Spending watchdog criticises DCLG for breaching expenditure limit

The Department for Communities and Local Government breached the annual limit on its expenditure for 2012/13, the National Audit Office has revealed.

As a result the Comptroller and Auditor General qualified his regularity opinion on the DCLG’s financial statements.

According to the spending watchdog, the Department had a net cash requirement estimate of £28,972m and an outturn of £29,027m.

The NAO said: “This breach occurred because the Department failed to identify and adjust for all movements in working capital, leading to current liabilities exceeding current assets.

“The Department did not monitor its position against the control total at any point during the year and failed to detect that the outturn was above the normal profile from the start of the financial year.”

The DCLG met its further liabilities with an unauthorised bank overdraft and ended the year some £217m overdrawn.

The Treasury imposed penalty interest charges worth £20,000.

The NAO said two of the Department’s arm’s length bodies – the Valuation Tribunal Service and the Commission of Local Administration in England – had exceeded their delegated capital budgets.

The watchdog said: “The VTS excess arose because of a failure to understand the financial consequences (around the need for enhancements to the supporting IT systems) of a policy decision that Valuation Tribunals would hear council tax reduction appeals. In consequence, the VTS reported capital expenditure at year-end against a delegated nil budget.

“The CLAE excess arose following a review by new senior staff of capitalised spending on an IT system upgrade after the financial year end. A late adjustment in the categorisation of some spending from resource to capital pushed the outturn against the Department’s Capital limit into excess.”