5.28 Public sector bodies need to ensure they have the necessary statutory powers (see Chapter 3) and authority through Estimates to incur expenditure and receive receipts from the JV, or become exposed to other liabilities such as through indemnities, which may require a change to the 'ambit' or preambles to the Vote.52 Even if the JV is classified to the private sector, the relevant Accounting Officer will be responsible for regularity, propriety and VfM of public expenditure on the JV. Any such expenditure, and information relating to it, will be subject to scrutiny by Parliament and the Comptroller and Auditor General or Audit Commission.
5.29 The public sector body needs to consider carefully the implications of guaranteeing or indemnifying the JV against any risks. It should avoid taking any actions which give rise to any unnecessary potential liabilities. In addition to this being good sense, where any representations, warranties or indemnities are provided it must confirm that is has the necessary powers to do so. Where guarantees and the like are provided, the public sector body should consider the need for financial cover.
5.30 The JV will need to produce accounts in line with its accounting policy, which will depend on the classification of the JV as either public or private sector and any legal requirements under the Companies Act or other establishing legislation.
5.31 The way in which the results and assets and liabilities of the JV are recorded in the accounts of the public sector body will depend on its relationship with the JV (the extent of its involvement in, and control over, the day-to-day management of the JV) and whether the public sector body is included in the resource accounting boundary.
5.32 For accounting purposes, the public sector body's relationship with the JV can be classified as that of a subsidiary, associate or 'JV' (in a narrower sense than used elsewhere in this Guidance). The way in which subsidiaries, associates and 'JVs' should be incorporated in a public sector body's accounts is summarised in Annex E.
5.33 Public sector subsidiaries, associates and JVs (narrowly defined) may be incorporated into Central Government Accounts and/or Whole of Government Accounts.53
5.34 Private sector auditors will be appointed to audit the accounts of the JV. The public sector parent's auditor (whether the Comptroller and Auditor General or a private sector auditor) will also look at the public sector parent's expenditure and income from the JV, as well as the financial information on the JV which appears in the public sector body's accounts (see Annex E which sets out the accounting issues in more detail). The public sector body's auditor may need to go behind these figures to ensure that they provide a true and fair view of the public sector body's accounts. To do that the auditor may look to the JV's own auditors in order to obtain assurances. Authorities may wish to consider providing in the engagement letters for the JV's auditors that such assistance to its own auditors will be provided where necessary. It may also be prudent to provide for this requirement in the JV agreement drafting.
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52 See HM Treasury, Supply Estimates: a guidance manual October 2007.
53 For details of the Whole of Government Accounts Programme see www.hm-treasury.gov.uk/psr_government_accounts.htm.