Government accounts qualified

The National Audit Office (NAO) has qualified the 2012-13 financial statements of the Department for Communities and Local Government (DCLG) on the basis of two breaches of authorised spending limits say Northampton accountants Harris & Co.

In the first instance DCLG breached its agreed cash spending limit set by Parliament. This was £28,972m, but the department actually spent £29,027m. The NAO says this was down to failure to identify and adjust for all movements in working capital. The department did not monitor its position against the control total at any point during the year, and only realised it was close to its limit in February 2013 when the Treasury intervened.

At this point it was too late to avoid the overspend, and the DCLG met further liabilities at year-end with an unauthorised bank overdraft, finishing the year £217m overdrawn. It also incurred HM Treasury imposed penalty interest charges of £20,000.

In the second instance, DCLG was found to have breached its Local Government Capital Departmental Expenditure Limit total of £80,000, by spending £1.2m. This was down to two arm’s length bodies, the Valuation Tribunal Service (VTS) and the Commission of Local Administration in England (CLAE), which both overspent their funds. The NAO report said that individually, either excess reported by these bodies would have caused an overall breach for the department.

DCLG said that it has commissioned an immediate review of both breaches, to be carried out by its cross departmental internal audit service.

Margaret Hodge, chairman of the Public Accounts Committee, described DCLG’s failures in financial control as ‘a shocking example of incompetence’.

‘I am staggered that the department has been so blasé with its resources and so poor at staying within some of its budgets. If local authorities, for whom the department is responsible, acted in this way, the department would be down on them like a ton of bricks,’ Hodge said.