Twenty-Eighth Report - Improving the Accounting Officer Assessment process

The quality of published AO assessments varies, with some providing insufficient information to understand a programme’s purpose or how it has been assessed. AOs are responsible for assessing all spending against the four standards set by HM Treasury. However, not all published summaries provide the lay reader with insights into a programme’s aims, and some include only generic descriptions of the consideration given to each standard. Departments with more programmes on the Government Major Projects Portfolio, such as the infrastructure programmes funded by the Department for Transport and the equipment programmes funded by the Ministry of Defence, appear to be doing a good job of completing summaries. Departments generally found assessing the standards relevant to value for money and feasibility more challenging than assessing propriety and regularity. Recommendation: HM Treasury should share with departments good practice, to help facilitate learning from others and draw in expertise, to support them in addressing difficult factors as part of AO assessments. 6 Improving the Accounting Officer Assessment process

While accounting officers recognise the value of AO assessments, they are not being used consistently across government. AO assessments can help accounting officers in several ways – they support decision making about whether a project or programme should go ahead, or whether a ministerial direction is required before doing so. They can also help accounting officers consider a programme’s political context alongside practical implementation and act as ‘corporate memory’ and ‘audit trail’ for earlier decisions. We have seen their value when scrutinising programmes such as High Speed 2. But AO assessments are not being used widely enough across the breadth of central government activity. The Cabinet Office acknowledges the need to address the timing, quality and consistency of AO assessments. HM Treasury says that while it is very clear for some programmes that an AO assessment was required, for others more judgement is required. It recognises that more needs to be done to create a culture whereby accounting officers consistently see the benefits and value in completing an AO assessment. Recommendation: Cabinet Office and HM Treasury should embed AO assessments into training for senior civil servants and set up specific forums for AOs to share how they use AO assessments to draw judgements against each of the four AO standards.

HM Treasury and the Infrastructure and Projects Authority (IPA) do not always use AO assessments to build their understanding of programmes and systemic issues across government. AO assessments show an accounting officer’s consideration of the risks major spending decisions pose to Managing Public Money and how these risks are managed. The Cabinet Office recognises that, working together with HM Treasury, it could make more use of AO assessments. HM Treasury says it is looking to align its spending decisions on programmes to the approach taken to completing AO assessments. Also, while an AO assessment serves a different purpose to the assurance provided by the IPA, we were surprised the IPA does not see AO assessments nor consider them valuable in helping understand the challenges across programmes. Recommendation: HM Treasury, IPA and CO should set out how they consider AO assessments as part of their monitoring and decision-making of major programmes. The HMT and IPA should also set out how they will use AO assessments to understand programmes specific risks and wider issues.

Government major programmes are experiencing significant challenges, such as skills gaps and inflation, which will impact on their feasibility and value for money. HM Treasury is clear that a new AO assessment should be completed where changing circumstances have led to a departure from the original plan. All our witnesses acknowledged that programmes faced some significant challenges in the future. For example, the IPA identified a skills gap of some 3,000 people across the programmes it monitors. And HM Treasury considered that departments were struggling to assess the impact on increasing inflation on their programmes. Government is also looking to reduce the number of civil servants by 20%. Recommendation: HM Treasury and IPA should outline the extent to which current challenges may significantly change major programmes to help accounting Improving the Accounting Officer Assessment process 7 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. 8 Improving the Accounting Officer Assessment process 1 Ensuring compliance

On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury, the Cabinet Office and the Infrastructure and Projects Authority.1

We asked what was being done to encourage the greater use of AO assessments given they have proven themselves valuable for decision making.12 HM Treasury told us it was working in five areas to bring about improvement – such as providing effective support and changing culture.13 But HM Treasury also told us that the “basic rule of thumb” was that it sets the guidance which it expects people to follow. It does not monitor everything an accounting officer does.14 Neither HM Treasury, Cabinet Office nor the IPA maintains a central register of published AO assessments, making it hard to assess the impact of the guidance and changes.15 In response to the NAO’s report—and anticipating the Committee’s report—HM Treasury said it would see whether there was a case for “extending the central register”.16 Improving quality

Accounting officers are personally responsible for making sure that the organisation they lead delivers against the four standards relevant to the organisation’s governance, decisionmaking and financial management.17 The standards apply to all spending decisions and types of programmes, and it is good practice to complete an assessment for decisions categorised as “novel and contentious”.18 HM Treasury acknowledged that the range of programmes government manages is broad and AO assessments for, for example, policy and infrastructure programmes require different expertise. It told us that departments such as the Department for Transport and the Ministry of Defence, which have many programmes on the Government Major Projects Portfolio, were good at AO assessments compared to other departments. HM Treasury told us that it was working on getting those departments which have experience of completing and publishing AO assessments to work with those which do not.19

The quality of published summary AO assessments varied.20 For example, departments generally provided basic information such as background on the programme. But they did not provide more detailed information to help a layperson understand, for example, a programme’s aims. And some provided generic descriptions of how the AO had considered 9 Q 9; C&AG’s Report, para 1.6 10 Qq 14, 43; C&AG’s Report, para 1.15, Figure 5 11 Dear Accounting Officer letter 04/22 – Accounting officer assessments and framework documents. Available at: DAO_0422_Accounting_officer_assesments_and_framework_documents.pdf. 12 Qq 64, 65 13 Q 9 14 Q 17 15 Q 15; C&AG’s Report, para 1.9 16 Q 17; 17 Q 77; C&AG’s Report, para 1.2 18 Qq 1, 43; C&AG’s Report, para 1.8; Figure 1 19 Q 21; C&AG’s Report, para 1.15; Figure 5 20 Qq 2124; C&AG’s Report, paras 3.10 to 3.13; Figure 5 10 Improving the Accounting Officer Assessment process the standards.21 HM Treasury told us that the quality of assessments varied because of the breadth of programmes being considered.22 The Cabinet Office acknowledged that the quality of AO assessments needed to be addressed.23 The National Audit Office found that, while departments did not find assessing a programme against the four standards as too challenging overall, some standards—feasibility and value for money—were more challenging than others.24 Improving timely publication

HM Treasury guidance states that for GMPP programmes the accounting officer should publish a summary of the key points in each AO assessment unless there are overriding sensitivities, such as commercial considerations, that outweigh the merits of making the assessment publicly available.25 HM Treasury requires accounting officers to publish a summary AO assessment ‘as soon as the decision to proceed has been noted’ but does not set a prescribed timeframe for doing so.26

The previous Committee raised concerns about the lack of transparency because some assessments were not being published.27 A lot of summary AO assessments are still not published.28 The National Audit Office reviewed 73 published summary assessment to see how soon they had been published after they had been signed. Only 56 of these had sufficient information to enable it to complete this analysis, a quarter were published more than six months after signature.29 HM Treasury told us that “transparency is absolutely critical” but it was not clear on the consequences for departments not publishing summary AO assessments. It also told us that departments do not report or account to it for their responsibilities.30

The lack of summary AO assessments being published remains a real concern.31 HM Treasury said that there can be practical reasons why summary AO assessments take longer to publish – for example, because the department concerned is in the middle of a commercial negotiation or is engaging with the market. It recognised that it had to do more, through training for example, to create a culture where people see the benefits and value of completing an assessment .32 Responding to the NAO’s report, HM Treasury wrote to all accounting officers to emphasise that an AO assessment reflects a programme’s status at a point in time and asking that summaries of all AO assessments are published by September 2022. It said it would write to us with a summary of the outcome of this exercise so the Committee can directly raise with accounting officers why there are gaps in performance at its future sessions.33 21 C&AG’s Report, paras 3.10 to 3.13 22 Q 21 23 Q 47 24 Q 21; C&AG’s Report, para 2.5; Figure 8 25 Qq 1, 10, 13; C&AG’s report, para 1.14 26 C&AG’s report, para 3.8 27 C&AG’s report, para 3.9; Figure 9 28 Q 12 29 C&AG’s report, para 3.8; Figure 10 30 Q 15 31 Q 15, 37 32 Q 37–38 33 Qq 12, 47 Improving the Accounting Officer Assessment process 11 2 Maximising the value of AO assessments Consistent application

AO assessments are intended to support good decisionmaking and provide positive assurance that the four accounting officer standards have been met in line with Parliament’s expectations.34 They are a requirement for all programmes on the Government’s Major Projects Portfolio, as well as for decisions considered novel and contentious.35 The Cabinet Office told us that it found them “incredibly useful, particularly for novel, contentious and shortterm things – Covidrelated, Brexitrelated, the ports infrastructure fund, special one off projects to do with G7”. It described the AO assessment as a “fantastic guide” to “steering a route” through the complexities and uncertainties which surround some decision making. For example, when the Department for Business, Energy & Industrial Strategy was investing in British Steel.36

AO assessments can also help an accounting officer consider the political context alongside practical implementation issues to show that they have done what we would describe as “a thorough job regarding taxpayer’s money”.37 HM Treasury also see AO assessments as acting as a “corporate memory” and “audit trail” for why risks were considered and decisions made, which can be especially helpful for very long-term major infrastructure projects.38

HM Treasury recognised that there were “black and white points” where it was very clear that an AO assessment would be expected, whereas more judgement could be needed in other situations.39 Given this and the “big gaps” between the AO assessments it would expect to have seen completed and those have been published on a timely basis, it recognised more needed to be done to create a culture where accounting officers see the benefits and the value of completing an assessment.40 The Cabinet Office also acknowledged the need to address the timing, quality and consistency of AO assessments.41 Understanding systemic risks

One way HM Treasury scrutinises programmes ahead of funding and budgetary decisions is through the Major Projects Review Group (MPRG).42 The MPRG—which advises HM Treasury ministers on whether the highest profile and most complex government programmes should proceed—is attended by the relevant accounting officer.43 The Cabinet Office told us that it had tried, over the last two years, to make the process 34 C&AG’s report, para 1.3 35 Q 43; C&AG’s report, para 1.8 36 Q 43 37 Qq 20, 39, 82 38 Qq 44, 75 39 Q 19 40 Qq 9, 39 41 Q 47 42 HM Treasury’s Treasury approvals process for programmes and projects (March 2022). Available at: Treasury_ Approval_Process_Draft_Guidance_.pdf (publishing.service.gov.uk). 43 C&AG’s report, Figure 2 12 Improving the Accounting Officer Assessment process more standard and consistent.44 It described it as a “terrific forum” for making sure major programmes are subject to appropriate levels of checking and assurance.45 HM Treasury told us that it was looking at ways to align the decisions of the MPRG with an AO’s consideration of whether an AO assessment is required. For it to perform its role, the MPRG needs to have visibility of where there is a divergence from its initial approved authority.46

The Cabinet Office told us that because AO assessments focus on individual programmes they do not describe systemic risks, although particular themes may replicate themselves across individual programmes. While HM Treasury said that AO assessments were not the way to see common themes and risks faced by programmes, lessons could be learnt by looking across these assessments. For example, how to assess value for money and the approach to considering and then dealing with strategic risks.47 As such, although the Infrastructure and Projects Authority’s (IPA) primary role is to assess programme delivery, it was surprising to hear that it did not see AO assessments and that it saw little value in seeing them.48 IPA also told us that, while it had not “historically played a part in AO assessments” there was scope for it to “test and challenge” whether one is expected and, if it is, whether it exists.49 Future challenges

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

Looking to the future, departments face several challenges which may lead to significant changes to their programmes.54 We have seen estimates of a reduction in the size of the civil service of between 5% and 25%.55 The IPA told us that it estimates a skills gap on programmes of around 3,000 across all departments, of which fewer than half may 44 Q 42 45 Q 64 46 Q 67 47 Qq 69, 70 48 Qq 67, 79 49 Q 19 50 C&AG’s report, para 1.13 51 C&AG’s report, para 1.13 52 Qq 10, 13; C&AG’s report, para 1.13 53 Q 10 54 Qq 10, 13; C&AG’s report, para 1.13 55 Q 48 Improving the Accounting Officer Assessment process 13 be considered key positions. HM Treasury, working with IPA, is completing an exercise to understand this position in more detail after taking into account, for example, the potential for efficiency savings as well as constraints.56

IPA also characterised inflationary pressures as a “very real issue” which was “beyond a risk: it was a reality”. For example, it quoted inflation at 23% over the last six months on materials. IPA concluded that programmes will need to be more productive to help offset inflationary pressures.57 HM Treasury recognised that all departments were facing inflationary pressures with some struggling to evidence the impact of these pressures. This may be, for example, because some programmes were progressing commercial negotiations or had not yet reached a stage where the impact of inflation could be quantified.. HM Treasury also said that inflationary pressures were coming at the same time as supply chain challenges. It is looking to complete an exercise by autumn 2022 to provide an improved estimate of the impact of inflation on departments.58 56 Q 50 57 Q 55 58 Qq 60, 62 14 Improving the Accounting Officer Assessment process