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UK National Audit Office Reports

Report of the Comptroller and Auditor General on the Accounts of: Equal Opportunities Commission

HC 90 2000-2001
19 July 2001

The Certificate of the Comptroller and Auditor General to the Houses of Parliament

I certify that I have audited the financial statements on pages 38 to 51 under the Sex Discrimination Act 1975, as amended by the Race Relations Act 1976. These financial statements have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and the accounting policies set out on page 42.

Respective responsibilities of the Equal Opportunities Commission, the Chief Executive and Auditor

As described on page 30 the Equal Opportunities Commission and Chief Executive are responsible for the preparation of the financial statements and for ensuring the regularity of financial transactions. The Equal Opportunities Commission and Chief Executive are also responsible for the preparation of the other contents of the Annual Report. My responsibilities, as independent auditor, are established by statute and guided by the Auditing Practices Board and the auditing profession’s ethical guidance.

I report my opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Sex Discrimination Act 1975, as amended by the Race Relations Act 1976 and Treasury directions made thereunder, and whether in all material respects the expenditure and income have applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. I also report if, in my opinion, the Foreword is not consistent with the financial statements, if the Commission has not kept proper accounting records, or if I have not received all the information and explanations I require for my audit.

I read the other information contained in the Annual Report and consider whether it is consistent with audited financial statements. I consider the implications for my certificate if I become aware of any apparent misstatements or material inconsistencies with the financial statements.

I review whether the statement on page 30 reflects the Commission’s compliance with Treasury’s guidance ‘Corporate governance: statement on the system of internal financial control’. I report if it does not meet the requirements specified by Treasury, or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. In this respect I draw attention to weaknesses in internal financial control procedures over payments which have caused me to qualify my opinion on the financial statements for the year ended 31 March 2001.

Basis of opinion

I conducted my audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Equal Opportunities Commission and Chief Executive in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Commission’s circumstances, consistently applied and adequately disclosed.

I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by error, or by fraud or other irregularity and that, in all material respects, the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In forming my opinion I have also evaluated the overall adequacy of the presentation of information in the financial statements.

Qualified opinion in respect of payments not in conformity with Treasury authorities which govern them

Government Accounting sets out the financial framework within which central government sector entities are required to operate. Government Accounting states that, as a general rule, entities should only make payments in arrears, that is, after the specified goods or services have been satisfactorily provided. In principle therefore, entities should make advance payments only on an exceptional basis, and even then, only where they are able to demonstrate an appropriate value for money case for doing so.

The Equal Opportunities Commission balance sheet includes prepayments of £297,509 that, under Government Accounting, were not properly due in 2000-2001 and did not meet Government Accounting’s requirements for making advance payments. Accordingly, I have concluded that although these payments have been applied to the purposes intended by Parliament, they do not conform with the authorities which govern them.

Opinion

In my opinion:

John Bourn: Comptroller and Auditor General
11 July 2001

Report of the Comptroller and Auditor General to the House of Commons

Introduction

  1. The Equal Opportunities Commission (the Commission) is an executive non-departmental public body established in 1975 under Section 53 of the Sex Discrimination Act, as amended by the Race Relations Act 1976. The Commission’s duties under the act are to work towards the elimination of discrimination; to promote equality of opportunity between women and men generally; and to keep under review the working of the Act and the Equal Pay Act 1970 and, when required by the Secretary of State, or when it thinks it necessary, to draw up and submit to the Secretary of State proposals for amending them. This report explains the circumstances surrounding qualification of my audit opinion on the Commission’s financial statements for 2000-2001.

Basis for the qualified audit certificate

  1. I am required, under Auditing Standards, to satisfy myself that in all material respects the expenditure and income shown in the financial statements have been applied to the purposes intended by Parliament and conform to the authorities which govern them. In determining whether expenditure and income conform to the authorities which govern them, I have regard to:
    • the legislation authorising each financial transaction;
    • relevant regulations issued under the governing legislation;
    • Parliamentary authorities;
    • appropriate Treasury authorities; and
    • Government Accounting which sets out the financial framework within which government entities are required to operate.
  2. In March 2001, and as explained in more detail below, the Commission made material payments in advance of need amounting to £297,509, departing from the requirements of Government Accounting. Although these payments have been applied for the purposes intended by Parliament, I have concluded that they do not conform to the authorities which govern them. I have therefore qualified my opinion on the financial statements for 2000-2001 in this respect.

Grant in Aid

  1. Total Grant in Aid available to the Commission in 2000-2001 amounted to £8.686 million of which £1.6 million represented additional funds to implement a Commission modernisation programme of early retirements, voluntary severance and upgrading of their telecommunications network. However, formal approval by DfEE to the £1.6 million additional funds spend in 2000-2001was not received by EOC until December 2000. The Commission have informed me that it was their understanding that this money had to be spent by 31 March 2001.

Advance payments to a contractor

  1. There were essentially three component parts to the telecommunications work: upgrading the Wide Area Network (WAN) using Cellstream technology; new Meridian telephone systems for the Cardiff, Glasgow and London Offices; and an enhanced video conferencing system. Prelimary discussions with the preferred supplier took place between October 2000 and February 2001 with contracts/orders being signed by IT Management on 19 February (WAN), 20 February (Meridian) and 21 February (video conferencing). Although contracts/orders did not include delivery/installation dates, in the case of WAN and Meridian the key lead times specified in the suppliers proposal were 60 – 70 working days and 6 – 8 weeks respectively from date of contract/order. The Budget Holder for Information Technology and Telecommunications is the Head of Corporate Services with the IT Manager as Budget Manager. Both of these officers have delegated authority to incur expenditure of any amount within the annual budget set by the Commissioners.
  2. Concurrent with the placing of the contract/orders the Commission’s IT Manager requested that the contractor should bill in advance for the component parts of the telecommunication work including installation and annual rental as appropriate. Although these requests do not appear to have been formally authorised by Finance, I understand that they were submitted with the full knowledge of the then Head of Corporate Services. Invoices for all three elements were presented by the contractor in March and duly paid within the 2000/2001financial year. The payment authorities for all invoices had been endorsed by the Head of Corporate Services.
  3. As a result of our audit the National Audit Office have established that only the video conferencing equipment had been delivered to the Commission by 31 March 2001and we have therefore concluded that prepayments totalling £297,509 for WAN and Meridian equipment did not come within the course for payment and were therefore irregular. These payments comprise:
    • A sum of £103,095 for the Meridian Solution telephone system upgrade.
    • A sum of £67,106 for the network cabling for the WAN system upgrade and connection equipment.
    • A sum of £127,308 for rental payable for 2001-2002 for the Meridian and WAN systems.
  4. Installation and commissioning of the Meridian telephone systems in the Cardiff and Glasgow offices was completed by mid-May and in London by mid-June. With regard to WAN, the equipment was delivered on site to Cardiff, Glasgow and London in early June and brought into operation in mid-July. However, the equipment for Manchester was not delivered until the end of June and will not become operational until mid-July. The operative date for commencement of rental payments for the telephone system is 1 July and mid-July for the WAN.
  5. Government Accounting states that advance payments should be the exception and that where such payments may be desirable the value for money case should be established. Additionally, Government Accounting normally requires entities making advance payments to seek a bank guarantee and to seek either Departmental or Treasury approval, as appropriate. The National Audit Office found no evidence that the Commission had achieved value for money by making such payments, neither had they sought guarantees, or obtained Departmental or Treasury approval. On the question of guarantees it is the Commission's view that, as the supplier of the standard equipment involved was a long established company, these would have been unnecessary.

Internal financial controls

  1. As I have noted in my audit certificate, the payments in advance of need are indicative of weaknesses in internal financial control procedures. In response, the Commission are reviewing their internal delegated authorities to budget managers to prevent a similar occurrence in future.

John Bourn: Comptroller and Auditor General
11 July 2001