Press Release - HM Treasury: Exchange Equalisation Accounts
1997-98
26 January 2000
Sir John Bourn, head of the National Audit Office, today
reported to Parliament on the financial statements of the Exchange
Equalisation Account (EEA), which holds the UK's official reserves
of gold and foreign currencies. The accounts for 1997/98 are the
first to be published. Sir John’s opinion on the accounts was
unqualified but in his report he notes that in order for him to be
able to complete his work his staff had to raise with the Treasury
and the Bank of England issues about:
- the basis on which the accounts are prepared; and
- the trail between individual transactions undertaken on the
account and the accounting returns from which the Treasury prepares
the financial statements.
The Bank of England ("the Bank") manages the EEA on a day to day
basis on behalf of the Treasury, who establish a strategy for the
Bank to follow and monitor the Bank's operations on the account.
The Treasury prepares the accounts from information supplied by the
Bank.
Sir John notes that the accounts as currently drawn up include
elements based on cash accounting and elements based on commercial
(accruals) accounting, although this is reflected in the Treasury’s
stated accounting policies for the account. In order to reconcile
to underlying cash movements some transactions such as profits and
losses on sales and interest receipts were initially included in
the accounts more than once. Changes have been made to the final
accounts to bring them more into line with principles of cash
accounting. The Treasury intends to move from the current basis of
accounting to report on an accruals basis in accordance with
generally accepted accounting principles. This is likely to be
implemented from 2000/01, and the Bank is developing new accounting
systems to support a revised basis of accounting.
Sir John’s audit also revealed a lack of ready trail in the
Bank’s systems from individual transactions undertaken on the
account to the accounting records from which the Treasury prepares
the accounts. The Bank undertook additional programming of its
computer systems to obtain information on individual transactions
making up the figures disclosed in the financial statements and the
historic cost of investments held by the EEA at the year end. From
1998/99 the Bank are retaining records of individual transactions
on a daily basis to ensure a complete and readily accessible
transaction trail.
Notes for Editors
The Exchange Equalisation Account holds the UK's official
reserves of gold, foreign currencies and International Monetary
Fund (IMF) special drawing rights. The account, which was
established by Section 24 of the Finance Act 1932, is used to
facilitate payments abroad by the public sector, for certain
purposes arising from the UK's membership of the IMF and for
checking undue fluctuations in the exchange value of sterling.
Under the Exchange Equalisation Account Act 1979, the funds held in
the account may be invested in the currency of any country, in the
purchase of gold or in the acquisition of special drawing
rights.
Prior to the accounts for 1997/98, financial statements for the
Exchange Equalisation Account were not published and the
Comptroller and Auditor General was only required to confirm the
regularity of transactions undertaken on the account. Following the
Chancellor of the Exchequer's decision to publish the 1997/98
financial statements, the scope of Sir John's audit opinion has
been extended and is now consistent with that provided for other
Central Government accounts prepared on a cash basis.
The National Audit Office are on the Internet. Press
notices and reports are available from the date of
publication. These can be accessed through the NAO home page at
http://www.nao.org.uk/
The Comptroller and Auditor General, Sir John Bourn, is the head
of the National Audit Office employing some 750 staff. He and the
NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 03/00
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