Oxera, the independent consultants, said an audit carried out by PwC could
not clearly link what
Metronet had reported
as divisional costs to the company’s management accounts.
It also found that Tube Lines, which controls the rest of the tube network,
spends substantially more proportionately on finance function operations than
its beleaguered counterpart.
Oxera compiled the benchmarking review of Metronet Rail and Tube Lines’
costing protocols on behalf of the government’s PPP watchdog, which is gearing
up for a periodic review of the two companies.
In submitting its findings to the monitor, Oxera said: ‘This is likely to
emerge as a major issue: PwC was unable to provide assurance that the costs
reported as administration and other costs by Metronet Rail could be traced back
to the management accounts of the company.’
The study also highlighted the contrasting level of detail between Metronet
Rail and Tube Lines in disclosing administrative costs, which led to Oxera
having to compile its own data to compare the companies.
Its figures showed that 3% of Metronet’s Bakerloo, Central and Victoria line
costs went on its finance operations and 4% on its Sub Surface Lines finance
department. In contrast, Tube Lines’ finance department’s Jubilee Northern and
Piccadilly responsibilities took up 7% of its overall costs.
It also emerged that the PPP Arbiter had not issued regulatory accounting
guidelines, although they were a common feature in other regulated sectors,
Oxera urged the watchdog to establish a robust accounting framework for the
two infrastructure companies. ‘The OPPPA may find it necessary to adopt
approaches similar to those used by other regulators, including the
formalisation of accounting principles,’ it said. ‘Once a feasible set of cost
allocation rules has been devised, the OPPPA may therefore need to formalise
these into a set of accounting guidelines.’
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