Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Accepted
Urgently implement robust financial controls and processes to deliver unqualified accounts for UKHSA
Conclusion
UKHSA had a fundamental weakness in financial controls and processes which resulted in it being unable to prepare auditable accounts. On 1 October 2021, the day that it became operational, UKHSA implemented a new IT accounting system and transferred the operations of its three predecessors onto this new system. At the same time, it was responding to the COVID-19 pandemic and managing rapid large-scale changes in spending and headcount. Implementing a new IT system is always a challenge, but these circumstances brought significant additional risks and shortcomings in the quality and timeliness of financial management of the organisation. UKHSA did not have effective control over its cash management process and did not even perform bank reconciliations, one of the most basic financial controls for an organisation. It also made an operational decision to not perform stocktakes on the emergency stockpile items transferred to it; even though weaknesses in controls resulted in no effective stock counts having being undertaken on the Test and Trace inventory transferred to UKHSA or at the year end. These were just three of the many issues which meant there was a fundamental absence of financial control within the organisation, which resulted in the C&AG taking the very unusual step of disclaiming his opinion on the financial statements. Recommendation 4: UKHSA should urgently ensure robust financial controls and processes are put in place and that there is a clear plan in place to deliver unqualified accounts. Department of Health and Social Care 2021–22 Annual Report and Accounts 7
Government Response Summary
The government states UKHSA immediately established a Finance and Control Improvement Programme aimed at achieving unqualified accounts by 2024-25, acknowledging 2022-23 is not possible. A multi-year project plan for this programme will be in place by Autumn 2023, overseen by a dedicated board and Audit and Risk Committee.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. processes, to evidence compliance with government functional standards and best practice. Following the disclaimed 2021-22 audit opinion, UKHSA immediately established a Finance and Control Improvement Programme to inform the production of 2022-23 auditable accounts and continue to provide oversight and scrutiny of UKHSA’s financial controls. The programme will develop to systematically address areas where controls and processes can be improved further. Activities have been focussed on the accounts production but will broaden out into wider financial management and controls without losing focus on the accounts. The aim of the programme is to enable UKHSA to achieve a fully clean, unqualified audit opinion at the earliest feasible opportunity, which is the 2024-25 accounts. Due to the disclaimed opinion, NAO advised it is not possible to achieve a clean audit for 2022-23. Unqualified accounts must demonstrate a clean audit position over successive years to enable an accurate prior year comparator. The programme is governed by a board chaired by UKHSA’s Chief Executive, with representation from DHSC, GIAA and HMT. The UKHSA Audit and Risk Committee oversees the programme closely with regular formal progress reporting to the department. The programme will have a fully developed, multi-year project plan in place by Autumn 2023. This aligns with the expected outcome of the 2022-23 audit and allows any further findings to be incorporated. In the meantime, UKHSA intends to continue driving rapid progress, tightly managed through the improvement programme.