Accounts qualified in five government departments

The day before parliament is due to go on its summer break it has been
revealed the accounts for five Whitehall departments have been qualified by the
National Audit Office.

The new head of the NAO, Amyas Morse, has even told the Treasury and HM
Revenue and Customs that their accounts are not up to standard.

Accounts from the department of work and pensions, defence and the Equalities
Commission were also qualified in reports slipped out amid a deluge of
paperwork from Whitehall.

Morse said he declined to sign off the Treasury’s resource accounts for
2008/09 because the department incurred £24bn more expenditure than Parliament
authorised, arising from losses from the operation of the Asset Protection
Scheme.

Morse also reported the Treasury’s balance sheet showed the net of total
assets, less liabilities, now stand at £44bn – up £2bn on 2007/08.

The NAO qualified the accounts of the DWP for the 20th consecutive year
because they showed a net £2.7bn loss in fraud and error across all benefits
except the state pension.

And Revenue and Customs’ were subject to error and fraud in the tax credit
system

totaling between £1.58bn and £1.84bn (up on the £1.31bn to £1.54bn in
2006/07).

Morse said he qualified the MoD’s accounts because of a ‘net error’ of £140m
in the amount a new computer system that allows servicemen and women to enter
expense claims without further checks. There was missing radio and computer
equipment worth £155m and a ‘significant risk of error’ over £14.1bn in raw
materials and spares.

The Equality Commission’s accounts were qualified because £629,000 was spent
paying consultancy fees to former staff whose departure terms excluded being
rehired.

Morse said the financial year had been ‘an extraordinary one’ for the
Treasury, and appeared to accept that the need to intervene to prevent a
financial markets meltdown with the Asset Protection Scheme prevented it from
seeking the necessary additional resources from Parliament.

A Treasury spokesman said: ‘The NAO has acknowledged that the need to act by
introducing the Asset Protection Scheme did not allow time to seek Parliamentary
approval for the accounting consequences of the scheme, which resulted in a
technical qualification of the accounts.

‘In-principle, agreements were not reached with the participating banks until
after the final supplementary estimates were laid with Parliament in February.’

But Liberal Democrat shadow chancellor Vince Cable said the NAO’s concerns
were ‘entirely legitimate’ and claimed: ‘The Asset Protection Scheme is quite
simply a massive fraud on the taxpayer, providing insurance for ‘bad’ loans but
with a huge, open-ended risk.’

The qualified accounts were not drawn attention to as a piece but spread
unevenly amid an raft of government documents on other matters.

The MoD issued its own press release stressing the high priority it gave to
success on operations and quoted new defence secretary Bob Ainsworth praising
the ‘bravery, professionalism and dedication’ of the armed forces. It ignored
the qualification.

A later report from the Commons Public Accounts Committee slated HMRC for
failing to maintain physical checks on goods entering the UK, while evidence
showed non-compliance over paperwork among traders had increased.

PAC chairman Edward Leigh said: ‘It is far from reassuring to learn that the
department’s management of customs activities is fragmented and disjointed, that
accountabilities are blurred and that management information is poor.’

A Treasury statement also revealed that £5bn has been set aside for claims of
over paid VAT based on a legal ruling last year involving Michael Fleming, an
Aston Martin dealer, and Conde Nast the publishing group. During the case, law
lords ruled the taxman had acted illegally when in 1997 when it ruled that
people only had three years to claim for overpaid VAT.

Further reading:

View
the MOD report

View
the HMRC report

View
the Treasury report

View
the DWP report

View
the Equality and Human Rights Commission’s report