Spending-control breach sparks Cabinet Office drive to boost compliance

Cat Little responds to MPs' concerns over whether Cabinet Office is on top of compliance duties given its own agency broke rules
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By Tevye Markson

22 Apr 2024

The Cabinet Office is working with departments to improve compliance with spending controls following a breach by one of its own agencies, its permanent secretary has confirmed.

The department has taken action after the Government Property Agency broke the rules in a 2022-23 tender evaluation, Cat Little said. The GPA engaged with would-be suppliers to agree the final allocation of contracts before obtaining approval from the Cabinet Office commercial control team, which the National Audit Office found amounted to a failure to comply with Cabinet Office spending controls.

Little, who took over as perm sec from Alex Chisholm this month, has answered a series of questions on the breach in a letter to MPs on the Public Administration and Constitutional Affairs Committee, published last week.

Asked by then-PACAC chair William Wragg how an executive agency of the Cabinet Office was able to breach spending controls set by its own parent department, Little said the Cabinet Office Commercial Control team had “deemed the engagement to constitute an implied award (as the bidders were informed of the evaluation outcome as part of the engagement) and therefore a breach of the control”.

Following the breach, “the GPA team have established closer working relationships with the Cabinet Office Commercial Control team and the Facilities Management Control team in order to ensure the requirements of the control are better understood and fully adhered to going forward”, added the letter, which was sent on 11 April.

Little said the contracts aimed to “to produce a more flexible and resilient model” that would “mitigate the impact of a Carillion-style incident” where the government is too reliant on a firm which then collapses, and to “support the GPA’s growing portfolio”. She said this approach saved £9-10m and “mitigated the risk of a legal challenge”.

She added that the NAO had found that “there was no other inappropriateness in the procurement approach or its outcome”, with the contracts approved by both the Treasury and the Cabinet Office’s Facilities Management Control team.

Little said an accounting officer assessment “concluded that there was no issue of propriety or feasibility” and that “a balance needed to be struck between the regularity test and securing value for money”. “On balance, the decision was to put value for money ahead of regularity, especially given the regularity concerns were procedural,” she said.

Little was also asked if she thinks the Cabinet Office is adequately ensuring compliance with commercial spending controls across government, given it failed to do so for its own executive agency, and what steps it is taking to prevent further non-compliance. She said the Cabinet Office has been working with the GPA to improve its adherence to the controls.

“We have a number of ways of ensuring compliance with spending controls to reduce the amount of retrospectives that occur,” she said.

“We worked closely with GPA to formulate and implement a plan of action to improve compliance, and reiterated that Cabinet Office approvals need to be factored into their timelines. The improvement plan included activities such as running improvement workshops; increased scrutiny over a 12 month period; and whilst also working closely with HMT, who withhold their own approval of business cases, (and subsequent the release of funding), until the spending control and other applicable controls have been achieved.”

On wider government performance, she said there were 11 breaches in 2023-34 that required retrospective approvals. “For each we worked together with the departments to identify and understand why this occurred, how judgement was applied; and agreed and implemented an improvement plan to address the root cause,” she said.

The Cabinet Office then continues to engage and monitor with these departments to ensure controls are “understood, applied and tightened where required", she added.

Breaches of the spending controls and requests for retrospective approvals “are often linked to poor awareness of controls”, according to Little.

She said the central controls team is undertaking wider work to improve compliance across government by conducting more awareness-raising activities and refreshing guidance. This include “pipeline reviews and teach-ins”.

Little also confirmed that NAO comptroller and auditor general Gareth Davies is set to qualify his regularity opinion for the 2023-24 GPA accounts due to the security contract non-compliance. 

“We will continue to work with the NAO transparently now this has happened and will ensure that we work with the GPA to ensure controls are enhanced and tested,” she added.

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