The Crown Prosecution Service
Annual Report and Accounts 2021-22

Financial review

Introduction

The CPS receives the majority of its resources in the form of Parliamentary funding through the Estimate process. This is supplemented by income, relating predominantly to awards of costs made against convicted defendants and to the Asset Recovery Incentivisation Scheme. The CPS is accountable to Parliament for how it uses these funds and must work within the control totals that Parliament sets. The CPS’ net funding for 2021-22, as voted by Parliament, was £663 million.

This Financial Review explains the budgetary framework within which the CPS operates and sets out how the CPS has performed against its control totals.

Public sector budgeting framework

Like all government departments, the CPS is subject to spending controls set by Parliament and administered by the Treasury. Forward looking spending plans are set through Spending Reviews, which set the level of resources available to departments over the term of the review. Specific control totals for the current financial year are then confirmed through Estimates, which are voted on by Parliament. There are two Estimate publications during the financial year: in May the Main Estimate sets the initial budgets for the year, whilst in February the Supplementary Estimate allows for adjustments to be made and confirms the final budgets against which outturn will be measured. If outturn exceeds the controls voted by Parliament, then this results in an Excess Vote.

Budgets are divided into a number of headings. Firstly, they are categorised under either Departmental Expenditure Limits (DEL) or Annually Managed Expenditure (AME). DEL budgets are set in Spending Reviews and cover the majority of government income and spending. AME budgets apply to more volatile or demand-led areas of income and spending, as determined by Treasury. Some categories of expenditure are automatically treated as AME, including movements in provisions and some types of impairment.

All DEL and AME budgets can be further classified as either Resource or Capital. Resource budgets include most day-to-day income and spending, including delivery of public services, running costs of public sector bodies, and revenue earned. Capital budgets include investment activities, such as purchase and disposal of property, plant and equipment, intangible assets, and some financial assets. Additionally, payment of capital grants and some research and development expenditure is treated as Capital.

Resource DEL budgets are also divided into Programme and Administration budgets. Programme refers to income and spending that relates directly to delivery of departmental objectives and front-line services. All other income and spending is treated as Administration, which covers administrative functions and other overheads. In order to maximise spending on front-line services, departments are set limits on Administration spend. These limits are not voted on by Parliament, but are still treated as control totals with any breach resulting in an Excess Vote. Resource AME budgets are always treated as Programme.

Departments are also set a limit on Net Cash Requirement. This is the cash funding requirement arising from Resource and Capital budgets, together with planned movements in working capital. It is effectively the maximum amount of Parliamentary funding that the department can draw down, and breaching this limit results in an Excess Vote.

Control totals are set on a net basis – there are no separate controls on income and expenditure and, subject to Treasury approvals on the retention of income, additional income can be offset against additional expenditure.

A further control on spending is that budgets for depreciation and impairment of assets are treated as ring-fenced. These elements of Resource DEL budgets may not be used for other spending without Treasury approval. However, the ring-fence is not a control voted on by Parliament.

The following are further terms within the budgetary framework:

• Non-budget – Amounts that fall outside the budgetary framework, such as the impact of Prior Period Adjustments.
• Non-voted – Funding that is not voted on by Parliament, such as National Insurance funding.
• Total DEL (TDEL) – The total of Resource DEL and Capital DEL, less depreciation and impairment. This is a measure of overall DEL spending, adjusted to avoid double counting the impact of capital investment in current expenditure.

Outturn against 2021-22 financial control totals

The table below shows the CPS’ performance against our 2021-22 control totals, as agreed by Parliament in the Supplementary Estimate. Further detail on these figures is shown in the Statement of Outturn against Parliamentary Supply and the related notes in the Parliamentary accountability and audit report.

There were no breaches of control totals and our Resource DEL underspend has significantly decreased when compared with the 2020-21 underspend. We are confident that our future spending plans will continue to utilise a high proportion of our budget without the risk of a breach.

Significant variances between Estimate and outturn are discussed below.

Significant variances between Estimate and outturn

At the start of the year we estimate our costs for each budget type and we monitor against these throughout the year. Explanations for the underspends between Estimate and outturn were as follows:

Resource DEL (£000):

Estimate 650,698 Outturn 628,012

Resource spending (RDEL) is money that is spent on day-to-day resources and administration costs. It includes the hire of agents; prosecution costs; costs of confiscating the proceeds of crime; capacity building in the criminal justice system; support of voluntary sector organisations within the criminal justice system; and depreciation. The RDEL funding is shown net of income, including that arising from costs awarded to the CPS in court or received through the Recovered Assets Incentivisation Scheme.

The majority of our spend goes towards our internal workforce, in particular Legal and Frontline pay. Together with the cost of the highly valued work undertaken on behalf of the CPS by the external Bar and spend towards supporting victims and witnesses attending court, this accounts for over 75% of CPS expenditure.

The Resource DEL underspend of £22.7m is mainly due to lower prosecution and associated costs than expected and some of our IT projects slipping into the following year. As a result, a small underspend in depreciation was also noted. In addition to Crown Court sitting days being lower than anticipated, there were a number of instances where cases listed for a hearing did not proceed as planned. Both these factors contributed to prosecution spend being lower than expected.

Resource AME (£000):

Estimate 5,950 Outturn (1,003)

Annually Managed Expenditure (AME) is uncertain in nature and difficult to predict. The CPS recognises an allowance for expected losses relating to cost awards income, which scores against the AME budget. Following a reduction in income in the early stages of the pandemic, income levels have continued to recover through 2021-22, with a corresponding increase in receivables to near pre-pandemic levels. This resulted in the loss allowance increasing in year by £0.2m.

However, this small increase was offset by the writing back of a number of provisions for both legal cases and dilapidations that are no longer required, as well as by the utilisation of provisions used in year. This resulted in a large underspend.

Capital DEL (£000):

Estimate 6,205 Outturn 2,678
The underspend relates to the anticipated capital required for the recognition of right-of-use assets relating to new leases no longer being required due to the associated leases slipping from 2021-22 into 2022-23.

Capital AME (£000):

Estimate 500 Outturn (1,743)

In 2021-22 the CPS adopted IFRS 16 – Leases. The new standard requires an estimate of any dilapidations liability to be capitalised as part of the corresponding right-of-use asset value. Existing dilapidations provisions were incorporated into right-of-use asset values as an opening balance adjustment on 1 April 2021. Thereafter, any movements in the year in respect of these provisions scores against the Capital AME budget. As the overall estimate of these provisions reduced during the year, this resulted in a negative outturn against Capital AME and therefore an underspend.

Net Cash Requirement (£000):

Estimate 639,523 Outturn 633,672

The £6m variance was mainly as a result of the RDEL underspend offset by movements in working capital.

Reconciliation of budget outturn to financial statements

The budget headings used in Estimates are designed to support the treatment of expenditure in the UK’s national accounts, whereas the financial statements in departmental accounts are prepared in accordance with International Financial Reporting Standards (IFRS). In most cases, transactions are treated similarly in both frameworks, but there are some misalignments. For instance, the payment of capital grants to external bodies is treated as current expenditure in financial statements, but for Estimate purposes are reported against Capital budgets.

The following diagram illustrates how the CPS’ budget outturn above differs from the amounts reported in the financial statements.

Budget outturn trend analysis

The following charts show the CPS’ Resource DEL and Capital DEL outturn for the past five years.

Payment to suppliers and witness expenses

The CPS is committed to paying bills in accordance with agreed contractual conditions or, where no such conditions exist, within 30 days of receipt of goods or services or the presentation of a valid invoice, whichever is the later. The CPS also seeks to pay all expenses to prosecution witnesses within five working days of receipt of a correctly completed claim form.

In 2021-22 the CPS settled 95.1% of undisputed invoices and staff and witness expense claims within 10 days of receipt (2020-21, 93.8%). The CPS paid £nil (2020-21, £nil) in interest due under the Late Payment of Commercial Debts (Interest) Act 1998.