Source · Select Committees · Public Accounts Committee
Recommendation 6
6
HMRC too often struggles to provide reliable and timely financial estimates upon which good financial...
Conclusion
HMRC too often struggles to provide reliable and timely financial estimates upon which good financial and operational planning depends. HMRC is responsible for dealing with vast sums of public money, both revenue and expenditure. Reliable and timely financial estimates are vital if it is to manage and allocate resources effectively, assess and report on its progress, judge how much it can afford to do, and consider where it needs to adjust its focus and interventions. Yet we have seen numerous examples where it has struggled: for example, its estimates of Corporation Tax revenues needed to be retrospectively amended by £6.6 billion in 2019–20; it exceeded its cash requirement control total by more than £700 million because of basic errors in financial forecasting; it is uncertain what its estimate of fraud and error from tax credits should be; and there has been a delay in producing a more rigorous estimate of the level of fraud and error associated with the Research & Development relief. On understanding the impact of COVID-19, HMRC is falling behind where it needs to be. For example, it is some way off being in a position to better assess the actual level of error and fraud from the employment support schemes, with planning estimates ranging from 5% to 10% on the Coronavirus Job Retention Scheme; and it has no estimates of error and fraud from the Eat Out To Help Out scheme, despite the scheme having ended in August. Recommendation: HMRC should, in its Treasury Minute response, set out: • the steps it is taking to ensure its financial estimates are sufficiently timely and rigorous; and • when it will have an estimate of the actual amount of error and fraud in the COVID-19 grant schemes it administers, rather than a planning estimate, and its plans for recovering those losses. 8 HMRC performance 2019–20 1 COVID-19 support schemes administered by HM Revenue & Customs
Government Response
Acknowledged
HM Government
Acknowledged
6.1 The government agrees with the Committee’s recommendation. Recommendation implemented 6.2 The government does not accept that HMRC “too often struggles to provide reliable and timely financial estimates upon which good financial and operational planning depends”. 6.3 There is a robust process in place for ensuring all financial estimates are accurate and reliable. These are audited every year by National Audit Office (NAO). 14 6.4 The 2019-20 Resource Account was qualified for breaching the Net Cash Requirement (NCR). This was due to an error in preparing the 2019-20 Supplementary Estimate. The department has introduced additional validation exercises and strengthened the department’s sign off process. 6.5 The department also breached its HM Treasury Income Control Total by £5.98 million during the 2019-20 financial year. At the year-end and as the audit process concluded, there were several unforeseen changes in the income outturn which resulted in the breach. The department subsequently requested to make a non-budgetary adjustment at the 2020-21 Supplementary Estimate to correct this. The department should have flagged this breach earlier and sought retrospective permission to retain the additional income or surrendered this amount back to the Consolidated Fund and the department did not. Since then, the department has moved quickly to improve its controls and increase the robustness of its forecasts and will be reporting its forecasts to the Treasury on a monthly basis. 6.6 The government agrees with the Committee’s recommendation. Recommendation implemented 6.7 The department will not have a complete assessment of the total fraud and error for the CJRS until the end of 2021 at the earliest. This is because the department requires most of the cases selected for CJRS random enquiry to be closed before a final assessment can be made. 6.8 For the SEISS, the department requires the 2020-21 Self-Assessment returns to be filed in order to produce a firmed-up estimate for the current phases of the scheme. 6.9 The department’s plans to recover funds from those who have abused CJRS and SEISS are set out in its post-payment compliance approach – identifying cases via risk profiling, contacting many via one to many approaches and following up on those who do not respond, or whose response needs further investigation. This approach will be kept under review and adapted as necessary to effectively address fraud whilst not over burdening compliant claimants.