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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:

  1. The full text of today’s report is attached.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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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