Highways Agency

5. Financial Arrangements

Financial Regime

5.1 The Agency is subject to public expenditure controls, including Supply Estimates and the Government public expenditure planning arrangements in force. Its expenditure forms part of the Departmental Expenditure Limit (DEL) and administration cost limit. Decisions on allocations to the Agency rest with the Secretary of State on advice from the Principal Accounting Officer. The Chief Executive is responsible for Agency expenditure. The Chief Executive must ensure that the requirements of Government Accounting and the Resource Accounting Manual are met and that any recommendations of the Public Accounts Committee, other Parliamentary Select Committees or other Parliamentary authority accepted by Government are put into effect.

Annual Report and Accounts

5.2 The Chief Executive will prepare and publish each year an Annual Report and Accounts in accordance with the guidance and accounting policy set out by the Cabinet Office and Treasury. That report will be agreed with the Permanent Secretary, prior to Ministerial clearance.

5.3 The report and accounts will set out the Agency's performance related to the objectives, forecasts and targets published in that year's business plan. The accounts will be audited by the Comptroller and Auditor General, and will be published and laid before both Houses of Parliament.

5.4 The Chief Executive is responsible for ensuring that the Agency's management information and accounting systems allow for detailed and effective control over its use of resources. The accounting system will permit verification of the accounts by the Comptroller and Auditor General and the Agency will maintain the necessary interfaces with the Department's financial and accounting systems.

Financial delegations

5.5 The Permanent Secretary will issue annual financial allocations to the Agency, covering the forthcoming year and future years consistent with spending reviews, before the start of each financial year, which will include details of the freedoms and flexibilities available to the Chief Executive to redeploy resources between programmes. Budgeting and financial control regimes will be agreed for the same period.

5.6 All losses and special payments are subject to separate limits set by the Treasury. These include losses due to fraud, and extra-contractual, ex-gratia and compensation payments. A full list of definitions can be found in Chapter 18 of Government Accounting. The delegated authorities for the Highways Agency in respect of losses and special payments are the subject of detailed agreements between the Department and the Treasury and will be reviewed as appropriate.

5.7 The Principal Accounting Officer has the ultimate responsibility for ensuring that the Department and the Agency have in place effective financial management systems and procedures, and that the operation of those systems and procedures is consistent with the requirements of regularity, propriety and the economic and efficient conduct of business, including the sharing of information on commitments and changes to budgets. The Chief Executive will provide annual assurance to the Principal Accounting Officer as required by Treasury.

Contractual Delegations

5.8 The Chief Executive will establish appropriate policies and practices for the Agency's purchasing arrangements, in accordance with Departmental and Treasury guidelines, and will ensure that instructions are promulgated to all staff. The Chief Executive has unlimited delegated authority for competitive procurement and authority for single tender action limited only by the Treasury's overall delegation to Departments. The Chief Executive may authorise contractual sub-delegations to staff within the Agency.

The Management of Risks, including provisions, contingent liabilities and insurance

5.9 The Agency's financial risks, including public and employer liability, are carried in line with Government policy on insurance. The Chief Executive will keep the Permanent Secretary informed of the level of risks in the Agency and the consequence for the Agency's provisions and contingent liabilities, including where possible an assessment of their values.

Audit Arrangements

5.10 The Chief Executive will maintain an internal audit function for the Agency and direct its work. The Chief Executive will be supported by an Audit Committee established as a committee of the Agency's board in accordance with Government Accounting and Cabinet Office and Treasury guidance. The Audit Committee will be chaired by a non-executive member of the Agency's board and will approve the internal audit programme and consider the issues arising from the auditors' work.

Internal Audit

5.11 The Chief Executive will establish and maintain arrangements for internal audit in accordance with the objectives, standards, scope and practices set out in Treasury guidance and manuals and operate within the Department's Group Audit Assurance framework.

5.12 The Department's Group Head of Internal Audit will attend the Agency's Audit Committee meetings.

5.13 The Department's Internal Audit will not undertake audit work within the Agency unless specifically requested to do so by the Chief Executive or exceptionally by the Principal Accounting Officer after consultation with the Chief Executive.

5.14 The Department's Internal Audit will carry out periodic checks to confirm that the internal audit arrangements established in the Agency meet the required standard and will report on these as appropriate to the Chief Executive and to the Principal Accounting Officer.

5.15 The Department's Internal Audit will agree any other reporting requirements with the Chief Executive and the Principal Accounting Officer.

External Audit

5.16 The Comptroller and Auditor General will:

• audit the Agency's expenditure and receipts;
• examine their regularity and propriety; and
• lay the accounts before Parliament.

In addition, the Comptroller and Auditor General will have access to the books and records of the Agency in order to follow up any concerns over matters of regularity and propriety and to carry out examinations into economy, efficiency and effectiveness with which the Agency has used its resources in discharging its functions.

Scheme Appraisal

5.17 The Agency will provide the Department with such information as it requires for the audit of scheme appraisals or the evaluation of pilot projects.