Committee Reports::Report No. 25 - International Comparisons of Parliamentary Accountability::20 January, 1987::Report

MEMBERS OF THE COMMITTEE ON PUBLIC EXPENDITURE

Deputy

Michael Keating - Chairman

Michael O’Kennedy - Vice Chairman

Bernard Allen

Michael Bell

Paudge Brennan

Richard Bruton

Hugh Byrne

Hugh Coveney

Joe Doyle

John Farrelly

Liam Fitzgerald

Colm Hilliard

Liam Hyland

John Kelly

Frank Prendergast

Noel Treacy

John Wilson

Background

1As part of its review of public expenditure programmes the Committee on Public Expenditure decided to contact similar parliamentary committees to examine procedures and systems in operation in a number of other countries.


2Between January 1985 and October 1986 Committee delegations visited London, the United States and Berne, Switzerland. The following report summarises the systems for public expenditure evaluation and control in those countries. The Committee, on the basis of the information gathered during those visits, makes recommendations for rationalisation and improvement of the present systems in Ireland in the area of audit, evaluation and control of public expenditure programmes.


Select Committees in the UK House of Commons

3Select committees are composed of a number of Members of the House specially appointed from time to time to consider particular matters. The normal size of such a committee is about 11 or 13 Members, and most such committees are appointed for the lifetime of a Parliament (typically 4 - 5 years). Members are nominated by the House itself; select committees choose their own chairman, who may be (by agreement) a Member of a party in opposition.


4A select committee will normally proceed by inviting persons whom they believe may assist them - often but by no means invariably government officials or even Ministers - to appear before them and give oral evidence. Evidence is also sought in written form, and a substantial proportion may be published at the end of an enquiry, together with the committee’s report.


5There is no procedure in the House of Commons automatically bringing forward for debate the report of a select committee, though many reports are of course debated or referred to in the course of debate.


6The Government will normally make a reply to the report of a select committee, which the committee will publish.


7As a matter of practice, but not of rule, select committee have long conducted their affairs in a non-partisan spirit, though this is not to say that the reports which they agree are uncontroversial or only platitudinous. But the proceedings themselves are not normally characterised by party divisions.


The Treasury and Civil Service Select Committee

Appointment of the Committee

8The Committee was one of the fourteen new Departmentally-related Select Committees first established by Order of the House on 25th June 1979, at the conclusion of a debate on the First Report from the Procedure Committee of Session 1977 - 78 (HC 588). The Committee did not commence work until December 1979, following the appointment of its members on 26th November 1979. The Committee was reappointed in the new Parliament on 9th December, 1983.


9The Committee’s terms of reference (common to all the departmentally related Select Committees) are: “to examine the expenditure, administration and policy of the principal government department(s)” (i.e. the Treasury, the Management and Personnel Office, the Board of Customs and Excise and the Board of Inland Revenue) and “associated public bodies” (these include the Bank of England, the Central Office of Information and Her Majesty’s Stationery Office) “and similar matters within the responsibilities of the Secretary of State for Northern Ireland”. (Standing Order No. 99). Consideration of the relevant current legislation thus does not fall within the remit of the Committee.


10The Committee has the normal powers of Select Committees, including the powers to send for persons, papers and records, to sit outside the Palace of Westminster and to appoint specialist advisers. It also has the power, in common with only two of the other Committees, to appoint one Sub-Committee. The Sub-Committee has similar powers as the main Committee, but cannot report to the House directly and its decisions are subject to control by the main Committee.


11Work of the Treasury Committee


The Committee has undertaken a wide variety of enquiries ranging from the very short to the very long (the Third Report of 1980 - 81 took nearly a year). The programme has settled around three annual reviews of the Government’s economic policies, one of the Budget, one of the Autumn Statement, and one of the Public Expenditure White Paper. Other enquiries have been undertaken in between and around these reviews.


12The Sub-Committee was originally given the task of concentrating on the Civil Service, administration and taxation aspects of the Committee’s remit. In the new Parliament, the Sub-Committee has been nominated on an ad-hoc basis for each enquiry. By convention, the Chairman of the Sub-Committee is a member of the opposition party.


13A complete list of the Reports and evidence taken by the Committee is available. Where Government replies to the report have been received these are also listed. No Reports of the Committee have been specifically debated by the House on a Motion, though several have been discussed in debates as background material to a wider motion with reference to the Report being included on the Order Paper.


Staff

14The Committee and Sub-Committee together are staffed by 2 Clerks, 1 Chief Office Clerk, 1 Secretary and 2 Specialist Assistants (i.e. staff with specific qualifications in the field in which the Committee is interested, appointed for two to four years to help in research work etc).


15The Committee has also been served on a per diem basis by Specialist Advisers, mostly academics, some of whom have been appointed in connection with particular enquiries while others have been advising the Committee consistently since its inception.


Visit by Committee delegation to the United Kingdom (1985)

16A delegation of the Committee on Public Expenditure Expenditure held meetings with:-


-the Treasury and Civil Service Committee


-the Committee of Public Accounts


-the Prime Minister’s Efficiency Unit


-staff of the Trade and Industry Committee and the Employment Committee


Treasury & Civil Service Committee

17The delegation held a discussion with Mr. Bill McKay (Clerk) and Mr. Steve Priestley (Sub-Committee Clerk) of the Treasury and Civil Service Committee.


The Select Committee usually meets each week and deals with


(a)a mixture of in-depth reviews and “one-off” studies which are produced very quickly.


(b)the Public Expenditure White Paper which is produced between the U.K. Budget and the Finance Bill.


(c)Interest and monetary policy


(d)the Government’s long term trends over 10 years


18Broadly speaking the Committee deals with expenditure, policy and administration.


19The Committee’s relationship with the Treasury are generally good - at official level there is good co-operation; generally Government Members on Committees do not raise controversial questions on Government policy. The reports produced are agreed reports i.e. there is no mechanism for a minority statement other than a seperate report by a Member who might disagree with the thrust of a Committee report.


20The Treasury and the Civil Service Committee liaises well with the Committee of Public Accounts and there are generally agreed lines of demarcation between the two Committees. Reports have to be based on a considerable foundation of evidence, therefore, the Committee must be well briefed in advance so that the most searching and relevant qeuestions will be asked.


Prime Minister’s Efficiency Unit

21The delegation attended a meeting in the Prime Minister’s Efficiency Unit with Miss Kate Jenkins (Deputy Head of the Unit) and Mr. C. Chivers (Assistant Secretary). Miss Jenkins explained the background to the Efficiency Units (set up in 1979 under Sir Derek Rayner) and the relationship with Departments. A paper entitled “Guidance for Ministers and Officials handling scrutinies” is attached at Appendix III.


22Basically a scrutiny is a method of reviewing an area of expenditure or policy which can be used by the Minister responsible or by a department’s senior management as a means of investigating a particular activity in depth. The scrutiny process is no longer one which is triggered by action at the centre. Scrutinies are intended to come out of top management systems in Departments. The annual systematic examination of costs, performance and plans for all departmental activities should identify areas where the scrutiny process can provide better value for money.


23The Prime Minister’s commission to the present Head of the Unit was to the effect that:-


-The Prime Minister’s interest in efficiency is undiminished


-Public servants must be convinced of the need to improve efficiency


-The Efficiency Unit is to help Ministers use MINIS (Management Information Systems) to:-


(a)set targets for activities


(b)commission efficiency studies


(c)review progress on lasting reforms


-Central efficiency programme to be devised using MINIS data.


-Scrutiny techniques to be developed.


24The Efficiency Unit operates on the basis of persuading and encouraging internal management of Government Departments to scrutinise areas of expenditure and take appropriate action.


25There is little or no direct contact between the Efficiency Units and the Select Committees. The Efficiency Unit is involved in some value for money studies undertaken by the National Audit Office. (The delegation’s impression was that there was some element of overlap between the Unit, the Select Committees and the National Audit Office).


26Objectives of Efficiency Unit


-Maintaining momentum of scrutiny programme


-Use of MINIS systems


-Focus on substantial opportunities


-Implementation of findings


-Extension into wider public sector


Scrutiny Programme

Central Government - Annual Savings (1979 - 1983)



27The Scrutiny Unit originally concentrated on running costs but now deals mainly with policy issues.


28In response to the delegation’s queries as to what was the incentive to implement scrutiny reports, Miss Jenkins said thatthe Unit’s experience was that


(a)people do, in fact, want to operate efficiently


(b)a scheme of “performance pay” was under discussion e.g. payments of £500 - £3,000 to be made available for civil servants in the rank of Under Secretary down to Principal - payments not to be made available to more than 20 per cent of a particular grade.


29The Scrutiny Unit avails of expert advice as required. A full-time consultant is used for the selection of other consultants and advisors. The Unit recommends publication of reports and these are available at the Royal Institute of Government Publications.


30Conclusions arising from U.K. Visit


The Committee’s overall view was that the U.K. Select Committees did not appear to be more effective than the Committees operating in Ireland.


2. This Committee has priority in relation to Motions for Dáil debates noting reports - this facility does not seem to be as clearcut in the case of U.K. committees.


3. The U.K. Committees’ terms of reference include the examination of policy which does not exist here at the moment.


4. The U.K. Committees can compel witnesses to attend and may sit outside the Palance of Westminster.


5. The Treasury and Civil Service Committee also examines “associated public bodies” including the Bank of England while the Central Bank of Ireland is not subject to Oireachtas Committee scrutiny.


6. There is an effective Liaison Committee in the U.K. (Chairmen of 14 Select Committees) which produces an annual report. A similar system should operate here in the case of the Oireachtas Committees. This would enable the Houses of the Oireachtas and the public have an overall view of the activities of the Committees.


II Visit by Committee delegation to the United States, September, 1986.

31A delegation of the Committee on Public Expenditure, visited Washington DC and Albany, New York in September, 1986.


32The purpose of the visit was to discuss with legislators and officials of US Government and the State of New York their systems of controlling public expenditure, including budgeting, auditing and evaluation.


33The following is a summary of the main issues discussed at the various meetings held.


1. General Accounting Office (GAO)

34The Comptroller General of the US, Mr. Charles Bowsher, and his senior staff briefed the Committee on the GAO’s remit, powers and activities. The GAO (staff of 5,100) was created to assist the Congress in its oversight of the executive branch in carrying out programmes enacted by Congress. The Office also assists Committee Chairmen on request. It is also required to review the operations of all Government agencies. Thus, GAO serves a dual role of directly assisting Congress and of independently auditing, investigating and evaluating.


35GAO staff is multidisciplinary. It includes evaluators, auditors, attorneys, actuaries and other mathematical scientists as well as economists, computer and other professional and technical experts. Consultants are also used extensively to supplement GAO staff when required. The US Government is required under the 1985 Act to eliminate its budget deficit of $200 billion by 1991. The GAO’s responsibility is to help Congress make its decisions by assessing the accuracy, timeliness and reliability of financial information of federal government agencies. By reviewing virtually every major domestic and defence programme the GAO ensures the available funds are used efficiently and effectively.


36The GAO has very wide powers and recent legislation strengthened its authority to enforce statutory right of access to records of federal agencies and entities.


37The Comptroller General’s booklet “Standards for Audit of Governmental Organisations, Programmes, Activities and Functions” used and accepted by all levels of Government as well as by the accounting profession.


38 Conclusions


(1) Auditing : It is clear to the Committee that the U.S. Comptroller General has much wider powers than the Comptroller and Auditor General in Ireland. The U.S. General Accounting Office (GAO) has a role, not only in relation to auditing past expenditure, but also (a) planned expenditure programmes and (b) ensuring that such programmes do not breach the terms of the Balanced Budget and Emergency Deficit Control Act of 1985 which seeks to eliminate the $200 billion deficit by 1991.


(2) As stated above the U.S. G.A.O. staff is multidisciplinary and includes evaluators, auditors, attorneys, actuaries, econimists, computer and other professional technical experts. The Committee concluded that our Comptroller and Auditor General should have access to the same type of expertise, perhaps through loan of staff from other areas of the public service or on a per diem fee basis.


(3) Where gaps may exist at present the C.& A.G. should have statutory right of access to records of all agencies which are fully or partially funded by the Exchequer.


(4) The U.S. Comptroller evaluates as well as audits Government expenditure. The Committee believes that our Comptroller and Auditor General’s function and role needs to be reviewed to bring them into line with to-day’s requirements in the area of public expenditure audit and control (see recommendations at the end of this report.)


2. The House and Senate Budget Committees

39The Committee delegation met with


(a)the House Budget Committee Staff Director, Mr. Stephen Pruitt also members of the Committee, including Representatives Butler Derrick, Jim Slattery and Lynn Martin.


(b)The Senate Budget Committee Staff Director, Mr. Bill Hoagland.


40A Congressional Budget Act of 1974 established a standing Committee on the Budget in each House. The Committees are given the following duties:


(i)to report to their respective Houses matters relating to the budget;


(ii)to make continuing studies of the effect on budget outlay of relevant existing proposed legislation;


(iii)to request and evaluate continuing studies of tax expenditures with direct budget outlays;


(iv)to review the operations of the Congressional Budget Office (see below).


41The Committees were created to guide the Congress in the tasks of settling national fiscal policy aggregates, i.e., total spending, revenue and debt levels. The powers of both Committees are wide-ranging in these and other areas of balancing the budget and controlling the deficit.


42Conclusions


(1) The Committee believes that there are good grounds for the Oireachtas giving consideration to the setting up of an Oireachtas Budget Committee or re-defining the terms of reference of an existing Committee to allow a greater input to the budgetary process before final decisions are made by the Government. As this would require legislative change the Committee suggests that priority should be given to an early examination of the present budgetary process and the changes that would have to be made in existing legislation. The Joint Committee on Legislation would seem to have a role in that area.


(2) With the exception of Ireland and the United Kingdom the Committee understands that budgetary committees exist in all the other E.E.C. member states and the European Parliament and that they have a useful and essential function in the overall budgetary process.


3. Congressional Budget Office.

43The Congressional Budget Office (CBO) furnishes Congress key information relating to the US economy, the Federal budget, and Federal programmes.


44Each year, CBO provides Congress with two forecasts of the state of the economy. It reviews and prepares an analysis of the President’s budgetary proposals. And, it provides Congress with 5-year projections of the total Federal budget, against which changes in taxing and spending policies can be measured. CBO also keeps score of how closely Congressional spending and revenue actions match resolution targets.


45The agency provides 5-year cost estimates on all legislation reported by Congressional committees. In addition, CBO analyses programmatic issues affecting the Federal budget and regularly testifies before Congressional committees on fiscal and budgetary matters.


46CBO is a non-partisan congressional agency. It does not make policy recommendations, but assesses available policy alternatives and options


47The delegations met Ms. Rosemary Marcuss, Assistant Director, Mr. C.G. Nuckols, Deputy Assistant Director and other senior officials of the CBO.


48Conclusions


(1) The Committee concluded that the U.S. Congressional Budget Office provides a vital link between the Executive and the Legislature and that there are grounds for establishing a similar service in Ireland. However, until the question of a budgetary committee has been examined and resolved here it would be premature to make any specific recommendations in this area.


(2) As a general conclusion the Committee would wish to see the early establishment of an information section in Leinster House. This section, which would be primarily for the benefit of Oireachtas Members, should have the latest technology available to it and should be staffed mainly by economists who could prepare reports and studies for individuals or groups on request.


4. Office of Management and Budget (0MB)

49The delegation met Mr. Carey P. Modlin, Assistant Director for Budget Review and two senior members of the staff of 0MB. The Office’s functions include the following: To assist the President in his programme to develop and maintain effective government by reviewing the organisational structure and management procedures of the executive branch to ensure that they produce the intended results;


To assist in developing efficient co-ordinating mechanisms to implement Government activities and to expand interagency co-operation;


To assist the President in the preparation of the budget and the formulation of the fiscal programme of the Government;


To supervise and control the administration of the budget;


To assist the President by clearing and co-ordinating departmental advice on proposed legislation and by making recommendations as to Presidential action on legislative enactments, in accordance with past practice;


To assist in the development of regulatory reform proposals and in programmes for paperwork reduction, especially reporting burdens of the public;


To assist in the consideration and clearance and, where necessary, in the preparation of proposed Executive orders and proclamations;


To plan and develop information systems to provide the President with programme performance data;


To plan, conduct, and promote evaluation efforts to assist the President in the assessment of programme objectives, performance, and efficiency; and


To keep the President informed of the progress of activities by Government agencies with respect to work proposed, initiated, and completed, together with the relative timing of work between the several agencies of the Government, all to the end that the work programmes of the several agencies of the executive branch of the Government may be co-ordinated and that the moneys appropriated by the Congress may be expended in the most effective manner.


50Conclusions


(1) Given the differences in the relationship between the President of the United States and the Houses of Congress as compared with the Oireachtas, the Committee concluded that it had no role in making recommendations for a similar office in the context of our legislature.


(2) The Committee’s overall view was that it would be useful for the Minister of Finance to study the system used by the 0MB with a view to incorporating changes or improvements of relevance to the preparation for and consideration of the budget.


51The Committee also held a series of meetings in the New York State Capital, Albany, New York.


(1) Rockfeller Institute, State University of New York, Albany, New York.

52Discussions were held with Dr. W. Ilchman, Director of the Institute, Dr. R.M. Stout, Professor of Political Science, and Mr. John Flynn, Analyst, New York State. Dr. Joseph Zimmerman of the New York University also attended. The main issues discussed were :


-the budgeting and evaluation system used by New York State. These include general accounting principles (GAP) and key item reporting which is concerned with an accural accounting system and efficiency and effectiveness respectively.


The Institute works closely with the New York State legislators and its analytic work is available to them.


-A brief discussion was also held on the proposed Irish Studies Programme for 1987 under which New York University students of political science and law would be assigned to various Oireachtas Committees.


(2) Division of the Budget

53The delegation met Mr. R.P. Kerker, Deputy Chief Budget Examiner, New York Division of the Budget; also the heads of executive units dealing with the State’s mental health programmes. The delegation was briefed on the detailed systems used, i.e., a complete financial plan of expenditures and revenues is required for each major programme and these are processed by the Division of the Budget. Evaluation techniques, including indicators, are being increasingly used by the Division.


(3) Division of Audits and Accounts

54The Deputy State Comptroller, Mr. Robert Attmore, Division of Audits and Accounts briefed the delegation on the systems used in New York State. The powers of this Office are extremely wide-ranging. The main responsibilities are :


-pre and post auditing (use of key item reporting);


-control of accounts;


-ensuring that detailed management guidance manuals are adhered to ;


-giving formal legal opinions to the legislatiors;


-has major treasury function;


-acts as trustee for State’s pension funds of $30 billion.


55The Division and Audit and Accounts is very effective through the timely publication of its reports.


(4) Legislative Commission on Expenditure Review

56Dr. Bernard Geizer, Director of the Commission and his senior staff briefed the delegation on the Commission’s activities. It is unique in that it is a joint Commission of the New York State legislature which was set up in 1969 as a permanent legislative agency. Its primary objective is to determine whether State departments and agencies implement their programmes efficiently and effectively in accord with legislative intent and authorisation programme audits are conducted by inter-disciplinary research teams which include persons with required degrees and experience in the various areas under review. Agencies reviewed have an opportunity to respond to the draft audit reports.


57Programme evaluation (a) provides the legislature with information to assist in the development of policy and (b) executive units are shown how to respond to the need for internal improvements and use reports as a catalyst for change. For the public it provides information about services bought with tax dollars and other revenues.


58Conclusion


(1) The Committee found the visit to New York State extremely valuable as it was clear that the budgetary evaluation and Auditing techniques, while very sophisticated, are used very effectively. More importantly, the New York Legislative Commission on Expenditure Review provides an efficient tool for the Legislators in determining whether State departments and agencies implement their programmes efficiently and effectively.


(2) As in the case of the U.S. House and Senate Budget Committees the Committee is of the view that there are grounds for the establishment of similar systems here.


(3) The Committee also found that as in the case of the U.S. Comptroller General the New York State Comptroller has much wider functions and powers than their Irish counterparts, the Comptroller and Auditor General. This aspect should be addressed by the Minister for Finance as a matter of priority.


III Visit by Committee delegation to Switzerland, October, 1986.

Introduction

59In the course of its review of Parliamentary procedures for examining public expenditure in other countries, the Dáil Committee also sent a delegation of three of its members to Switzerland in October, 1986.


60Though the intention was to combine a visit to both the Swiss and West German Parliaments, this proved impossible because of a clash with the National Conference of one of the main political parties in West Germany.


61The mandate of the delegation was to learn from the Swiss experience of parliamentary accountability for public expenditure and, in particular, to report to the Committee on any improvements or changes it should consider in light of the Swiss experience so that the Committee could, in turn, report to Dáil Éireann.


62The Committee was particularly struck by the strength of the Swiss economy, its state of full employment, the low level of public expenditure which it ascribed to the very effective community and federal system of Government in Switzerland reducing to a minimum the cost, scope and scale of the control apparatus of Government.


63This part of the report summarises the report of the delegation on the Swiss economy and system of Government, the Swiss system of Parliamentary reviews of public expenditure, the administrative system in which it is based, the lessons it offer the Dáil Committee on Public Expenditure and recommendations arising.


Key features of the Swiss Economy

64Switzerland is smaller than Ireland with a population of 6.5 million people - enjoying average income and living standards, three times those of Ireland. Though an export led economy it is a high cost economy in terms of wages but low in terms of taxes. It has been consistently successful in attracting international industry and developing around it a strong indigenous base.


65Though internationally viewed as a service economy with strong banking and tourist sectors industry still provides 38% of the jobs compared with say, 33%, in Britain and 30% in Sweden, an economy of approximately similar size.


66Switzerland’s main industries are the chemical and pharmaceutical industry while it is developing on electronics industry to replace its declining watchmaking industry.


67For the delegation the most striking dimensions of the Swiss economy were the low cost of funds, the low level of unemployment (less than 1%) and the low level of public sector employment, which is less than in Ireland with one third of the workforce and half the population.


The System of Government

68The system of Government in Switzerland could be described as a devolved Federal system with strong community participation. This would misrepresent it, however, in that it is a thoroughly bottom-up system with the strictest limitations on central authority in relation, inter alia, to taxation. So the State never had the power implicit in describing the system as devolved. Though in existence as a Union of States since the Middle Ages, the State of Switzerland was not constituted by the 26 Cantonal States until 1848.


69The system is comparable in structure to the United States of America. It is also comparable in the racial, religious language and cultural mix it represents. But it includes not only 26 States but also 3,000 self-administering communities.


70The cantons are firmly protected and provided for in the first article of the Constitution in a form that renders it unlikely that a canton could be suppressed though a new canton was recognised in 1978 after 30 years of pressure to accede from Berne.


71Each canton has its own constitution being requested only to be republics and to respect the principle of equality and civil rights. The cantons in turn shape the State Constitution both in referendum and through representation since the upper house consists entirely of two representatives from each canton (and one each from 6 half cantons).


72The cantons have extensive powers in the fields of education, public health, commercial policy, planning and the environment and law and order but for the most part, civil and criminal law is a federal matter.


73The structure of State Government has two Houses of Parliament of equal authority which are obliged to meet jointly on cantonal matters including the election of the 7 person Federal Council of Government and the Federal Judiciary. The Upper House of 46 is elected by the cantons and the Lower House of 200 is elected by the electorate which, up to 1978, was all males over 20. It was only then that women were given a vote in State elections.


74The Government, since 1959, has been elected in accordance with what is described as the “magic formula” which provides that the Government will consist of two people from each of 3 parties and one from another, elected by Parliament which may not necessarily, and often does not, elect the nominated party representatives. The Government is a college of equals who elect a President each year from among themselves on a revolving basis.


75The Government continues in office for a full term regardless of the outcome of parliamentary votes. Neither can the Government veto Bills of Parliament. One of the interesting results of this system is that less than 6% of Parliamentary time is taken up with political and personal issues while 51% is dedicated to legislation and 42% to administration and control.


76The use of the referendum is also extensive and may be demanded by the people. It requires 50,000 signatures to refer legislation on treaties to referendum and 100,000 to initiate a constitutional amendment. This has resulted in 349 referenda since 1848, 95 of these related to the adoption of bills or treaties. The level of participation in these elections is low however, usually ranging from 35 - 40% though two referenda in the ‘70s resulted in turnouts of over 70%.


77The result of this system is a very high degree of stability which, despite having seven distinct parties has seen no significant change in the balance of power in Parliament since 1918.


78The Parliament consists entirely of part-time politicians who attend the 4 three week sittings annually but they are also likely to be involved as political representatives in their own canton and community. Many are also involved as professional or elected community or cantonal officials.


79Tax levels are low perhaps because of the right of the people to referenda and as a result public sector programmes and employment are much less than in Ireland or other European countries and, incidentally, income is higher and unemployment is substantially lower.


Parliamentary Supervision of Public Spending:

80There is one integrated Committee system which is set out graphically on page 5. It involves a Finance Committee from both Houses of Parliament which has 11 subcommittees between them. They elect a Finance delegation to supervise the State and semi-State public expenditure programme. By an arrangement with the Government dating back to 1959 and referred to as “the Gentleman’s Agreement”, this Committee is also responsible for supervising personnel matters and has a right of veto over new recruitment and the remuneration of higher public servants.


ORGANISATION CHART OF THE PARLIAMENTARY FINANCE SUPERVISION IN SWITZERLAND



81This Committee receives the reports and files of the Swiss Federal Audit Office on each public expenditure programme and on the 600 bodies in receipt of annual Exchequer grants-in-aid. It also receives the reports and files of the Federal Financial Controller which supervises financial administration. The practise of the Federal Audit Office is to audit these every 4 to 5 years leaving the interim audit work to public auditors duly appointed by the bodies themselves.


82The entire work of the Finance Delegation is supported by a small staff (four) over and above the Federal Audit office staff and its task is to continually examine all State expenditure with the exception of the Federal Railways and the agency operating the State’s alcohol monopoly.


83The system which is provided for in the Constitution is in operation since 1902 and is summarised as follows:


- the Federal Council, which is the directory and superior executive authority of the Confederation, administers the finances, presents the budget and accounts for receipts and expenses.


- Parliament, which is built on the bicameral system and consists of the National Council, in which the 200 members are elected in proportion to the population and to the Council of States, which consists of 46 members, i.e., two per canton, lays down the budget, passes the accounts and is the supreme supervising body of the finances of the Confederation.


84Each of these two councils exerts an authority with regard to financial matters via a Commission on Finances, which consists of 23 members of the National Council and 11 members of the Council of States, and through a Common Delegation on Finances consisting of 3 members from each council, chosen by and from the members of each financial commission. The Federal Financial Control, which is an administrative office, has lately joined these organs so, that together they are the supreme supervisory body as regards the Confederation’s finances.


The Commissions on Finances

85At the beginning of each term of office each of the two Houses constitutes two permanent commissions on supervision, as follows: The Commission on Administration entrusted with the checking of the Confederation’s administrative management and the Commission on Finance, whose task is to control the Confederation’s financial administration, to examine financial schemes, budgets, requests for additional credits and the accounts of the Confederation the Departments and most state sponsored bodies. The Commission on Finance submits reports and suggestions to its council, which makes the decisions. The Commission exerts a formative supervision when attending to the drawing up of the budget and when examining the State accounts.


Procedure

86The Commissions on Finance and their 11 sub-Committees every year devote the month of November to the examination of the Confederation’s budget for the following year and the month of May to the State accounts of the preceding year. The Federal Council presents these matters to Parliament and federal counsellors are often invited for discussions on the problems which have arisen during their deliberations or in the course of the inspections.


87The budget and the accounts of the Postal, Telegraphic and Telephone Services are examined concurrently with those of the Confederation. The same applies to the two budgetary supplements.


Principle, method and significance of the examinations

88The Comissions examine the general principles applying to the Confederation’s administration of finances the legality and the urgency of expenditure and also the efficient and thrifty application of the Confederation’s funds. The Commissions also take account of financial policy dictated by circumstances and the Delegations on Finances and the presidents of the two Commissions law down directives for examining every budget and every State account.


89The Commissions have extensive rights of inquiry and examination. They can request any information from the Federal Council and from the Administration which they consider useful. As Parliament has the authority to sanction or to refuse credits, the Commissions on Finances can exert a direct and important influence within all fields of State expenditure. But the people decide on the receipts, through their right of referendum, whereas an increasing proportion of expenses are seen as imperative. Consequently the Commission on Finances and Parliament have a narrow manoeuvring margin for curbing the development of the federal finances, which have been showing a deficit since 1971.


90The Finance delegation holds a two-day meeting at least every two months and a number of extraordinary meetings are also held each year. Its authority to request information on financial and administrative matters is absolute and it is provided with all Government decisions on financial administration.


It is entitled to withhold monies pending satisfactory explanations from any Department or agency and to approve additional spending over budget in the name of Parliament.


91The delegation, its staff and advisers are bound to observe the confidentiality of all sensitive matters. The delegation then produces one report each year on its activities and the financial administrative system which is first considered by the Finance Commission of both Houses which appoint them and then published in the official gazette.


92The system is, in short, built into the internal financial control and external audit system and is found to be a cost effective link between Parliament and the financial administration incorporating a brake on the system and the necessary democratic accountability. While it combines elements of practise in other countries it is uniquely Swiss and has the refinement of 84 years’ experience. The system in the cantons also reflects this federal system.


The Administrative System underpinning the Parliamentary supervision of financial administration

93While this matter has been extensively referred to in describing the system of parliamentary supervision it warrants a separate description.


94While the system here described relates to the Federal system it is reflected both at canton and communal level. The Federal Audit Office includes in its remit the full range of bodies in receipt of Exchequer grant-in-aid whether they are statutory, public, private or voluntary. The only link between the Federal and Communal administration is that they share a tax collecting system with a fixed share of revenue applied at each level and to the churches. Each canton and commune can supplement this income with further taxes bearing in mind at all times that the people have the right to reject new taxes by referendum - one of the consequences of this right is that total public expenditure in Switzerland is 12.9% of G.N.P.


95The Chancellory is responsible for all financial decisions by the Government. The Federal control on finances advises and services both the Parliament and the Government in relation to these decisions and is responsible for inspecting the internal accounting system throughout the entire administration, including adherence to budget, the law, and good accounting practice.


96It is also administratively responsible for the Secretariat of the Finance Commissions and delegation though the Secretary is appointed by the Government on the advice of the delegation and also acts as a liaison officer of the Federal Audit Office. The Secretariat also draws on expert advice as required.


97The terms and obligations of the Swiss Federal Audit Office are clearly spelled out in legislation and parallel the position of the Comptroller & Auditor General in Ireland. Because of the structure, however, the audit function is much more extensive in the administrative system effectively combining the roles of internal and external auditor in so far as the making of payments is concerned.


98The Law governing the Federal Audit Office is set out in Appendix II.


99The budget allocation and accounting system in Switzerland is centralised and all payments issue as “payment orders” which are processed through the Audit Office. Without the counter signature of the Audit Office these payment orders cannot be processed by central accounting. This activity of checking payment orders at the time of issue and approving them as being in accordance with the budget and the law and being cost-effective occupies half the staff of the Audit Office.


100The other half of the staff are occupied with annual or less frequent audit work on all State Departments and agencies and bodies in receipt of annual grants from the State. The work also includes participation on the Board of Auditors of many of the multilateral agencies with headquarters in Switzerland. These audits are primarily of operations rather than transactions and, as such, are primarily focussed on value for money. This is possible because the system ensures adequate transactional audit through the approval process.


101The Swiss Federal Audit Office draws its staff from auditing firms from the universities and from within the administrative system. About 70% of its staff are professional.


102Conclusions


(1)While the delegation was naturally interested in the Swiss economic and political systems as part of the background to its mandate these conclusions relate entirely to those emerging from its evaluation of the system of Parliamentary supervision of financial matters.


(2)The Swiss system of Parliamentary supervision linked, as it is, both to the financial control, internal audit and external audit function and through the “Gentleman’s agreement” with the Government and cabinet decision-making works. It has proven to be a valuable brake on public expenditure though the extent to which this is transferable to the Irish context should not be overestimated. The Irish system is not federal and Irish taxpayers do not have the constitutional protection of the Swiss against tax increases.


(3)The Swiss system has been refined over its 84 years of experience to its present state and all of those involved recognised the importance of the “Gentleman’s agreement” of 1959 by which Parliamentary financial supervision was enhanced by incorporating control over remuneration of senior public servants and new recruitment.


(4)Though the Swiss do not have a public health service the fact that they have developed a very sophisticated and expensive social environment and industrial infrastructure from a very low tax base would suggest that both their system of Government and the system of financial supervision have proven themselves to be cost-effective.


(5)The fact that they are an independent, neutral, non-aligned export dependent small open economy with little by way of natural advantages suggests that we in Ireland have much to learn from the Swiss system.


(6)The fact that the system can be effectively controlled by part-time politicians with a minimum of staff support suggests that it is to the design of their systems rather than the qualities or calibre of the personnel that we should look.


(7)The Irish system of financial control and supervision compares rather unfavourably with the Swiss system in some important respects.


-The constitutional and statutory provisions in relation to internal account and external auditing are old and show little signs of learning from the experience of the system or the wider experience of developments in the accounting profession.


-The payments order system is diffused in Ireland whereas it is centralised in Switzerland which by contrast has a highly federalised and diffuse administrative and executive system.


-The Comptroller & Auditor General, the Department of Finance and the accounting officers and accountants in the various Government Departments do not seem to be able to recruit and retain a reasonable proportion of qualified and experienced accountants to meet the massive requirement of the public sector for competent financial controllers and internal and external auditors.


-The practice of the Comptroller & Auditor General has not been to allow for intermittent audits interspersed with audits by public auditors. Such a practice would allow for catching up the arrears of State-sponsored bodies and spreading supervision of that office wider


-There is a very considerable, though it seems unknown number of bodies benefitting from annual grants-in-aid from public funds who are not only not audited by the C & A.G., but may not be audited at all or if audited may have no obligation to submit their accounts to the Dáil which votes their funds. In Switzerland, in contrast, each of the 600 bodies receiving exchequer support is subject to the Swiss Federal Audit Office.


-The Parliamentary supervisory system is not integrated but rather diffused between three separate committees, each very different in structure, genesis and authority. This contrasts with the Swiss system which though containing three Parliamentary


(8)Committee in all and 14 subcommittees it is integrated into one system with one secretariat and drawing together supervision of the internal and external audit function and the financial control and personnel functions.


(9)The Swiss system provides for direct access by the Parliamentary supervisory systems to the financial decisions of the Government and to the files of the Federal Audit Office. The Irish system starts with published documents and largely generates its own supplementary data. This often results in the system being confrontational rather than supervisory.


Recommendations:

103The Committee considers that the United States and Swiss Parliamentary systems of finance supervision and the underlying system of financial control and internal and external audit should be more comprehensively studied in a manner which was simply not possible in short study visits by parliamentary delegations. The task could be undertaken under the joint auspices of the three relevant Oireachtas Committees,(a) in association with the Comptroller & Auditor General and/or a selected public auditor on a consultancy basis.


104In relation to systems in operation in the United Kingdom at present the Committee was of the view (i) that our own committee system appeared to be at least as effective but that (ii) the role of the Consultancy, Inspection and Review (CIR) Services operated in U.K. Government departments through the Prime Minister’s Efficiency Unit should be further examined by the Minister for Finance.


105The Committee offers the following recommendations on the basis of its own observations and discussions and with a view to presenting the prospect of deriving the benefits which can undoubtedly accrue for Irish public expenditure control from the lessons of the U.S. and Swiss systems.


1. That the orders of reference of the three Committees reviewing various aspects of public expenditure be revised to provide one integrated system headed by a public sector finance supervisory committee from the membership of the other three committes whose functions would be redefined to ensure greater integration with the functions of the financial control, personnel internal audit and the Comptroller & Auditor General.


2. That this supervisory committee be charged with responsibility, inter alia, for reviewing the constitutional and legislative provisions relating to public sector finance and for determining the procedures for establishing levels and terms of employment in the public sector.


Committee of Public Accounts, Joint Committe on the Commercial State-sponsored Bodies and the Committee on Public Expenditure.


3. That the supervisory Committee be given full freedom of access to all Government decisions relating to finance and that it be determined to be ultra vires for any agency in receipt of public funds to engage in contracts or undertakings which purport to exclude themselves from this system of parliamentary supervision.


4. That the right of intermittent audit by the Comptroller & Auditor General of any organisation, private, public or voluntary whether incorporated or not, in receipt of Exchequer grant-in-aid be established in law and practice. Meanwhile that it be provided that the up-to-date audited accounts of each such agency be laid before Dáil Éireann before it is legally possible to approve further grant-in-aid to that body.


5. That the legal position of accounting officers in Government Departments/Offices be reviewed with a view to giving responsibility to qualified and experienced financial controllers to be recruited for each Government Department/Office.


6. That each State body and Government Department, Oireachtas Committee and other agency assigned a budget be given expenditure approval within that budget and be subject to annual audit and to the parliamentary supervisory process.


7. That the internal audit function be incorporated in the Office of the Comptroller & Auditor General and that this system includes the countersigning of all payment orders.


8. That the Comptroller & Auditor General’s Office merge with the Office of the Local Government Auditor’s Office.


9. That the staff of the Comptroller & Auditor General be increased through competitive recruitment to take on the additional workload and that they contract out work if necessary to public auditors to clear the work arrears.


10. That the annual report of the Comptroller & Auditor General be changed in format to include any necessary comment on the State-sponsored bodies and the report of the Parliamentary Supervisory Committee.


11. That the Supervisory Committee, on the advice of the Comptroller & Auditor General, be given authority to delay the payment of funds.


12. That the orders of reference of one of the Committees within the Supervisory Committee include a role in the preparation of the Budget and in approving credit lines.


13. That the orders of reference of another of the Committees include all bodies sponsored by the State whether or not they are described as State-sponsored bodies.


14. That the orders of reference of the third Committee include the supervision of the financial system in Government Departments.


15. That each of these Committees be empowered to establish subcommittees within its own orders of reference.


_______________________


MICHAEL KEATING T.D.


CHAIRMAN


20 JANUARY 1987


(a)Committee of Public Accounts, Joint Committee on the Commercial State-sponsored Bodies and the Committee on Public Expenditure.