Committee Reports > List of Committees > Dáil > 1988 > Committee of Public Accounts > Special Report - Future role of the Comptroller and Auditor General and the Committee of Public Accounts

APPENDIX 2

REPORT

Visit by the Advisory Group on Public Financial Accountability and the Public Accounts Committee to Sweden, on 28 February - 2 March, 1988.

1.A delegation, consisting of Deputy G. Mitchell, Chairman; Mr. P. L. McDonnell, Comptroller and Auditor General; Mr. W. Donnelly, Director, Institute of Certified Public Accountants; Mr. J. Gallagher, Director General, I.P.A. and Mr. P. Judge, Secretary to the Advisory Group, visited Stockholm to hold discussions with relevant people involved in national and parliamentary audit.

2.The purpose of the visit was to establish the means by which public accountability and audit is achieved in Sweden.

3.Swedish audit control is exercised by;

-Parliamentary Auditors and

-the National Audit Bureau

4.Parliamentary Auditors

After a general election the parliament elects 12 auditors from the parliamentary members for a three year term, one of whom is elected Chairman along with a first and second vice chairman. In addition, 12 other deputies are also elected to the auditing group. For auditing work the auditors are divided into three audit divisions with four members and four deputies in each of them. They are not professional auditors in the strict sense. Areas for investigation may be selected by the parliamentary standing committees, the auditors themselves, the secretariat or members of the public.

The secretariat to the parliamentary auditors consists of 21 employees, including 11 investigators.

Work proceeds by way of the investigators undertaking a preliminary study and on the basis of that study the parliamentary auditors decide whether to proceed with an in-depth investigation. Such action takes place after consideration by one of the three audit divisions.

The wider investigation is in two separate stages:-

(i)project planning by the investigator. This may involve use of consultants or computer studies.

(ii)a draft report is then submitted via the audit division and if approved by the plenary session the report is sent to the audited agencies for observations.

When the audited agencies’ views are received a formal report (proposal) is submitted to parliament and considered by a standing committee. The committee prepares a paper and this forms the basis of a parliamentary debate and a formal decision.

Note: The Parliamentary auditors may investigate the State sector, government level (excluding administrative practice) and the parliamentary sector. This appears to overlap to some extent with the National Audit Bureau which also has responsibility for audit of the State sector. The two systems evolved under different constitutional requirements.

5.National Audit Bureau (N.A.B.)

The NAB is the central agency for accounting and auditing in the government administration. Compared with the Parliamentary Auditors’ staff of 21 the NAB has a staff of 400, including 90 investigators.

The NAB audits all State agencies and other public enterprises. Auditing consists largely of effectiveness auditing; performance and regularity auditing. By effectiveness is meant the ratio of the effects of results reached to the cost involved.

(i)State agencies: auditing under all three headings

(ii)Public enterprises: performance and regularity auditing using private auditors as in the case of private companies.

(iii)National enterprises: e.g. electricity board use private audit bureaus.

The NAB, unlike the parliamentary auditors, does not report to parliament, but to government and to the agencies concerned. Its reports are not debated in parliament but may lead indirectly to parliamentary questions or other follow up action. In the normal way the NAB publishes and publicises its own reports and the publicity generated tends to lead to reforms. Agencies must reply to NAB reports within six months.

Plans and reports may be exchanged between the two audit agencies but in general they act independently of one another.

There also exists an Advisory Council which consists of nine members; four members of parliament, the Auditor General and two members each from the Ministries of Finance and Public Administration.

In dealing with effectiveness auditing the NAB necessarily deals with many policy issues particularly in the preparation of legislation for parliament.

The NAB officials illustrated examples of audit work undertaken in recent years in:-

(i)security in computerised systems

(ii)punctuality of train services

(iii)financial auditing of different agencies, in similar fields e.g. in the area of control of drugs by public utilities.

6. Stockholm City Council

The delegation held discussions with the President (Mayor) of Stockholm City Council and officials on the financial control and audit systems used by the City. The City Council appoints auditing committees consisting of 25 elected members (out of 101 members in all) plus 45 full time employees. The City Council employs 60,000 people and deals with a very wide range of services including social welfare, education and public works (Government administration in Sweden is much more decentralised than in Ireland).

7.Meeting with Professor Daniel Tarschys, M.P.

The delegation were also met by Professor Daniel Tarschys, M.P, Chairman of the Social Affairs Committee in the Swedish Parliament.

Professor Tarschys outlined the relationship between parliament; the parliamentary auditors and national and regional auditors. He indicated that there were problems at different levels. Part of the difficulty related to the fact that the parliamentary auditors were generally confined to audit at the national level while the vast bulk of public expenditure was channelled to and under the control of regional and local bodies. (There are 300 full time auditors in regional offices in the Swedish communes).

Professor Tarschys indicated that:-

-There was no Swedish equivalent of the Committee of Public Accounts,

-there was no Comptroller General as such.

-Ombudsmen deal with legal aspects of the government system while officers deal with the check on public administration,

-the concept of Accounting Officers does not exist in Sweden.

-in practice there is little action taken on audit reports. Part of the problem is that follow up action is undertaken by the same people who made the decision on programmes in the first instance. This tends to blunt the desire for change.

-a weakness in the National Audit Bureau was its inability to report to parliament.

-Parliament does not have direct access to internal operations of State bodies due to the “myth” that government is not responsible for their actions on a day to day basis.

-while a Constitutional committee of parliament may scrutinise activities of government the concept of public accountability was not formalised in Sweden. The system was recognised as being blurred and somewhat inefficient.

Professor Tarschys said he would recommend an increase in power in the area of parliamentary scrutiny in Sweden. One way of achieving this was through external auditing under the control of the parliamentary audit system.

-Parliament, while having no formal power to compel attendance by witnesses, has had no problems in this area.

REPORT

Visit by the Advisory Group on Public Financial Accountability to the Federal Republic of Germany on 6 - 8 March 1988.

Delegation

Mr. Gay Mitchell T.D.

Mr. P.L. McDonnell

Mr. John Purcell

Mr. Paddy Judge

The purpose of the visit was to establish the means by which public accountability and audit is achieved in Germany.

This involved meeting

1.The Federal Court of Audit (FCA) in Frankfurt

2.Members of the Bundestag in their capacity as representatives of the Budgetary Committee (BC) and its sub-committee on Auditing (ASC) in Bonn

3.The Ministry of Finance in Bonn.

Meeting No. 1

The FCA participants were

Dr. Zavelberg - President

Mr. Heuer - Vice-President

Dr. Mennicken - Head of International Relations Dept.

Mr. Herzog - Senior Principal, International Relations Dept.

Main Points

(a)Upon the proposal of the Government the German Houses of Parliament elect the President and the Vice-President of the Court without debate by a majority vote in a secret ballot. The Federal President appoints those chosen for a period of 12 years. They cannot be re-elected.

(b)Since 1952 the Government of the day have appointed the respective Presidents of the FCA to act as Federal Commissioner for Efficiency in Public Administration.

(c)The FCA has a complement of 530. This is made up of 59 Members (viz. the President, Vice-President, 8 Directors of Audit, 49 Audit Managers), some 320 Auditors and some 150 support staff.

(d)The majority of the Auditors are lawyers by profession. The rest are mainly business and political economists and engineers in various disciplines. They don’t employ accountants.

(e)The FCA examines

•the financial management of the Federation and federal undertakings including the Railways and Post and Telecommunications

•public corporations established under federal law

•social security institutions established under federal or State laws where they receive grants from the Federal Government or where the Federation has entered into guarantee commitments

•the activities of the Federation in private law enterprises of which it is a shareholder

-in no case does this involve the financial audit of the enterprise but the private auditors have extra reporting responsibilities and the FCA may have the right to examine the operations and records of the enterprise

•entities in receipt of subsidies from Federal funds

(f)Where the FCA and any State Court of Audit share auditing responsibilities, they may perform joint audits, or they may by agreement undertake or delegate audit functions.

(g)The FCA submits its annual report both to the Government and the Houses of Parliament. The observations are not limited to the year for which approval is sought - they relate to the up to date position. The FCA may also make special reports on matters of significance.

(h)The FCA also gives advice before expenditure is incurred if it thinks fit but it is in no sense a ‘before the fact’ audit.

(i)The FCA is totally independent in its functions. The FCA sets its own audit priorities, arranging for mere sample audits, or by leaving certain accounts unaudited. Parliament’s requests for audit are met to any extent possible.

(j)The emphasis in the FCA’s work is very much on VFM audit. The basis for the work is systems audit which encompasses both regularity and VFM.

(k)The FCA has not been given authority to enforce its own proposals or recommendations but rather works through the BC and the ASC. These committees have endorsed over 90% of the audit findings.

(l)The FCA must not judge the merits of political considerations and the resulting decisions. But it may conduct examinations and report on whether the preconditions underlying political decisions were real and what the effects of such decisions are.

(m)There are approximately 4000 staff involved in pre-audit in Federal departments and agencies. Although forming an integral part of the executive branch, pre-audit offices are subject exclusively to the professional and technical guidance of the FCA.

(n)In theory 3 rapporteurs from the Bundestag audit the FCA but in practice there is no audit.

(o)The President of FCA acts as the Chairman of the supervisory board of Treuarbeit A.G. which is a firm of chartered accountants in which the Federation and 5 States hold 75% of the shareholding. This firm audits the accounts of many public enterprises e.g. Lufthansa and also some private firms.

(p)In 1986, FCA recommendations resulted in DM300m. once-off savings and DM600m recurrent annual savings.

Meeting No. 2

The participants from the Bundestag were

Mr. Walther (SPD) - Chairman of the Budget Committee

Dr. Friedmann (CDU/CSU) - Chairman of the Auditing Sub-Committee

Mr. Diller (SPD) - Committee Member

Main Points

(a)The Budget Committee (BC) is a powerful Parliamentary Committee headed by a member of the main opposition party.

(b)The Auditing Sub-Committee (ASC) is a sub-committee of the BC with a remit broadly along the lines of our own PAC. It is headed by a member of the ruling coalition.

(c)All members of the ASC (13) are also members of the BC (25). The BC has a permanent administrative staff of 10 and the ASC has 3 staff.

(d)The ASC uses the FCA’s reports as the basis for its examinations and only deals with matters referred to it by the BC.

(e)The committees haven’t a function in relation to policy but that apart, the only criterion is that the subject of examinations must relate to public moneys.

(f)The committees may urge certain courses of action but ultimately it is for the relevant Minister to decide. In practice the BC has a strong lever in that it can amend future budgetary provisions.

(g)Discrete parts of the FCA Report are assigned to individual members of the ASC who meet the relevant FCA officers before reporting to the ASC. These reports would include up to date developments.

(h)The ASC usually calls the Parliamentary Secretary (who is a M.P.) or the Permanent Secretary and their senior officials before the committee. It has on occasion summoned Ministers to appear and has encountered no refusals even though there is no specific legal power in this regard.

(i)The ASC makes recommendations to the BC which reports to Parliament where the matters are debated in plenary session.

(j)The FCA don’t generally refuse ASC requests even though the FCA is within its rights to so refuse. On infrequent occasions the ASC may engage private sector consultants but this was regarded as an unsatisfactory alternative to use of the FCA.

Meeting No. 3

The Ministry of Finance participants were

Dr. Karl - Head of the Budget Division

Dr. Caspar

Dr. Mennin

Main Points

(a)The Ministry of Finance does not have the same pre-eminent role that its Irish counterpart has.

(b)It has no function in regard to follow-up of FCA Reports

(c)It works to only one Parliamentary Committee - the Budget Committee

(d)Its principal function is to establish the draft Budget for submission to the Cabinet which seeks the approval of Parliament through the BC for its proposals.

(e)The implementation of the Budget is the legal responsibility of the individual ministries although the Minister for Finance has certain powers of veto in relation to overall financial matters.

(f)The separate identities and powers of Government and Parliament were reiterated in the sense that Parliament is not merely the alter ego of the Government in budgetary matters but has a powerful role which it fulfils through the BC.

REPORT

Visit by delegation from the Advisory Group on Public Financial accountability and the Public Accounts Committee to USA on 21 - 23 March 1988.

Delegation

Mr. Gay Mitchell T.D.

Mr. Noel Dempsey T.D.

Mr. Liam Naughton T.D.

Mr. P.L. McDonnell - Comptroller and Auditor General

Mr. John Purcell

The system for public accountability in the USA must be viewed against the background of the series of checks and balances which operate between the Executive (as represented by the President) and the Legislature (as represented by Congress). In recent years the balance appears to have tilted in the direction of Congress and this has been reflected in more sophisticated control mechanisms being installed on behalf of Congress to monitor the Executive’s actions and performance.

The main instruments used by Congress for this are

1.Senate Committees and in particular the Senate Committee on Government Affairs

2.House of Representatives Committees and in particular the House Committee on Government Operations

3.General Accounting Office (GAO) viz. the American equivalent of the Comptroller and Auditor General’s Office

4.Departmental Inspectors General

5.Congressional Budget Office (CBO).

1.Senate Committee on Governmental Affairs

This Committee has a very wide brief which includes

(a)the referral of all proposed legislation relating to

(i)budget and accounting measures, other than appropriations

(ii)Federal Civil Service

(iii)organisation of the executive branch of Government

(b)receiving and examining reports of the Comptroller General and submitting its recommendations thereon to the Senate

(c)studying the efficiency, economy and effectiveness of all agencies and departments of Government

The Committee consists of 14 Senators of which 8 are Democrats and 6 are Republicans. The Chairman is a Democrat. It is serviced by a staff of 30 directly - 19 majority staff and 11 minority staff with secretarial/clerical backup. The Committee generally uses the GAO to do its investigative work although its own staff do such work on occasion. Private sector consultants are not employed but do from time to time advise the Committee on a non-fee paying basis.

Its own staff also prepare draft legislation for the Committee. The meeting the delegation attended was conducted by the Chairman alone, no other Senators being in attendance. This was not unusual as a quorum is not necessary. The Committee’s staff counsel can also question witnesses though this did not happen while we were at the meeting. The Committee can grant immunity to witnesses and sub poena their attendance.

2.House of Representatives Committee on Government Operations

This Committee is a mirror image of its Senate counterpart. Its brief includes oversight of

(a)budget and accounting measures, other than appropriations

(b)the overall economy and efficiency of Government operations and activities, including Federal procurement

(c)reorganisation in the executive branch of Government.

The Committee consists of 39 Members of which 24 are Democrats and 15 are Republicans. The Chairman is a Democrat. It is serviced by a staff of 86 in all - 75 majority staff and 11 minority staff. The Committee has specific authority to conduct its own studies and this may account for the large support staff. The GAO is generally used to carry out such examinations and again private consultants are not used although they may assist the Committee informally. The meeting the delegation visited was well attended by members. It came across as a dynamic unit unlike its Senate counterpart. Its reputation is high mainly due to the personality of its long serving Chairman who has a hard hitting style.

3.General Accounting Office

The GAO is headed by the Comptroller General

Tenure of Office

Congress nominates 3 candidates for appointment as Comptroller General or Deputy.

Comptroller General and Deputy Comptroller General appointed by the President, subject to confirmation by the Senate, for a fifteen-year term, or until he reaches 70.

May be removed from office during term by a joint resolution of congress, on which the President has veto powers, or by process of impeachment.

The Comptroller General is not eligible for re-appointment.

Functions

Auditing the financial systems of federal government agencies (but not attesting to the financial statements of the Government itself). Reviewing the efficiency of management’s use of resources and the effectiveness of programmes in achieving the objectives intended by Congress.

Auditing government corporations.

Prescribing principles and standards for accounting in the federal agencies, co-operating with those agencies in improving their accounting systems and approving them when deemed satisfactory.

Rendering legal opinions, furnishing legal advice and settling claims made by and against the United States.

Providing advice and assistance, on request, to members of Congress and congressional committees.

Scope

Extends to all activities financial transactions and accounts of the Federal Government except those that relate to the Federal Reserve Board and banks, the Comptroller of the Currency, the Exchange Stabilisation Fund, Federal Land Banks, and most intelligence activities.

Relationship to legislature

Office is an independent, non-political agency in the legislative branch of government. Provides the Congress, its committees and members with information and recommendations on operations of the Government.

Some 80% of GAO’s work comes from Congressional requests. Includes making audits and special studies requested by Committee Members or required by Law, appearing before congressional hearings, providing comments on proposed legislation and assigning staff to committees. General Accounting Office has close relations with the Senate and House Appropriations Committees, the House Committee on Government Operations and the Senate Committee on Governmental Affairs.

Staff

Staffing: 5,100

Under extensive delegation from the Civil Service Commission the recruitment and appointment of staff is the responsibility of the Comptroller General.

Since 1980 control over budget and staffing matters has been transferred from the Civil Service Commission to the Comptroller General.

Following an oversight examination of the GAO by the House Committee an Government Operations in 1985 the GAOs work programme is now largely driven by Congress. It is gradually evolving into being part of the legislative branch. Despite this trend the GAO is vigilant in guarding what it sees as its independence. It states the facts as it sees them and does not tailor its reports for Congress. The Congress demands timely reports from the GAO and expresses dissatisfaction if its demands are not met.

On the other hand the GAO insist on a rigorous review procedure to ensure the quality of its reports.

We got the impression that a modus vivendi had been reached between Congress and the GAO in the wake of some scathing criticism in the oversight report. The criticisms have been addressed but there appears to be no danger of the GAO resting on its laurels while the House Committee, in particular, continues to have the clout it enjoys.

4.Departmental Inspectors General

(a)The Inspector General (IG) concept originated in the Armed Forces some 25 years ago. The current statutory authority for an office of the IG in each major department/agency is an Act of 1978. The IG effectively replaced the internal audit function. There are currently 19 IGs

(b)Each IG is appointed by the President and has to be confirmed by Congress which must be consulted if he is to be removed. The IGs may or may not be replaced by an incoming President. Statuswise he is subsidiary to the Secretary of the Department. The IG presents his own budget to Congress.

(c)His reports go to

President

Congress

Secretary of Department

Attorney General

and are used as a means of providing information for the making of policy.

(d)His mandate includes both financial and VFM audit. It includes inspection rights of organisations doing business with the Department whether suppliers or State administrations.

(e)The GAO audits the IGs and sets auditing standards used by the IGs.

(f)The IG has sub poena and prosecution powers. He may testify to Congress committees.

(g)The offices of the IG were set up partly as a result of GAO’s inability to perform the kinds of programme evaluation required. It was felt that an expanded GAO might have been too monolithic and unwieldy.

(h)The IG activity is co-ordinated via the President’s Council on Integrity and Efficiency of which all IGs are members and which is chaired by a top official of the Office of Management and Budget.

(i)Moves are afoot to establish statutory IGs in the Treasury and the Department of Justice. They argued successfully against inclusion in the 1978 Act.

(j)The delegation visited the IG of the biggest spending Department - Health and Human Services.

(i)staff numbers 1000 approx.

(ii)IG audits accounts of component parts of Department

(iii)IG produces some 5000 investigative reports per annum

(iv)60% of work is requested by Departmental management 40% is self-initiated.

5.Congressional Budget Office

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

Each 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 taxation and spending policies can be measured. CBO also keeps score of how closely congressional spending and revenue actions match resolution targets.

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

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

It was established under legislation in 1975.

Its Director is appointed by the Heads of both Houses of Congress on the recommendation of the Budget Committees of both Houses.

Schedule of Meetings

1.Attendance at meeting of Senate Committee on Governmental Affairs (SCGA)

2.Meeting with GAO

Comptroller General - Mr. C. Bowsher

Chief of Liaison with Congress - Mr. T. Hagenstad

Director of International Relations - Mr. P. Aliferis

3.Meeting with

Mr. R. Kusserow, Inspector General

Department of Health and Human Services

4.Attendance at meeting of House Committee on Government Operations (HCGO)

5.Meeting with staff of HCGO

Mr. J. Lewin - Chief Investigator (Majority Staff)

Mr. A. Cook - Counsel (Minority Staff)

6.Meeting with staff of SCGA

Mr. S. Ryan - Counsel (Majority Staff)

Mr. J. Parisi - Counsel (Minority Staff)

7.Meeting with CBO

Mr. S. Greigg - Director of Intergovernmental Relations

Mr. J. Blum - Assistant Director for Budget Analysis