Source · Select Committees · Public Accounts Committee
Recommendation 17
17
Accepted
HM Treasury’s guidance states that an AO assessment should be produced for a programme or...
Recommendation
HM Treasury’s guidance states that an AO assessment should be produced for a programme or project if, after its initial approval, it ‘departs from the four standards [for accounting officers] or the agreed plan […] in terms of costs, benefits, timescales, or level of risk, which informed the accounting officer’s previous approval’.50 While the guidance is not prescriptive about what this means in practice, IPA told the NAO that this could be interpreted as a substantial change to a programme’s business case which alters HM Treasury’s approvals.51 The NAO found that departments consider whether a programme has undergone a significant changes in different ways. Of the 227 programmes on the GMPP at 31 December 2021, 27 might reasonably be considered to have changed significantly.52 HM Treasury told us it was following up on the 27 to get a complete record of the AO assessments which should be published.53
Government Response Summary
The government considers that the AO assessment process is owned by the AO and the departments, and that challenges posed by high inflation, materials shortages, labour market disruption, high interest rates, and skills gaps, are important considerations that AOs must assess.
Government Response
Accepted
HM Government
Accepted
5. PAC conclusion: Government major programmes are experiencing significant challenges, such as skills gaps and inflation, which will impact on their feasibility and value for money. 5. PAC recommendation: HM Treasury and IPA should outline the extent to which current challenges may significantly change major programmes to help accounting officers determine when an AO assessment is required. They should then use these assessments to understand the impact of these challenges on programmes being delivered in line with the standards set out in Managing Public Money. 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 It is important to consider that the AO assessment process is owned by the AO and the departments, and it is for the AO and SRO to decide what they consider important and must defend that decision to Parliament 5.3 The government considers that challenges posed by high inflation, materials shortages, labour market disruption, high interest rates or other events likely to have significant impact on delivery can signal extended periods of volatility and uncertainty. It is unlikely that the supply chain and pricing disruption will quickly settle back into the stable, low interest rate, low inflation environment that has been seen for the past decade and a half and as such AOs must consider this in light of their ongoing duties to consider feasibility and value for money. 5.4 Meeting these challenges will require departments to plan and deliver projects in ways that can address this turbulence and maintain delivery outcomes. IPA continuously monitors its assurance and support activities in light of the impact that market conditions can have on project and programme performance. 5.5 The government agrees with common AO practice that having defined thresholds such as advice from an investment committee or IPA assurance ratings are sensible to have as a trigger to update AOAs. As part of the IPA’s ‘Response to Red’ process, updated AO assessments should be produced following a case conference when a project receives a red stage gate assessment. This updated AO assessment should be provided to HM Treasury to support TAP or MPRG decision making as part of the escalation process.