The Comptroller and Auditor General and head of the National Audit Office (NAO), Gareth Davies, has taken the unusual step of disclaiming his “true and fair” and regularity opinions on the UK Health Security Agency (UKHSA) 2021/22 accounts altogether because of “a lack of adequate governance, oversight and control”.

Davies also qualified his audit opinion on the Department of Health and Social Care (DHSC)’s 2021/22 financial statements on limitations of scope over inventory, brought forward accruals, and the lack of evidence to support UKHSA transactions and balances. He qualified the regularity opinion because the department exceeded the budget authorised by Parliament due to a prior-period adjustment, as well as a lack of evidence over whether UKHSA’s transactions complied with its framework of authorities. 

DHSC’s consolidated financial statements cover the department, plus more than 500 hospital trusts, clinical commissioning groups and other health bodies in England, including UKHSA. The period ending 31 March 2022 was the first set of accounts produced by UKHSA and the first time they were consolidated.

DHSC reported a write down of personal protective equipment of £6bn, of which £2.5bn was for items procured during the year. When taken together with the £8.9bn of impairments reported in 2020/21, this brings the total value of impairments for DHSC to £14.9bn since the start of the pandemic.

UKHSA is an executive agency of the DHSC bringing together the functions of NHS Test and Trace and Public Health England. It was first established in April 2021 and became fully operational on 1 October 2021. 

UKHSA disclaimed opinion 

Davies was unable to provide an audit opinion on the UKHSA’s accounts because of “a lack of sufficient, appropriate audit evidence and significant shortcomings in financial control and governance”.

The NAO said that throughout 2021/22, there was no formal Board or Audit and Risk Assurance Committee in operation, in breach of HM Treasury and Cabinet Office guidance on governance arrangements.  

UKHSA did not appoint non-executive directors until 28 April 2022, seven months after it first became operational in October. The Advisory Board and Audit and Risk Committee did not meet formally until June and July 2022 respectively.

“This lack of formal governance arrangements exposed UKHSA to a high level of risk, with no clear oversight structure in place for its first six months of operation,” Davies said.  

Inadequate internal controls 

The NAO found that during UKHSA’s first six months, it did not carry out effective bank reconciliations, showing that critical elements of internal control were not in place.

Shortcomings in the introduction of a new accounting system, combined with a reliance on temporary staff, meant that UKHSA was not able to provide the NAO with evidence to support key balances and transactions in the accounts.  

UKHSA were unable to provide the NAO with sufficient evidence to support £794m of NHS Test and Trace inventory or £254m of stockpiled goods transferred from its predecessor organisation, Public Health England (PHE). The NAO also could not obtain sufficient evidence to support the £1.6bn of accruals transferred to UKHSA on 1 October 2021. 

Gareth Davies, the head of the NAO, said: “Even taking into account the challenging context, it is unacceptable that UKHSA has not been able to produce auditable accounts and provide the transparency and assurance that Parliament needs. When setting up new bodies, it is essential that basic governance arrangements are put in place. DHSC and UKHSA must work with HM Treasury to get on track to produce auditable accounts.” 

The NAO reported that DHSC failed to oversee or support UKHSA sufficiently to resolve issues that it inherited from its predecessors.

Oliver Simms, ICAEW Public Sector Audit and Assurance Manager, said: “Despite the difficult circumstances of its establishment in the middle of a global pandemic, the shortcomings in financial control and governance at UKHSA are disappointing. 

“High-quality accounts are vital for transparent, evidence-based decisions and this is particularly important with the current challenges facing the NHS. 

“The DHSC needs to invest in strong financial teams and governance to ensure value for money in spending on healthcare at a time of rising pressures and limited resources. More broadly, the government must learn lessons from this when setting up new bodies in future.”