Resource dry-run alert

At least 14 government departments have already fallen behind resource accounting schedules, according to Parliament’s financial watchdog.

Last week, Comptroller and Auditor General Sir John Bourn published his general report, which included a comprehensive summary of the progress made by all departments in switching from cash to accruals type accounts.

The report said many of the departments would not meet the 1 April deadline for starting a resource accounting dry-run. Several departments said they would not have an opening balance for the accounts until October 1998.

According to the report two ‘major departments’ will not even have systems in place by 1 April. In addition, although ‘the majority’ of departments had acquired the computers and staff to do a trial-run, many were not actually planning to use a fully developed resource accounting system to produce their dry accounts.

A third of the departments have associated bodies whose accounts should be consolidated into their accounts. But the National Audit Office said two departments had not yet established which bodies those were.

Much of this evidence confirms the opinion Sir John Bourn presented to the Public Accounts Committee three months ago, when he said an extra year’s dummy run might be necessary. ‘I think it’s optimistic to believe we’ll get the whole system right first time,’ he warned the committee. He said a dual reporting system should be extended from two to three years.

Government insiders said there were no plans to revise the original timetable, although it has not been ruled out.

NAO’S STANCE ON CHARITY TAXATION

The Inland Revenue has been told to tighten its checking of tax exemption for charities. The National Audit Office yesterday said the Revenue could improve its checks on charities compliance with tax law through better targeting. Around 300,000 charities claim up to #1bn a year in tax exemptions.

Comptroller and Auditor General Sir John Bourn, head of the NAO, said voluntary compliance was the best way to ensure the law was observed and praised the Revenue for ‘clear and comprehensive guidance’ and its readiness to provide advice to charities who request it.

But he recommended the Revenue carries out work to establish the risks from charities claiming income from items such as bank or building society interest. The NAO also recommended procedures to ensure organisations which lose charitable status do not continue to receive the tax-free payment.

It called for better checks on the number and type of investigations undertaken into charities to ensure they are properly targeted as part of a ‘new risk-based targeting system’.

The NAO wants a reduction in the length of investigations, which average 25 months, better checks on larger gift aid payments, and more special enquiries into target areas where tax may be at risk, such as bartakings and conference income.