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National Audit Office report: HM Treasury: Exchange Equalisation Account 1997-98

HM Treasury: Exchange Equalisation Account 1997-98

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 […]

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.

 

Publication details:

ISBN: 0105566160 [Buy a hard copy of this report from TSO]

HC: 9 1999-2000

Published date: January 26, 2000