The Comptroller and Auditor General has qualified his audit opinion on the Arts Council England’s 2010-11 Grant-in-Aid financial statements and the Lottery financial statements.

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Amyas Morse, the Comptroller and Auditor General (C&AG), has qualified his audit opinion on the Arts Council England’s 2010-11 Grant-in-Aid financial statements and the Lottery financial statements.

The C&AG qualified his audit opinion on both sets of accounts relating to the use of Grant-in-Aid money to meet Lottery commitments. Since the Lottery began, there has been a clear separation between Grant-in-Aid funded activities and Lottery activities. In accordance with statutory provisions, separate annual financial statements are prepared by the Council and audited by the C&AG.

In forming the audit opinions the C&AG is required to check that expenditure has been charged to the correct set of accounts.

During 2010-11, grants of £9.2 million were paid from Grant-in-Aid money in respect of amounts previously recorded as Lottery commitments. Once the Council has agreed to make a grant from the Lottery and this has been recorded within the Council’s internal systems the expectation is that this payment should be recognised in the Lottery accounts.

The C&AG considers that where grants have previously been accounted for as commitments of the Lottery and reported as such to Parliament, continuing grant payments should, except in exceptional circumstances, have been charged to the Lottery and not Grant-in-Aid. As a result, Grant-in-Aid expenditure has been materially overstated by £9.2 million in the 2010-11 Grant-in-Aid financial statements and understated by £9.2 million in the 2010-11 Lottery financial statements.

There is a lack of clarity in the guidance provided by the Department for Culture, Media and Sport (the Department) and HM Treasury in respect of the use of grant-in-aid funds to meet Lottery commitments. The Department and HM Treasury have agreed to clarify the guidance.

27 April 2012

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