This statement is given in respect of the Resource Accounts for the House of Lords. As Accounting Officer for the House of Lords, I acknowledge my responsibility for ensuring that an effective system of internal control is maintained and operated in connection with the resources concerned.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve the policies, aims and objectives of the House of Lords; it can therefore provide only reasonable and not absolute assurance of effectiveness.

The system of internal control is based on a framework of regular management information, administrative procedures including segregation of duties, and a system of delegation and accountability. During the 2001-02 financial year, it was also subject to overall supervision by the House of Lords Finance and Staff Sub-Committee. Development and maintenance of the system is undertaken by executive managers within the House. In particular, the system includes:

• comprehensive budgeting systems with an annual budget for the House of Lords as a whole and for each of its constituent offices;

• procedures to review and agree the budgets;

• the preparation of monthly financial reports which indicate actual expenditure against the forecasts;

• as appropriate, formal project management disciplines, including procedures for monitoring the progress of works and other major projects, and clear guidelines for the control of capital investment.

All payments made by the House of Lords in respect of current and capital works services take the form of reimbursement to the House of Commons of expenditure incurred on behalf of the House of Lords. The House of Lords Internal Auditor includes the activities of the Parliamentary Works and Estates Directorates within his annual programme of work. However, the Internal Auditor does not generally have access to audit certain financial operations undertaken by the House of Commons and subject to audit by the House of Commons Internal Review Service. Accordingly, I have received a statement of assurance from the Accounting Officer of the House of Commons regarding the adequacy of accounting procedures used to determine the level of expenditure charged to the House of Lords, and of the system for periodically reviewing such procedures.

The Accounting Officer of the House of Commons has also provided an assurance on the accuracy of various items of accounting information necessary for the preparation of the House of Lords Resource Accounts. This information relates principally to the valuation of parliamentary assets as between the two Houses, and to the division of joint costs. It is, of necessity, prepared in the first instance by the House of Commons and is subsequently incorporated into the House of Lords Resource Account. I am content to rely on these assurances.

I expect a House of Lords review of controls over the collection and preparation of financial information in the House of Commons, and its communication to the House of Lords, to be completed during 2002-03. If the results of this review are favourable, it is possible that I shall no longer need to seek annual assurance from the Accounting Officer of the House of Commons in this regard.

The House of Lords has an Internal Auditor, who operates to defined Government Internal Audit Standards. The work of the Internal Auditor is informed by a judgmental assessment of the risk to which the House is exposed, and his annual internal audit plans, which I approve, are based on this assessment. The Internal Auditor keeps me informed on a regular basis of his internal audit work and provides me with his independent views on the adequacy and effectiveness of the internal controls.

My review of the effectiveness of the system of internal control in the House of Lords is informed by the work of the Internal Auditor and the executive managers within the House who have responsibility for the financial control framework, and comments made by the external auditors in their management letter and other reports.

As Accounting Officer, I am aware of the recommendations of the Turnbull Committee and am taking reasonable steps to implement a risk-based system of internal control. This system will be underpinned by an on-going process designed to identify the principal risks to the achievement of aims and objectives, to evaluate the nature and extent of those risks, and to manage them efficiently, effectively and economically. Initial development work was undertaken during 2001-02, including a senior management seminar, individual consultations with Heads of Offices and the development of office level risks. This work has continued during the current financial year with the result that I expect risk management to have been incorporated into the planning and decision making processes of all offices of the House of Lords by 31^st March 2003. I expect similar steps to be taken in those operational areas which are jointly funded by both Houses of Parliament.

As part of developments in management and services in the House of Lords, in June 2002 the House approved, amongst other reforms, the creation of an Audit Committee to review the scope and results of the audit function (both internal and external). The Committee met for the first time in October 2002.

Clerk of the Parliaments and Accounting Officer

29^th January 2003