The Scrutiny Unit Annual Reports and Accounts

1. The Scrutiny UnitAnnual Reports and Accounts Aruni Muthumala, House of Commons Scrutiny Unit 13 March 2012

2. Contents • Organisations involved in financial scrutiny • Characteristics of Annual Reports and Accounts • Why do select committees look at them? • How do select committees analyse them?

3. Parliamentary Scrutiny of Government Finances Scrutiny Unit [6 staff in finance team] Departmental Select Committees [On average 13 members supported by 5/6 staff ] • Public Accounts • Committee • [14 members supported by 4 staff] National Audit Office [880 staff] Government Departments

4. 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

5. 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

6. Some numbers

7. 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

8. 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

9. Some examples of questions