Section 22 Reports
“The 2007/2008 audit of the Queen's and Lord Treasurer's Remembrancer”<br />“The 2006/2007 audit of the Queen's and Lord Treasurer's Remembrancer”
Under item 3, I invite the Auditor General to give us a briefing on his reports on the 2006-07 and 2007-08 audits of the Queen's and Lord Treasurer's Remembrancer.
I hope that members who may not be fully aware of the Queen's and Lord Treasurer's Remembrancer do not mind if I use the acronym QLTR from now on.
The QLTR deals with various issues relating to ownerless goods in Scotland, which include the assets of dissolved companies or missing persons; lost or abandoned property; where a person dies without leaving a will and has no blood relatives, or none that can be easily traced; and treasure trove—to use that marvellous phrase—which includes anything taken out of the ground and thought worth preserving for the nation.
I have been obliged to present section 22 reports on the QLTR accounts for 2006-07 and 2007-08 because both sets of accounts failed to comply with the statutory deadlines for laying and publishing accounts.
As the committee knows, the Public Finance and Accountability (Scotland) Act 2000 requires that any accounts sent to the Auditor General for auditing should be sent not later than six months after the end of the financial year to which the accounts relate. The act also requires the Scottish ministers to lay accounts in Parliament no later than nine months after the end of the financial year.
I did not receive the audited accounts of the QLTR for both years until 9 February 2009, well after the statutory deadlines for laying them. The 2006-07 accounts were late for a number of reasons, including the fact that 2006-07 was the first year when the QLTR was required to produce a statutory set of accounts. In 2006, a review of the QLTR recommended that it should produce accounts in accordance with the 2000 act and the "Scottish Public Finance Manual". The review also recommended that responsibility for financial management within the QLTR should be clearly allocated to the most appropriate staff member.
As a result of that review, in March 2007 the Scottish ministers issued a direction requiring the QLTR to prepare accounts for 2006-07 and subsequent years. In August 2007, the accountable officer prepared an initial set of draft accounts for 2006-07, but he left the organisation shortly after and no one within the QLTR was given responsibility for preparing the accounts.
Those initial accounts were incomplete and a number of drafts were required before they were ready to be audited by the appointed auditors for the QLTR. That resulted in a considerable delay and the auditors did not conclude their audit of the 2006-07 reports until 4 February 2009, more than a year after the statutory deadline.
The QLTR experienced similar problems in preparing its accounts for 2007-08. Again, there was a lack of clear instruction within the organisation about whose responsibility it was to prepare the accounts. Not until September 2008 were QLTR staff members given a clear instruction from their accountable officer that accounts should be prepared.
The auditors received a set of draft accounts for 2007-08 in October 2008. However, other issues contributed to the delay in auditing the 2007-08 accounts. The auditors were asked to carry out forensic work on two potential fraud issues, which was not completed until February this year. They also needed to complete the 2006-07 audit to get the prior year balances to do the 2007-08 accounts. As a result, the auditors did not conclude the 2007-08 audit until 4 February this year, more than a month after the statutory deadline for laying accounts in Parliament.
My staff will continue to liaise with the auditors to monitor the QLTR's progress in preparing its 2008-09 accounts in order to meet the statutory deadlines for laying accounts as required by Parliament. I am happy to answer any questions.
Where to begin? This sounds like a total shambles, or potentially worse. It is bad enough that one set of accounts was delivered late, but for two sets of accounts for succeeding years to be late is completely unacceptable. I notice that in the report on the 2007-08 accounts Robert Black stated that other issues contributed to a further delay, and said verbally and in the report that the auditors were required to carry out forensic work on two potential fraud issues. He clearly believes that it was important to highlight that as a factor that contributed to the delay, although it was by no means the sole reason.
It is important that we take seriously the instances of potential fraud and ask the Auditor General further questions about them. More generally, we should ask how the delay happened. Who was the chief executive who departed in 2007 and who was the accountable officer at the time? Were they the same individual? Who are the chief executive and accountable officer now? Have any other individuals held those posts in the interim? We should consider taking the issue further with the Scottish Government, because it is unacceptable for us to be in this situation.
Finally, are any other organisations that are not audited hiding in the Government, or are we fairly certain that we reach all parts of the public sector? I do not know whether an authoritative answer can be given to that question. However, whatever the name of an organisation and however grand it sounds, it is important that it is accountable, that its audited accounts are available on time and that there is no fraud in the organisation.
I will attempt to address some of the concerns that have been raised—not necessarily in the order in which they were mentioned, but I hope to cover most of them. If I omit any of the points, please forgive me.
It is important first to indicate the scale of the organisation. According to the QLTR's accounts for 2007-08, the cost of running the organisation was £283,000. Those costs are charged on the QLTR's receipts and payments account, reducing the amount that is paid over from the recovery of estates and so on—it is a simple organisation.
As ever, it is important to appreciate the context. Before 2006-07, the QLTR accounts were audited by a firm of accountants in London, appointed by the Treasury, to which the QLTR was accountable before devolution. The review of 2006 recommended that the Auditor General for Scotland should appoint the appropriate auditor to audit the QLTR's accounts to the standards that are required by the 2000 act and the "Scottish Public Finance Manual". The instruction to prepare accounts in that form came from ministers only in March of the first financial year that was affected, so the organisation had to move fairly quickly at the end of the year.
The office of the QLTR is held by the Crown Agent, who is also the chief executive of the Crown Office and Procurator Fiscal Service. Since 2002, the post has been held by Norman McFadyen. Since 15 January 2008, the post of accountable officer of the QLTR has been held by Peter Collings, who is also the deputy chief executive of the Crown Office and Procurator Fiscal Service. Until 31 August 2007, the post was held by Mr Stephen Woodhouse.
The committee will appreciate that the fraud issues are still the subject of criminal investigation, so we cannot really say more about them. The amount of money involved is understood to be something under £100,000. The auditors have concluded their investigation and have assured us that the QLTR has strengthened its control systems.
Is the matter still under investigation by the police, or has a report been made to the procurator fiscal?
The other point that may be worth making is that we understand that the fraud does not relate directly to employees of the organisation—it is to do with inappropriate claims against estates.
You make a helpful point. I was going to ask about that because, although the cost of running the organisation is £283,000, presumably its turnover—the receipts and payments that it makes—is significantly greater.
Yes. It holds a large contingency of £2.5 million to cover its costs.
That is a reasonable cushion.
Angela Cullen will provide more information.
Angela Cullen (Audit Scotland):
The latest information that we have is that the police investigation is on-going.
Despite the obvious bemusement of some of my colleagues, I remember dealing with the QLTR on a number of occasions in my previous incarnation in the legal profession. Despite its rather grand title, it is a fairly mundane organisation. Members would be surprised to learn how many people die without leaving a will and without any relatives, so that their estates fall to the Crown. The QLTR collects the cash. I suspect that its turnover—the money that it receives—is fairly high.
I agree with Nicol Stephen's comments. It shows remarkable carelessness in a public organisation that the accountable officer should leave without anyone realising that someone else must be given the job of preparing the accounts. It is staggering that that was allowed to happen. We need to ask serious questions of the organisation.
I appreciate that, for legal reasons, the Auditor General is limited in what he can say about the fraud issues. However, is there any suggestion that there was fraud by someone who was in the employ of the QLTR or was the fraud external?
We understand that the allegation relates to fraud perpetrated by an external person or persons. That is all we know.
Okay.
I support the remarks that my colleagues have made. Do you have an indication of the net asset value of the operation—how much money it accrues on a yearly basis—or are we still waiting to find that out? You mentioned the cost of running the organisation and the contingency money, but how much does it ingather annually?
In the 2007-08 accounts, receipts from assets and estates were £5.477 million. The organisation received a substantial amount of money in that year, much of which was returned to the Government.
It is shocking to hear that no accounts were prepared in at least the past two years. We must investigate the matter further.
Thank you for the reports. I ask any members of the public who are present to leave, as we are moving into private session.
Meeting continued in private until 12:11.