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FRAB
Financial
Reporting Advisory Board
Contact:
Sue Gamble 020 7270 4562
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20 June 2001
FRAB WELCOMES LEGAL BACKING FOR INDEPENDENT
ROLE
The
Financial Reporting Advisory Board said
today that placing its independent role
on a statutory footing represented an important
endorsement of its work.
The
Board has sent a copy of its fourth report
to Parliament. The report describes the
Board’s work from April 2000 to March 2001
in assessing and advising on the development
of financial reporting by central government
to promote best practice.
This
reporting period saw the passing of the
Government Resources and Accounts Act 2000,
which places the Board’s role, of advising
the Treasury on resource accounting and
whole of government accounts, on a statutory
basis. This is the first report prepared
under these new arrangements.
The
Report sets out the Board’s views on a number
of issues, including:
Success
of the Resource Accounting Manual in practice:
The Board is pleased that the Manual
has been shown to be an effective document
in practice in the preparation of resource
accounts.
Role
of the Board: Discussions have taken
place regarding the extension of the Board’s
remit to include accounting standards and
principles for the accounts of the devolved
administrations in Scotland and Northern
Ireland, and the National Health Service.
These discussions are continuing.
Salary
and pension disclosures: The Board
is disappointed that the Cabinet Office
has not yet been able to finalise resolution
of the Board’s previously expressed concerns
regarding the omission of a requirement
to disclose benefits in kind for senior
management and the ability of individuals
to use the Data Protection Act to avoid
disclosure.
Heritage
assets: The Board agreed, following
the line taken in the Statement of Recommended
Practice ‘Accounting and Reporting by Charities’,
to the inclusion of additions to collections
of heritage assets on balance sheet even
though the existing collections might remain
off balance sheet. However, the Board has
concerns about the lack of consistency this
produces, and has written to the Accounting
Standards Board suggesting the policy is
reviewed in late 2002.
Private
finance initiative: The Board retains
an interest in seeing the effect of the
retrospective application of the Treasury’s
technical note, which followed the ASB’s
amendment note to FRS 5 regarding PFI projects.
The Board’s initial reaction is surprise
that under retrospection so few PFI assets
would appear on departments’ balance sheets.
Commenting
on the Board’s report, its chairman, Elwyn
Eilledge, said:
“Board
members and I welcome our independent role
being put on a statutory basis. This represents
an important endorsement of our work. We
continue to offer an independent view on
whether the Treasury’s accounting proposals
meet generally accepted accounting practice
and whether interpretations necessary for
the government sector are soundly based
.
The
full implementation of resource accounting
and budgeting from April 2001 and the developments
in train for whole of government accounts
strengthen the need for such review. We
are pleased that feedback from preparers
and auditors of resource accounts shows
that the Treasury’s Resource Accounting
Manual, which the Board has endorsed, has
been an effective document in practice.”
NOTES
FOR EDITORS
1.
The FRAB is an independent body. It was
set up in 1996 to oversee the Treasury’s
Resource Accounting Manual, which sets out
how Government departments will prepare
their resource accounts. The Board’s aim
is to help ensure that, as far as possible,
the Manual follows generally accepted accounting
practice (GAAP) in the UK and that any departure
from or modifications to GAAP are fully
explained and justified. That aim now extends
to the additional forms of accounting guidance
within the Board’s extended remit (paragraph
8 of these notes).
2.
This is the first report from the Financial
Reporting Advisory Board to the Treasury
since the Government Resources and Accounts
Act 2000 came into force.
3.
The Act requires that resource accounts
and whole of government accounts should
be prepared with a view to presenting a
true and fair view, and conform to GAAP
subject to such adaptations as are necessary
in the context of these accounts. The Act
requires the Treasury to consult an appropriate
advisory group on financial reporting principles
and standards. The Treasury, in consultation
with the Comptroller and Auditor General
in accordance with the Act, has determined
that the Financial Reporting Advisory Board
to the Treasury should be that advisory
group.
4.
The Act puts on a statutory basis the role
that the Board has been performing since
it was set up.
5.
Resource Accounting and Budgeting places
the planning and control of Government expenditure
on an accruals accounting basis. This measures
resource consumption rather than just cash
flow, comparable to the way that the private
sector manages its finances and prepares
its accounts.
6.
Government departments have prepared published
resource accounts in respect of the financial
year 1999-2000 onwards. The first stage
of resource budgeting was introduced in
respect of the financial year 2001-02 onwards.
7.
The Board’s fourth report covers the period
from April 2000 to March 2001, during which
it considered all the amendments to the
Resource Accounting Manual to make it applicable
to Government Departments’ resource accounts
for 2000-01. The Board also considered (in
February 2001) some amendments for the 2001-02
version of the Manual.
8.
During the period, the Board also endorsed
the first version of two sets of new accounts
guidance, for trading funds - the Trading
Funds Accounts Guidance - and for executive
non-departmental public bodies (NDPBs) -
the Executive NDPBs Annual Report and Accounts
Guidance - as well as some further amendments
to these publications to maintain their
consistency with the developing Manual as
appropriate. These two sets of guidance
take effect for
2001-02
accounts. This follows the extension of
the Board’s remit to oversee the accounting
guidance for these bodies.
9.
The Board comprises:
Chairman
Elwyn
Eilledge, CBE - Director of BG Group plc,
former Chairman of
BTR
plc, former Senior Partner at Ernst and
Young, and former
member
of the Accounting Standards Board.
Members
Colin
Balmer, Principal Finance Officer, Ministry
of Defence
Mike
Barnes, Head of Technical Development, Audit
Commission
Ros
Dunn, Head of Devolved Countries and the
Regions Team, HM Treasury
Heather
Jackson, Director of Finance, HM Land Registry
Graham
Jenkinson, Director, National Expenditure
and Income Division, Office for National
Statistics
Caroline
Mawhood, Assistant Auditor General, National
Audit Office
Professor
David Mayston, Professor of Public Sector
Economics, Finance and Accountancy, University
of York
Rosamund
Sykes, Director of Finance and Central Services,
Victoria and Albert Museum
Ken
Wild, Partner, Deloitte & Touche, Member
of the Accounting Standards Board and Chairman
of its Public Sector and Not for Profit
Committee
10.
Copies of the FRAB Fourth Report can be
purchased from the Stationery Office (ISBN
0102910057 £7.20). The report is available
on the internet at www.hm-treasury.gov.uk/docs/2001/frab.html,
where it can be accessed via the main index
under “Financial Reporting Advisory Board”.
11.
Media enquiries about Resource Accounting
and Budgeting should be addressed to Charles
Keseru in the Treasury press office on 020
7270 5188.
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