Source · Select Committees · Public Accounts Committee
Recommendation 24
24
HMRC handles large sums of money, both collecting and paying out.68 It relies on financial...
Conclusion
HMRC handles large sums of money, both collecting and paying out.68 It relies on financial estimates in various different contexts to help achieve its objectives. Yet we have recently seen several examples where there have been mistakes in those estimates. We asked the Department about the circumstances of its breach by £726 million, in 2019–20, of its net cash requirement total, an important parliamentary control over public spending. The Comptroller and Auditor General had to qualify his opinion on HMRC’s accounts because of this breach. HMRC recognised the seriousness of its breach. It explained that it had made an error in calculating its cash requirement which meant that it used more cash than it had predicted. The Department noted that it had not exceeded its budget and that in its view “there was no real-world impact from this error”. As a result of the breach, HMRC commissioned a review by its internal audit function to understand what had gone wrong and identify improvements to its processes for estimating its cash requirements.69 In a separate example, HMRC, as explained in its own Annual Report and Accounts, also had to correct its estimates of Corporation Tax revenues by some £6.6 billion in 2019–20, as a result of errors it made in its estimates in previous years.70
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.