The Money Advice Service will be required to explain any likely overspends or underspends against its industry-funded budget to the Financial Conduct Authority and the Treasury under the new regulatory structure.
An agreement between the bodies, published by the FCA yesterday, sets out that the MAS is independent of the FCA but that the regulator must ensure the service is carrying out its duties to improve public understanding of financial matters and their ability to manage their financial affairs.
The FCA is responsible for appointing the MAS board, approving the annual budget, and levying firms on behalf of the MAS. The MAS is funded by a statutory industry levy and has a budget of £78.3m for 2013/14, of which £43.8m will be spent on money advice and £34.5m will be spent on debt advice.
The Treasury is responsible for approving the MAS chair and chief executive, and has to be consulted on the MAS budget.
Under the terms of the agreement, MAS will have to “notify the FCA and the Treasury as soon as reasonably practical if over or underspends against the overall agreed budget are likely.
“At the time of any proposed overspend or variation to the overall annual budget, the MAS would provide the FCA with a paper justifying the proposed variation and underlying data to explain relevant cost components.”
The MAS will have to set out how it plans to use any “excess funds” in the last three months of the current financial year.
It will also have to provide the FCA with a high level income and expenditure report every three months, and put in place a reserves policy to be agreed by the FCA.
The regulator says it will consider any MAS plans to offset any overspends or underspends of the annual budget for the next financial year.
The agreement reiterates the Treasury’s commitment to review the MAS before the end of the Parliament in 2015. Economic secretary to the Treasury Sajid Javid told a Treasury sub-committee last December the Government plans to carry out a thorough review of whether the MAS is delivering on its objectives and bring the service under the scope of the National Audit Office.
FCA chairman John Griffith-Jones told the Treasury select committee in November the MAS should be subject to a value for money study and said the regulator was having “robust”discussions with the MAS over its budget.