Scheme in Northern Ireland, the Department of Health, Social Services and Public Safety: Health and Personal Social Services Superannuation Scheme breached the Net Cash Requirement by £7.2 million due to a miscalculation of the working capital figure included in the Estimates.
The Committee recommends that the Northern Ireland Assembly provides the necessary amount by means of an Excess Vote.
Conclusions and Recommendations
1. The Committee was encouraged to note that there were no excesses in Northern Ireland in 2005-06, following two pension scheme account excesses in 2004-05[1]. In 2006-07, one Pension Scheme breached the Net Cash Requirement. The Committee is concerned by the repeated occurrence of excesses on Pension Scheme accounts. More effective estimating procedures would have avoided the breach of the Net Cash Requirement in the Department of Health, Social Services and Public Safety: Health and Personal Social Services Superannuation Scheme in the current year.
2. The Committee is disappointed to note that this pension scheme also required an Excess Vote in 2004-05. Indeed, the Committee notes that the circumstances attributing to the current excess are very similar to those that led to the Excess Vote in the Department of Finance and Personnel Superannuation and Other Allowances pension scheme in 2004-05.
3. In the report entitled ‘Excess Votes (Northern Ireland) 2004-05’ (HC 917), the House of Commons Committee of Public Accounts reiterated its comments from a previous report in 2005 (HC 311) that it expected all Pension Schemes in Northern Ireland which are subject to resource budgeting to review their Estimates procedures to make sure they are not vulnerable to the deficiencies which gave rise to an Excess, and that all Northern Ireland departments are expected and required to have robust procedures in place to estimate and monitor their use of cash and resources. In addition, the Committee of Public Accounts recommended that departments must ensure that those preparing Estimates have the appropriate technical knowledge, experience and training in preparing Estimates and, for pension schemes, that there is more regular liaison with actuaries in assessing scheme liabilities in time for the Main and Supplementary Estimates.
4. The failures that led to the Department of Health, Social Services and Public Safety: Health and Personal Social Services Superannuation Scheme 2006-07 cash excess and the recommendations made previously in respect of the preparation of Estimates apply equally to all departments in preparing and monitoring their Supply Estimates. The Committee expects the previous recommendations of the House of Commons Committee of Public Accounts to be fully applied by all Northern Ireland departments and asks the Department of Finance and Personnel to bring the recommendations of this report to the attention of all departments, not just in respect of pension scheme accounts.
5. The Committee notes that the assurances given to the Comptroller and Auditor General by the Department of Health, Social Services and Public Safety in the current year as to the steps it has taken to minimise the risk of further problems in the future, are similar to the assurances it gave to the House of Commons Committee of Public Accounts following the 2004-05 Excess. The Department should review these steps to ensure they are sufficient to avoid any further Excess Votes.
6. The Committee notes that the Department of Health, Social Services and Public Safety funded the total cash expenditure of the Superannuation Scheme in the 2006-07 year through a shared bank account arrangement. In response to a recommendation by the Comptroller and Auditor General, the Department has agreed that a separate bank account will be set up in order to prevent such re-occurrence. The Committee encourages the use of separate bank accounts in all Pension Scheme accounts.
Excess Vote in 2006-07
1. Resource-based Supply requires departments to forecast and manage the resources they will consume in delivering services on an accruals basis, as well as their cash spending. Annual amounts in respect of both cash spending and the use of resources are authorised to departments up to limits set. In 2006-07 Northern Ireland departments were authorised total net resources of £16,830 million and a total net cash requirement of £11,194 million in Supply Estimates. This is accounted for in 16 Northern Ireland Resource Accounts and 5 Pension Schemes. Of these, one Pension Scheme, the Health and Personal Social Services Superannuation Scheme overspent cash by £7.225 million. Details of the Excess are summarised in Figure 1.
Figure 1: Summary of 2006-07 Excess Vote required
Department of Health, Social Services and Public Safety: Health and Personal Social Services Superannuation Scheme |
Cash £ |
Amount to be voted £ |
|---|---|---|
| Amount originally voted Amount expended |
4,757,000.00 11,981,593.19 |
|
| 7,224,593.19 |
2. The Committee has considered the Comptroller and Auditor General’s report on the Excess in the accounts of the Department of Health, Social Services and Public Safety: Health and Personal Social Services Superannuation Scheme for 2006-07. In summary, the Excess arose because of a lack of estimate cover for changes in working capital[2].
3. The Committee noted that the Department did not anticipate a reduction of Consolidated Fund Extra Receipts in debtors when preparing the Estimates. The Committee is most concerned that the Department did not include estimate cover for changes in working capital when it was likely that significant changes in working capital would occur in 2006-07.
4. The Department informed the Comptroller and Auditor General that it has taken steps to minimise the risk of a similar problem recurring in the future, including that it has developed a much closer working relationship with the Government Actuaries Department who have agreed to apply sensitivity analysis on actuarial assumptions in time for the Main and Supplementary Estimates. The Committee notes that the Department gave the House of Commons Committee of Public Accounts similar assurances following its 2004-05 Excess on this account, and strongly encourages the Department to review these steps to ensure they are sufficient to avoid any further Excess Votes.
5. The Department further advised that, whilst it has made improvements in its projection of the resource requirement, difficulties still exist with estimating its net cash requirement. The Department is committed to resolving this issue as a matter of urgency and the Committee would concur with the Department that this matter must be given immediate attention.
[1] In 2004-05 the Department of Health, Social Services and Public Safety: Health and Personal Social Services Superannuation Scheme required an excess vote of resources of £32 million and the Department of Finance and Personnel Superannuation and Other Allowances required an excess vote of cash of £7 million.
[2] The Excess arose as follows:
| Estimate £’000 |
Outturn £’000 |
Saving/ (Excess) £’000 |
|
|---|---|---|---|
| Resource outturn | 606,757 | 571,564 | 35,193 |
| Changes in working capital | - | 16,221 | (16,221) |
| Movements in provisions | (602,000) | (575,803) | (26,197) |
| Net Cash Requirement | 4,757 | 11,982 | (7,225) |
Appendix 1
Minutes of Proceedings of the Committee Relating to the Report
Thursday, 7 February 2008
Room 144, Parliament Buildings
Present: Mr John O’Dowd (Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Simon Hamilton
Mr David Hilditch
Mr Ian McCrea
Mr Mitchel McLaughlin
Ms Dawn Purvis
In Attendance: Mrs Debbie Pritchard (Principal Clerk)
Mr Jim Beatty (Assembly Clerk)
Mrs Nicola Shephard (Clerical Supervisor)
Mr John Lunny (Clerical Supervisor)
Mr Ricky Shek (Clerical Officer)
Apologies: Mr Roy Beggs
Mr Trevor Lunn
Mr Patsy McGlone
The meeting opened at 2.01pm in public session.
4. Briefing on Excess Votes.
Mr John Dowdall CB, Comptroller and Auditor General (C&AG) Northern Ireland Audit Office (NIAO), Mr Stephen McCormick, Director for Value for Money, NIAO, Ms Dorinnia Carville, Audit Manager, NIAO and Mr David Thomson, Treasury Officer of Accounts, Department of Finance and Personnel, briefed the Committee on Excess Votes and answered members’ questions.
2.16pm The meeting went into closed session.
Members then considered the draft Committee Report on Excess Votes.
Members considered the report page by page.
Pages 1-5 read and agreed.
Agreed: Members ordered the report to be printed.
[EXTRACT]
Appendix 2
List of Witnesses
who Gave Oral Evidence
to the Committee
1. Mr John Dowdall CB, Comptroller and Auditor General, Northern Ireland Audit Office.
2. Mr Stephen McCormick, Director for Value for Money, Northern Ireland Audit Office.
3. Ms Dorinnia Carville, Audit Manager, Northern Ireland Audit Office.
4. Mr David Thomson, Treasury Officer of Accounts, Department of Finance and Personnel.