The Comptroller and Auditor General, Amyas Morse, has qualified his regularity opinion on the 2012-13 financial statements of the Department for Communities and Local Government. This is in respect of two breaches by the DCLG of spending limits authorised by Parliament.

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The net expenditure of each government department is authorised by an Act of Parliament which sets an annual limit on the net expenditure which the department may not exceed and on the total overall cash it can use. Where these limits are breached, the C&AG qualifies his regularity opinion on the financial statements.

Net Cash Requirement Estimate

The Department had a Net Cash Requirement Estimate of £28,972 million and an outturn of £29,027 million. The C&AG qualified his opinion in respect of this breach.

This breach occurred because the Department failed to identify and adjust for all movements in working capital, leading to current liabilities exceeding current assets. The Department did not monitor its position against the control total at any point during the year and failed to detect that the outturn was above the normal profile from the start of the financial year. The Department became aware in February 2013 of its proximity to the Net Cash Requirement Estimate limit after HM Treasury contacted it to advise that it was close to drawing up to its Net Cash Requirement.  This was too late for the Department to manage its cash position sufficiently to avoid the breach.

Having drawn cash from the Consolidated Fund to its available cash limit, the DCLG met further liabilities at year-end with an unauthorised bank overdraft and finished the year £217 million overdrawn. It also incurred HM Treasury imposed penalty interest charges of £0.02 million.

As a result of the breach, the Department commissioned an immediate review of cash management by its Cross Departmental Internal Audit Service.

Net Local Government Capital Departmental Expenditure Limit

The DCLG had a net Local Government Capital Departmental Expenditure Limit of £80,000 and an outturn of £1,221,000. This is a breach of the Local Government Capital Departmental Expenditure Limit Control total.

The breach arose as two Arm’s Length Bodies, the Valuation Tribunal Service (VTS) and the Commission of Local Administration in England (CLAE), exceeded their delegated capital budgets. Individually, either excess reported by these bodies would have caused an overall breach for the Department.

As a result of the breach, the Department immediately commissioned a review by its Cross Departmental Internal Audit Service of the management of the Local Government Capital Departmental Expenditure Limit.

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