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Property Services in the English Occupied Royal Palaces

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Property Services in the English Occupied Royal Palaces NATIONAL AUDIT OFFICE REPORTBY THE COMPTROLLERAND AUDITORGENERAL PropertyServices in the English OccupiedRoyal Palaces ORDEREDBY THEHOUSEOFCOMMONS TO BEPRINTED 17JANUARY1994 LONDON:HMSO f8.95 NET 132 PROPERTY SERVICES E-4 THE ENGLISH OCCUPIED ROYAL PALACES This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act. John Bourn National Audit Office Comptroller and Auditor General 7 January 1994 The Comptroller and Auditor General is the head of the National Audit Office employing sane 800 staff. He, and the NAO, are totally independent of Government.He certifies the accountsof all Government departments anda tide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. PROPERTY SERVICES IN THE ENGLISH OCCUPIED ROYAL PALACES Contents Page Summary and conclusions 1 Part 1: Background 8 Part 2: The Department’s Financial Controls and Procedures 13 Part 3: The Royal Household’s Works Programme 20 Part 4: Fire Protection 27 Appendices 1. The Provision of Property Services to the Occupied Royal Palaces 35 2. External Auditors’ letter of Appointment - Extracts 41 3. Suggested Framework for Monitoring Projects and Works Tasks 45 4: Government Policy on Insurance 51 PROPERTY SERVICES IN THE ENGLISH OCCUPIED ROYAL PALACES Summary and conclusions Paragraphs 1.1-1.3 I The Government have been responsible for the upkeep of the English Royal Palaces since the mid 19th century. In April 1991 the Royal Household took over the management of the property services in the Occupied Royal Palaces, a development which the Government expected would achieve better value for money. For this work, the Royal Household are funded by a grant-in-aid from the responsible Department, originally the Department of the Environment and from April 1992 the Department of National Heritage (the Department). Figure 1 and Box 1 2 The Royal Household spend around 70 per cent of the grant-in-aid on improving and maintaining around 100 buildings and other structures on the estate. This is a major undertaking given the size and historical importance of the buildings concerned, which include Buckingham Palace and Windsor Castle. The remainder pays for staff and services such as fuel, telecommunications, grounds maintenance and fire protection. Paragraphs 3 The grant-in-aid was set to fall substantially in real terms over the six years from 1.8-1.10 1992-93. But on 20 November 1992 a fire at Windsor Castle caused damage which will cost some E30-40 million to salvage and restore. Whilst the Government are committed to pay for the restoration work, in April 1993 the Royal Household offered to fund around 80 per cent ofthe costs by charging the public for admission to Windsor Castle and Buckingham Palace and by savings elsewhere in the property services programme, an offer accepted and welcomed by the Government. The grant-in-aid will in addition still fall by 11 per cent in 1993-94. Paragraphs 4 Under the Memorandum of Understanding and Financial Memorandum which 1.4-1.7, Appendix specify the arrangements for management of property services by the Royal 1 and Box 4 Household, the Department’s Accounting Officer is responsible for the annual grant-in-aid to the Royal Household and for satisfying himself that appropriate financial and other management controls are applied by the Department and the Royal Household. Whilst the Financial Memorandum does not specify that the Department have access to the Royal Household’s internal processes or documents, the Royal Household have provided papers or information on request and have stated that they would be content for the Department to have access. The Department intend to amend the Financial Memorandum to specify that any reasonable request for access will be met. The National Audit Office have access to information provided by the Royal Household to the Department to enable them to discharge their responsibilities. But they du nut have access LU the Royal Household’s internal processes or documents, except where the latter are provided to the Department. The Department and the National Audit Office, prior to April 1991, had access to information relating to property services when these were managed within Central Government. Paragraphs 5 The National Audit Office examined the Department’s arrangements for funding 1.12-1.14 property services in the Occupied Royal Palaces and securing propriety and value for money, with particular reference to: . the Department’s financial controls and procedures (Part 2); 1 PROPERTY SERVICES IN THE ENGLISH OCCUPIED ROYAL PALACES . the evidence available to the Department as regards provision by the Royal Household of works services (Part 3); and . the Department’s oversight of the Royal Household’s fire protection arrangements and actions in relation to the fire at Windsor Castle and insurance (Part 4). The main findings were as follows. The Department’s 6 The Department have established a comprehensive framework for controlling the financial controls grant-in-aid and securing the accountability of the Royal Household. The main and procedures features are summarised below. Paragraphs 2.2-2.9 Paragraphs (4 From the evidence available to them, the Department have formed a high 2.10-2.15 opinion of the Royal Household’s management abilities and have delegated considerable responsibility to them, whilst retaining responsibility for certain major decisions. Paragraphs 2.3, [bl The Department receive and examine a regular supply of financial and other 2.6, 2.15-2.24 information relating to future and current years. The Royal Household’s annual report contains a very detailed account of financial matters and efforts being made by the Royal Household to improve value for money. Paragraphs (cl The assurances provided by the external auditors of the grant-in-aid, 2.20-2.21 including reports on aspects of financial management, form a key element in securing the accountability of the Royal Household. Paragraphs 2.15, Id) The Department and the Royal Household’s external auditors have 2.20-2.22 periodically reviewed the documentation of the Royal Household’s financial procedures and reviews of their operation by the Royal Household’s internal auditors. The procedures appear generally satisfactory. Paragraphs (e) The Royal Household, on assuming responsibility for the Occupied Royal 2.25-2.29 Palaces in 1991, had much work to do in developing control and monitoring systems and accounting and management information systems from scratch. Evidence available to the Department shows that the Royal Household have streamlined procedures and taken various initiatives to obtain better value for money, resulting in reported reductions in expenditure in specific areas. The Royal Household’s 1992-93 annual report listed 72 procedural improvements in the first two years of the grant-in-aid. Paragraph 3.19 0-l Further, the Royal Household have stated that projects costing fl1.4 million had been undertaken during 1991-92 and 1992-93 in addition to those originally planned. This suggests substantially improved efficiency. 7 The National Audit Office concluded that the Department had established satisfactory general arrangements for monitoring the grant-in-aid and that significant improvements had been achieved in the first two years. Observations arising from their examination included the following: 2 ‘\ PROPERTY SERVICES IN THE ENGLISH OCCUPIED ROYAL PALACES Paragraphs 2.7-2.8 (a) The estimated value of the Royal Household’s creditors at the end of 1992-93 was around f1.9 million higher than at the start of the financial year. The Royal Household explained that this was because of the large volume of work in the last quarter of the year, interim payments for some of which had been deliberately scheduled for 1993-94. The Department accepted that scheduling payments in this way enabled financial savings to be made and important work to be accelerated. From information provided by the Royal Household and their external auditors they concluded that the increase in creditors in no way breached Government Accounting rules on delaying payments to avoid an overspend. Paragraph 2.9 (II) Between April and August 1993 the Department clarified their understanding of whether specific items of expenditure, amounting to one per cent of the grant-in-aid, were proper to the grant-in-aid rather than other sources. With one exception, which is to be transferred from the grant-in-aid, the Department concluded that funding these items from the grant-in-aid accorded with the Memorandum of Understanding as interpreted by custom and practice. Paragraphs (c) The Department accept that a review of the Financial Memorandum is 2.13-2.14 needed: some changes to it have been agreed in advance. Paragraphs (d) The Department’s review of the Royal Household’s annual report was delayed 2.16-2.20 in 1991-92 but proceeded more quickly in 1992-93. The annual reports included performance indicators, devised by the Royal Household and agreed by the Department, to facilitate assessments of value for money. When the Royal Household assumed responsibility for property services there were no performance indicators. They set five, with targets, for X991-92 and nine more for 1992-93, with targets for these nine taking effect from 1993-94. The performance indicators generally form a realistic measure of the degree to which primary objectives of economy and quality are fulfilled. In response to a National Audit Office suggestion that a measure of the extent of the maintenance task to be undertaken and any backlog would be useful, the Royal Household explained that the former was fully identified in the rolling programme proposed in the plans submitted to the Department and that, except for projects already included in the current five year programme, there was now no maintenance backlog.
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