Press Release - Home Office: 2004-05 Resource Account
Disclaimer Opinion
31 January 2006
Sir John Bourn, head of the National Audit Office, reported to
Parliament today that the Home Office had not maintained proper
financial books and records for the financial year ending 31 March
2005. Sir John therefore concluded that, because the Home Office
failed to deliver its accounts for audit by the statutory timetable
and because of the fundamental nature of the problems encountered,
he could not reach an opinion on the truth and fairness of the Home
Office’s accounts.
The Home Office is now taking steps to strengthen its financial
control framework, and to improve its financial statements
preparation processes.
The implementation of a new accounting system contributed to
late delivery of the Home Office’s accounts. Difficulties
encountered in the transfer and cleansing of data and the fact that
staff were not trained to use the new system on a timely basis,
together with a lack of understanding of the new accounting system,
meant that the Home Office could not use data from its new
accounting system effectively to produce a cogent set of accounts
to the required faster closing and statutory timetables. In
addition, during 2004-05, there were significant control weaknesses
within key IT applications which the Home Office has now taken
significant steps to address.
Because of the difficulties in implementing the new accounting
system, the Home Office was unable to reconcile its cash position
during 2004-05, i.e. match its own records of cash payments and
receipts with those shown on its bank statements. This is a key
control for the prevention and detection of fraud. Following
significant work by the Home Office to investigate a £3.035 million
discrepancy, it had to make adjustments of £946 million to
reconcile its cash position. However the Home Office found no
evidence of fraud following this work.
The report points out that the poor quality of the financial
statements and the delay to their production reflected a lack of
skills within the accounts branch compounded by late recognition by
management of the serious problems being encountered. Management
procedures to ensure the quality of the financial information
produced were also inadequate.
The Home Office has recognised the need to strengthen its
financial control framework and to improve its preparation
processes for financial statements to enable it to meet its
accountability obligations to Parliament. Actions taken to address
the problems include:
- the redesign and restructuring of its financial accounting
function;
- continuing work on 2004-05 account in order to provide a more
robust basis for preparing a timely account for 2005-06;
- commissioning a review to determine the factors that prevented
the timely preparation of the 2004-05 accounts and the further
action that is required, which will report to the Audit Committee;
and
- ensuring that focus is maintained on financial control
environment through close monitoring.
Sir John Bourn said:
“It is disappointing that the Home Office had not
maintained proper financial books and records for the financial
year ending 31 March 2005 and has been unable to deliver its
accounts for auditing by the statutory deadline.
“The Home Office has recognised the need to strengthen its
financial control framework, and to improve its financial
statements preparation processes to enable it to meets its
accountability obligations to Parliament, and has taken or has in
hand actions for this purpose. Senior management leadership and
commitment will be vital to the Department’s success in producing
accounts for 2005-06 to meet the Treasury’s faster closing targets
and statutory requirements”.
Notes for Editors:
- The full text of today’s report is attached.
- A disclaimer of opinion is expressed when the auditor is
prevented from obtaining sufficient evidence to express an
unqualified opinion and the effect of this is so material or
pervasive that the auditor is, accordingly, unable to express an
opinion on the financial statements.
- Under the Government Resources and Accounts Act 2000, the
Accounting Officer of the Department was required to submit to the
Comptroller and Auditor General the signed accounts for 2004-2005
by 30 November 2005. The C&AG is required to certify the
accounts by 15 January 2006 so that the Treasury can lay them
before the House of Commons by 31 January 2006. Against an agreed
submission date for draft accounts of 30 June 2005, the Home Office
provided first draft accounts on 9 September 2005 and second draft
on 14 December 2005.
- Under the Treasury’s ‘faster closing’ initiative all
departments are aiming to have their resource accounts from 2005-06
onwards signed, certified and laid before Parliament before the
Summer Recess. To meet this commitment Home Office was aiming to
lay the 2004-05 resource accounts by 30 September 2005.
- Press notices and reports are available from the date of
publication on the NAO website, which is at
www.nao.org.uk. Hard copies can be obtained from
The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 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 07/06
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