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Statement on the System of Internal Financial Control: Exchange Equalisation Account Accounts 1998-99

This statement is given in respect of the accounts of the Exchange Equalisation Account for 1998-99.   As Accounting Officer for this Account, I acknowledge my responsibility for ensuring that an effective system of internal financial control is maintained and operated in respect of the Exchange Equalisation Account.

The system can provide only reasonable and not absolute assurance that assets are safeguarded, transactions authorised and properly recorded, and that material errors or irregularities are either prevented or would be detected within a timely period.

The system of internal financial control is based on a framework of regular management information, periodic audit, administrative procedures including segregation of duties, and a system of delegation and accountability.  In particular it includes:

• the existence of an appropriate control environment, such as clearly defined management responsibilities and evidence of reaction to control failures;

• regular monitoring of financial activity, on a daily basis at middle management level by the Bank of England as agents for HM Treasury, and at monthly meetings between  Bank and Treasury middle and senior management;

• the preparation of daily, weekly and monthly reports on the level of transactions.

The Bank of England has an internal audit function, which operates to standards defined in the Government Internal Audit Manual.   The work of the internal audit unit in respect of the Exchange Equalisation Account is informed by an analysis of the risks to which HM Treasury is exposed and annual internal audit plans are based on this analysis.  The analysis of risk and the internal audit plans are endorsed by the Bank’s Audit Commitee and approved by me.

The Bank of England’s Executive Director for Financial Market Operations provides me with regular reports through the Head of Internal Audit (HIA) covering internal audit activity in respect of the Exchange Equalisation Account.  Two biannual reports provide me with the HIA’s independent opinion on the adequacy and effectiveness of the system of internal financial control.   

My review of the effectiveness of the system of internal financial control is informed by the work of the internal auditors and of the managers who have responsibility for the development and maintenance of the financial control framework, and comments made by the National Audit Office in relevant reports.

Gus O’Donnell                                                                                                                

Accounting Officer