NAO e:newsletter January 2019: An overview of the NAO's recent publications

 

WELCOME TO OUR JANUARY E:NEWSLETTER

 

As we welcome in 2019, we are pleased to announce that Gareth Davies has been put forward by the Prime Minister and the Chair of the Public Accounts Committee (PAC) as the preferred candidate selected for the role of Comptroller & Auditor General (C&AG). Subject to the House of Commons agreeing to recommend the candidate to HM The Queen, Gareth will take up post from 1 June 2019 after Sir Amyas Morse leaves at the end of his ten-year term, on 31 May. As detailed in our press notice here, Gareth brings a wide range of private and public sector executive and leadership expertise.

 

This e:newsletter summarises our reports since last October, including:

  • EU Exit
  • The government’s planning and spending framework
  • Programmes and contracts, including an overview of the government’s commercial management and contracting activity
  • Reports on managing operations
  • Departmental Overviews

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Across government

 

Exiting the EU: The financial settlement – follow-up report aims to provide further clarity on the financial settlement, taking account of new information that has become available since our report in April 2018. We set out the series of events the government expects to take place if the UK and EU ratify the Withdrawal Agreement. We also set out the components of the agreement, highlighting which EU exit payments and costs are inside and outside the scope of the financial settlement. This report does not cover the implications of the UK leaving the EU without an agreement, nor of there being modifications to the existing agreement.

 

Improving government’s planning and spending framework reviews government’s progress in improving the planning and spending framework since we last reported in July 2016, and makes recommendations ahead of the forthcoming spending review. We found that HM Treasury is controlling public spending effectively and the Cabinet Office, with support from cross-government functions such as finance, is helping to improve business planning in government departments. However, we conclude that unless government makes use of a more integrated planning and spending framework to ensure its plans are deliverable and affordable, the cycle of over-optimism, short-termism and silo decision-making will continue – risking value for money for UK taxpayers in the long term.

 

Local auditor reporting in England 2018: Since 2015, the Comptroller and Auditor General (C&AG) has been responsible for setting the standards for local public audit, through maintaining a Code of Audit Practice and issuing associated guidance to local auditors. This report describes the local audit landscape; summarises the issues being reported by local auditors, and how these have changed over time; and examines how local bodies, central government departments and arm’s-length bodies use the information to address the weaknesses reported.

 

The Equipment Plan 2018 to 2028 assesses the robustness of the assumptions underpinning the Ministry of Defence’s (MOD’s) Equipment Plan 2018-2028. The MOD recognises that continued unaffordability of the Plan is not sustainable, with forecast costs exceeding budgets by a most likely figure of £7 billion over the next 10 years. In January 2018, it established the Modernising Defence Programme to make the decisions needed to close the affordability gap, but this work has not yet concluded. During this uncertainty, the MOD has resorted to short-term decision-making, increasing the longer term risks to value for money now. Given that 84% of the identified affordability challenge falls in the next four years, the MOD must make decisions now.


 

Progammes and contracts

 

Commercial and Contracting Overview: This report summarises the government’s commercial management activity. It includes ten case studies from our work over the last 18 months and covers what government does, how much it spends, recent and planned changes, and what to look out for. It includes sections on: getting it right at the start; managing contracts better by improving use of intelligence and performance measures; and improving government’s market management through better risk management, effective regulation and enhanced understanding of market supply chains. It also summarises our methodology for auditing commercial relationships.

 

On the NAO blog: The power of information for contracts is the latest in our ‘Contract insights’ series of posts. It identifies further insights from our recent reports on Capita and Carillion contracts.

 

E20: renewing the EastEnders set: The external filming set for EastEnders was built in 1984 and is no longer fit for purpose, partly because of increasing filming delays owing to stoppages in production due to health and safety concerns. The E20 programme to replace the set and core infrastructure was originally expected to be completed by 2018, but the BBC substantially revised the scope of E20 in 2015, moving its target completion date to 2020. With further delays and cost increases compared with the 2015 plan, E20 is now expected to cost £27 million more and take an additional 31 months to complete, and we conclude that the BBC will not be able to deliver value for money in the way that it envisaged in 2015. Reasons for this include: underestimation of aspects of the complexity; cost and risks of its revised approach; insufficient construction project management expertise; and inadequate integration between the end users and the programme team. The benefits of the programme still appear to be broadly achievable, albeit at a substantially higher cost and later than originally planned. However, sustained scrutiny, including by the BBC Board, is required to prevent E20 going off-track again.

 

Investigation into the British Army’s Recruiting Partnering Project: The Army entered into this project with Capita Business Services Ltd (Capita) in 2012 with the aim of reducing recruitment costs and recruiting more soldiers and officers. Although the Army committed £1.36 billion over ten years, recruitment targets have fallen short every year by between 21% and 45%. The project has been beset with problems, particularly in developing and using the complex online recruitment system and a high applicant drop-out rate due to the complexity and length of the Army’s recruitment process. The online system is owned by Capita, and not the Army, which may create issues if the contract with Capita is not renewed after 2022.

 

Rolling out smart meters examines the Department for Business, Energy & Industrial Strategy’s (BEIS’s) progress in rolling out smart meters for electricity and gas supply. A number of issues with the programme mean it will not meet its original timing and budget, with energy suppliers expecting to reach just 70%-75% of homes by the end of 2020 compared with the 100% originally planned. BEIS’s push to introduce the smart meters quickly, coupled with delays in implementing the infrastructure needed for the second generation of smart meters, had the unintended consequence of leading the industry to install more first generation meters than planned, and nearly a million of the smart meters that have been installed in consumers’ homes have lost their smart functionality (i.e. gone ‘dumb’). We conclude that although the issues are not fatal to the viability and value for money of the programme, they are serious issues that need to be addressed if smart meters are going to succeed. Our web-page includes a video that summarises the programme and its progress.


 

Managing operations

 

A review of the role and costs of clinical commissioning groups (CCGs): With the NHS currently outlining its vision for commissioning as part of its long-term plan, our review sets out the role, running costs and performance of CCGs; and the past and potential future commissioning landscape. Our previous work on the NHS reforms brought in under the Health and Social Care Act 2012 highlighted the significant upheaval caused by major organisational restructuring. We therefore conclude that it is important that the current restructuring of CCGs creates stable and effective organisations that can focus on transforming and integrating health and care services, rather than on reorganising themselves.

 

Managing the Bank of England’s Central Services examines whether the Bank has a sufficiently ambitious strategy for developing efficient and cost-effective Central Services (including Human Resources, technology, property, procurement, security and financial management) to support the Bank to deliver the change and cost control that it is seeking. The Bank is moving in the right direction, but challenges remains. Our recommendations focus on: the vision and demonstrating to staff the case for change; ensuring support across the Bank’s leadership; having a clear plan for managing within its budget cap – taking account of optimism bias in planning; establishing a robust framework for monitoring the delivery of the expected benefits; and strengthening its ability to monitor and manage performance and costs.

 

The Motability scheme, administered by Motability Operations with oversight by the Motability charity, enables eligible disabled people to exchange certain mobility allowances for the lease of a new car, powered wheelchair or scooter. Our review into the scheme found that it delivers an excellent service to its customers and that Motability Operations’ management deserves credit for having turned the business around and investing in features that have enhanced benefits for customers. However, the scheme has long operated in a protected environment, supported by government, and we do not consider that these advantages have been adequately reflected in: Motability Operations’ consideration of risk when compared to other companies; how it assesses its performance; and how its executives are rewarded. We have made recommendations to both entities that provide the scheme, as well as to the Department for Work and Pensions, to improve governance and review key aspects of the scheme’s operating model.

 

Handling of the Windrush situation examines how the Home Office handled the impact of the implementation of its immigration policies on the Windrush generation and other factors that may have contributed to the situation. Although the Home Office did not deliberately deny the Windrush generation their legal rights to be in the UK, it failed to protect their needs when it designed and implemented its immigration policies aimed at creating a ‘hostile environment’ for illegal migrants. The Home Office is now taking steps to put things right, but it has shown a surprising lack of urgency to identify other affected groups who are not of Caribbean heritage. The belated and costly exercise of seeking information about those affected, and then paying compensation, was not value for money and has caused reputational damage. We make recommendations to reduce the risk of a similar situation happening again. Our web-page includes a video that summarises the issues and our recommendations.

 

Investigation into the BBC’s engagement with personal service companies: The BBC hires a lot of freelancers, often through a personal service company (PSC) structure. Many of these individuals raised concerns that they may now be at risk of having retrospective HM Revenue & Customs (HMRC) investigations into the amount of tax they have paid, following HMRC reforms in 2017 that made the BBC responsible for assessing the employment status for tax purposes of freelancers it hired through their PSCs. Our investigation sets out the facts, focusing on: the BBC’s use of PSCs; the context to this; why issues have arisen and their scale; and relevant interactions between the BBC and HMRC.


 

Departmental Overviews and other publications

 

Departmental overviews: Each year we publish a suite of departmental overviews, designed to provide a quick and accessible view of the major government departments, how they spend their money and their major areas of work. Several new overviews have been published since our last e:newsletter, including on Commercial and Contracting, as noted above.

 

We have published a number of C&AG Reports on Financial Statements.

 

Administration of Scottish Income Tax 2017-18 provides our opinion on the correctness of the income tax revenues attributable to Scotland, key controls operated by HM Revenue & Customs (HMRC), HMRC’s risk management approach, and the cost of administering Scottish income tax.