Committee Reports::Special Report - Future role of the Comptroller and Auditor General and the Committee of Public Accounts::12 May, 1988::Report

1.1In January, 1985 the Committee of Public Accounts laid before the Dail a Special Report on “The Resources and Functions of the Comptroller and Auditor General”. Among its recommendations the Committee reported that an in-depth examination should be carried out into the statutory role of the Comptroller and Auditor General and that such examination should pay particular attention to the concept of “value for money” auditing and to the experiences of other countries in this regard.

1.2In April 1987 the Minister for Finance, in commenting on the Committee’s report, invited the Committee to submit their proposals on how legislation relating to the Comptroller and Auditor General might be improved. This invitation had earlier been extended to the Committee by the Minister in the context of the debate on the 1986 Estimate of the Comptroller and Auditor General (Col.165, Dail Debates, 7 May, 1986).

1.3On 2 April 1987 the Taoiseach indicated in the Dail (Col. 1247 of Debates) that “there has been a suggestion worthy of examination that perhaps the Public Expenditure Committee which we had the last time and the Public Accounts Committee would merge into a powerful Dail committee, something which we might look at in conjunction with the other parties”.

Developments Abroad

1.4The Advisory Group reviewed developments in national audit and parliamentary accountability and control on two levels:

(a)published reports by European and other institutions were studied with a view to identifying practices and procedures which could be adapted for use in Ireland.

(b)visits were made by delegations from the Group to parliamentary bodies and national audit agencies in Sweden, West Germany and the United States. The Group gained a very useful insight into the operations of the various audit and controlling bodies and took account of many helpful suggestions which arose in the discussions in drawing its own conclusions for the purpose of this report (see summary on visits in Appendix 2).

Witnesses Called

Sir Douglas Henley, former Comptroller and Auditor General of the United Kingdom,

1.6A submission was received from the Office of the Comptroller and Auditor General’s Branch, Public Service Executive Union.

Meetings

1.7The Advisory Group held its inaugural meeting on 13 January 1988 and held 13 meetings up to 10 May. An additional nine days were spent at meetings abroad with counterpart institutions as outlined above.

To review the roles and functions of the C & AG and the PAC with a view to making recommendations for improvements in the system of public accountability and to report its findings to the PAC.

OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL

2. STATUS

Tenure of Office

2.1.Under the terms of the Constitution the C & AG is appointed by the President on the nomination of Dail Eireann. Under the Comptroller and Auditor General Act 1923 he holds office until he is 70. He may not be removed, except by the President on foot of a resolution from both Houses and then only on grounds of stated misbehaviour or incapacity.

2.2.Once appointed the C & AG is thus free to carry out his functions as he deems fit. This independence is characteristic of the office of the C & AG in most countries where he is a constitutional or quasi constitutional officer. The Group is satisfied that the present arrangements for appointment, removal and tenure of office of the C & AG broadly reflect the implicit requirements of the Constitution. However in order to clearly demonstrate the role of Dail Eireann in the appointment process it recommends that the Public Accounts Committee (PAC) should be consulted before the name of the appointee is put before the House by the Government of the day (Executive). By virtue of its dealings with the work of the C & AG the PAC is in a unique position to advise on such an appointment. The fact that the Chairman of the PAC is by tradition a member of the leading opposition party would make such consultation an overt recognition of the Parliamentary dimension.

(a) the appointment and removal provisions in the 1923 Act which are out of line with the Constitution should be reviewed and

(b) the retiring age for the C & AG should be 65 in line with the Public Service.

C & AG’s Relationship with the PAC

2.4.The C & AG relies heavily on the PAC to get corrective action taken on matters raised in his annual Report. For its part the PAC uses material from the C & AG’s Report as the basis for most of its inquiries. On a formal level the C & AG attends almost all PAC meetings as a permanent witness and in many respects acts as an adviser to the Committee. The relationship between the two parties is therefore very close but in no way is the C & AG a servant of the PAC or vice versa. Each has its particular role to play in the process of public accountability. The statutory independence of the C & AG and the traditional non-partisan approach of the PAC have in different ways contributed to the successful working of the control process over the years.

2.5.The Group considered strengthening the relationship by giving the PAC powers of direction over the C & AG in order that he could more closely represent its concerns but decided against this course. Apart from the Constitutional question of whether auditing on behalf of Dail Eireann is the same as auditing on behalf of the State, the Group felt the giving of directions could damage the non-partisan approach. The production of an independent report setting out the facts without fear or favour is seen as one of the most important elements of a good system of public accountability. We recommend that the C & AG should take the views of the PAC into account when drawing up his work programme.

2.6.If the PAC is to develop its activities into undertaking its own studies by way of engagement of consultants this should not affect the mainstream relationship between the PAC and the C & AG and these studies should for the most part cover areas outside the scope of the C & AG’s work. In the normal course of events in order to avoid any overlap or duplication of effort the PAC should advise the C & AG before undertaking any such work (see 5.15 and 5.16)

2.7.On a working level, recent moves to improve the PAC briefing process have initially been successful and it is proposed to build on these initiatives. Committee staff are now being briefed by the relevant C & AG’s staff members with the ultimate aim of a more informed examination by members of witnesses.

C & AG’s Relationship with the Department of Finance

2.8.The Department of Finance holds a unique control position among the Departments of State in that it is the ultimate sanctioning authority for expenditure by Departments either by way of specific or delegated sanction. The absorption of the former Department of the Public Service functions has further strengthened the Department of Finance’s primary position among Government Departments. It is clearly the organisation used by the Executive to exercise on its behalf the a priori control function in relation to expenditure and receipts. The C & AG carries out the related post factum review function on behalf of Parliament.

2.9.In this respect both parties have similar objectives - the maintenance of proper and accurate accounting records, good control systems, efficient and effective use of resources, avoidance of waste and extravagence etc. Although in theory this unity of aims should result in a certain amount of co-operation between the two organisations, in practice there is little contact in matters affecting the control process as it applies to Departments. It is not being suggested that the two organisations should be required to work in unison but the Group feels that there is scope for more consultation and liaison where common causes are involved. Such co-operation can only be effective if it is done or the basis of independent equal partners. The existing legislation which suggests that the Department of Finance has powers of direction vis a vis the C & AG is inconsistent with that concept and should be repealed. (Exchequer and Audit Departments Acts 1866 - 1921).

Estimates/Resources

2.10.In the previous paragraph we referred to the basic flaw underlying the relationship between the C & AG and the Department of Finance. Nowhere is the manifestation of this flaw more obvious than in the area of resource control. There is general agreement that the C & AG should be completely independent in the exercise of his functions. The fact that the resources of the C & AG should be exclusively determined by a branch of the Executive on whose activities he is required to report is incompatible with the concept of independence. The C & AG’s independence in this important area is illusory. The Group cannot accept this.

2.11.In this regard we have looked at the practice in other countries with advanced systems of public accountability. We have noted with interest the ways in which this matter was handled. In the USA, United Kingdom, and West Germany the determination of the budget of the C & AG or his equivalent is not a function of the Executive. In Canada the Auditor General has a right of appeal to Parliament if he feels his budget is inadequate; in Australia and New Zealand the budget is determined by the Executive with special regard to the needs of the Auditor General (though in New Zealand there are moves for a UK type of arrangement). Each of these countries recognises the special position of the C & AG and most acknowledge that Parliament has to have a role in fixing the budget of the C & AG.

2.12.The Group has listened to arguments about the dangers of treating the C & AG as a special case. It has been contended that other State organs such as the Judiciary would have equal claim to special category. The Group does not accept the validity of this argument. The C & AG is unique in that he has personally to certify formally that he has carried out the functions assigned to him by the Constitution i.e. by giving his audit certificate on the Appropriation Accounts. It stands to reason that he must be given explicit control over the resources to carry out his functions. In this context it should be noted that, in Britain, when public service staffing cutbacks were being implemented in the early 1980s, a singular exception was made in the case of the then Exchequer and Audit Department which provided for an annual percentage increase in staff in order to strengthen public audit.

2.13.In recognition of the inherent difficulties in changing the arrangements for Estimate presentation within our system of parliamentary procedure the Group is satisfied that introduction of the Estimate for the C & AG’s Office should remain as a function of a member of the Government but it recommends changing the procedures for the preparation of the Estimate. At present a draft Estimate is prepared by the C & AG’s Office and is sent to the Department of Finance where, it is judged by the same criteria applying to all State departments and offices. It is also subject to across the board cuts as determined by Government.

2.14.The Group understands that the Estimate is regarded as part of the Department of Finance group of estimates and the allocation of resources to the C & AG is determined as part of the global allocation for the group of services covered by those estimates, with the result that a reduction or increase in resources for the C & AG cannot be considered on its own merits. It will be recalled that in the special report of the PAC on the Resources and Functions of the C & AG it was stated:-

“The Committee agrees with the view expressed forcefully by the C & AG in evidence and reiterated by the representative of the Department of Finance that while it might be administratively convenient to have the Minister for Finance handle certain matters - such as the introduction of the Estimate for the C & AG’s Office - there is no justification for tying the C & AG’s Office into a group of other Departments and Offices for the purpose of the control of numbers”.

On the Department of Finance’s own admission the grouping of the C & AG’s Office with a number of other Departments/Offices for the purpose of control of numbers cannot be justified. It follows that the grouping of his Estimate with those of other Departments/Offices for the purpose of the allocation of resources is equally unjustifiable because the funds provided in the Estimate for the C & AG’s Office are almost entirely for staff salaries and travelling expenses.

2.15.The Group proposes that the C & AG should prepare his draft Estimate in the normal course and present it to the PAC together with his work plan for the coming year. The PAC should examine the draft in detail, making any amendments that it thinks fit, while being cognizant of the wider public service considerations before submitting it to the Government.

2.16.As a general rule the Government should not change the Estimate so submitted, but if it does, it should justify such change(s) during the Estimates debate in the House. Within the Estimate so determined the C & AG should have full flexibility with regard to the allocation of resources including staffing and remuneration matters. He should, of course, have regard to the desirability of keeping the remuneration and other terms and conditions of employment of the staff of his Office in line with those applying to staff in the public service. Proper staffing in both qualitative and quantitative terms is a prerequisite to the C & AG being able to fulfil his present mandate or indeed any other mandate proposed as a result of the current review.

Audit of C & AG’s Office

2.17.It is somewhat of an anachronism that the C & AG should be responsible for the audit of his own Office. While the Group has no reason to believe that this arrangement might have resulted in problems in the past, it nevertheless feels that the practice is unsatisfactory from a public accountability viewpoint. To this end it proposes that the PAC should appoint an external auditor to the Office with the same rights that the C & AG has in relation to the Departments which he audits and he should report to the PAC.

3. SCOPE OF C & AG’S AUDIT

Accounts of Central Government

3.1.Article 33 of the Constitution imposes a duty on the C & AG to audit all accounts of moneys administered by or under the authority of the Oireachtas. The statutory basis for this audit is the 1866 Act and the 1921 Act. These Acts provide for the audit of the Appropriation Accounts, the accounts of the receipt of revenue and of every receiver of money which is by law payable into the Exchequer. They also provide for the audit of the so called ‘principal accountants’ if so required by the Treasury. Principal accountants are those which receive issues directly from the Exchequer account e.g. Paymaster General.

3.2.In practical terms the audit by the C & AG of Appropriation Accounts and funds administered by Departments and Offices of State is clearly provided for in the Constitution and no discussion is necessary on this part of the scope of his audit.

3.3.The Finance Accounts, which purport to be an account of Exchequer transactions for the year, owe their existence to an 1854 Act. That law provides for the accounts to be laid before each House by 30 June following the year to which the accounts refer. There is no statutory provision for audit. In fact the Finance Accounts are presented unaudited to the Oireachtas, though most constituent parts are audited individually.

3.4.The Group has examined the form and content of the Finance Accounts. We feel that, properly restructured and audited, they would be a valuable addition to the information available to Parliament on the national finances and that it would be appropriate for them to be referred to the PAC for its examination. The Group recommends that the Department of Finance, the C & AG and the PAC should consult as soon as possible regarding the format of the accounts and provision for their audit.

Accounts of State Sponsored Bodies

3.5.The question of whether the C & AG should audit State sponsored bodies (SSBs) is almost as old as the State itself. When the ESB was being set up in 1926 the appointment of auditors from the private sector rather than the C & AG caused divisions in Dail Eireann. In the early 1960s a policy decision was taken that, in the case of well established commercial State bodies, the Ministers concerned would not oppose any request from them to engage private sector auditors. Four bodies took the opportunity to change auditors - Irish Life, the Air Companies (Aer Lingus and Aer Linte) Irish Shipping and Ceimici Teo. Subsequently Irish Steel and NET changed from the C & AG to private sector auditors. Although there appears to be no coherent policy on this question a general pattern with some exceptions, has emerged over the years - the allocation of the audit of non-commercial SSBs to the C & AG and that of the commercial SSBs to private sector auditors.

3.6.The Group accepts that a distinction should be drawn between those SSBs which have a commercial character by virtue of the fact that they are trading entities and their revenues are generated by their operations and those SSBs which to all intents and purposes are executive agencies of Government Departments and derive the greater part of their revenues from the State.

Commercial State Sponsored Bodies

3.7.In the case of the commercial SSBs it is appropriate that they should have sufficient flexibility of action to operate profitably in their respective sectors though special considerations apply in the case of those SSBs which are in a monopoly situation. Regardless of their form commercial SSBs owe their existence to the State and were set up with finance provided by Dail Eireann. From time to time they have received Exchequer funds as equity capital, loans, grants and subsidies. In some instances guarantees have been given by the State on foot of loans raised by these bodies. In times of difficulty the SSBs usually turn to Parliament for assistance. In short in all cases there is an express or implicit dependence on the State. The Group feels that this dependence should be reflected in their accountability arrangements.

3.8.Concern has long been expressed at the lack of accountability of commercial SSBs. As far back as 1950 a motion was introduced and debated in the Seanad to provide that a Joint Committee should be set up to review the operations of State companies. Throughout the late 1960s and the early 1970’s the matter was a recurrent theme in Oireachtas debates and committee meetings. This concern ultimately led to the establishment of the Joint Committee on Commercial State-sponsored Bodies in 1978 with a brief to examine the Reports and Accounts and overall operational results of SSBs engaged in trading or commercial activities. Successive Joint Committees have contributed to an improvement in the public accountability process for these bodies although the cyclical nature of the reviews can result in many years passing before a body comes under scrutiny. Furthermore, no structured process was ever developed for responding to the recommendations or criticisms of the Joint Committee in the same way as the Department of Finance responds to those of the PAC.

3.9.In this situation there should be some compensating procedure to fill the accountability void. The Group believes that the PAC has an important role to play in this context. In view of the primacy which the Constitution confers on Dail Eireann in financial matters, it is the only parliamentary committee which is concerned with the audit aspects of public expenditure. The PAC, working through the C & AG, should therefore supplement the periodic performance reviews of the Joint Committee. The C & AG should be relieved of responsibility for direct audit of the commercial SSBs which he now audits, but he should have access inspection rights in relation to all commercial SSBs and his reports thereon should be subject to PAC examination and report. It is in the public interest that the C & AG should be an informed, independent contributor to the accountability process for these bodies. The exercise of such rights should obviously involve consultation, as appropriate, with the private sector auditors of the bodies. The proposed arrangement would appear to achieve the balance between the necessary operational freedom for the bodies on the one hand and the need to protect the State’s overall interests on the other. The protection of these interests would include such as

-identifying instances of wasteful competition between SSBs and areas of overlap

Non-Commercial State-Sponsored Bodies

3.10.The position with regard to the non-commercial SSBs is completely different. At the time of the establishment of the Joint Committee the Minister for Finance intimated that accountability for the non-commercial SSBs hinged on the fact that they were generally funded from voted moneys which were open to annual parliamentary debate and to the scrutiny of the C & AG. It was not until 1983 that a mechanism for partial accountability of these bodies was devised with the establishment of the Committee on Public Expenditure (PEC). The orders of reference for that Committee included reviewing the justification for and the effectiveness of ongoing expenditure of the non-commercial SSBs. The PEC has not been reconstituted by the new Dail so we have returned to the pre-1983 position.

3.11.In examining the question of accountability of the non-commercial SSBs the viability criteria applying to commercial SSBs do not arise. The Group considered whether audit should be viewed as an intrinsic part of the parliamentary accountability process in the case of non commercial SSBs. We are referring here to financial audit as distinct from VFM audit which will be dealt with in the next chapter. It can be argued that financial audit is a fairly straightforward legal requirement and that it is immaterial who undertakes the audit once access inspection rights are granted to the C & AG. There is justification for that view. However the Group feels that this does not recognise the C & AG’s primary responsibility for audit of moneys which are, after all, voted moneys at one remove and as such, should be subject to the rigours of public audit and accountability. We feel that the appointment of the C & AG as auditor of these bodies does tend to add a degree of assurance in the public’s mind that the management of State moneys is being thoroughly scrutinised. On a more practical level the allocation of these audits to the C & AG overcomes the possibility of duplication in any exercise of an inspection function.

3.12.While the Group proposes that the audit of non-commercial SSBs should continue to be carried out by the C & AG, we recommend that the C & AG should examine the feasibility of using private sector auditors working under his direction to undertake the detailed audit work where it is more economical and practical to do so.

Audit Report - State Sponsored Bodies

3.13.The Group wishes to draw attention to the situation in relation to the audit reports of SSBs generally. At present the formal audit opinion is the only report made available to Parliament by way of tabling the accounts in the House. In no sense is there a report to Dail Eireann. Because of the very nature of their establishment and funding, SSBs cannot be regarded in the same light as private sector firms in so far as reporting responsibilities are concerned. The Irish public is the ultimate owner of SSBs and therefore there must be a reporting requirement to their representatives i.e. Dail Eireann. The Group feels that there should be an audit report on all SSBs to Dail Eireann, over and above the audit ‘opinion’ or ‘certificate’, which would give detailed comments on the results of the audit perhaps along the lines of the content of the management letter. This would enhance SSBs’ public accountability and such a report should serve as a basis for PAC examination and report.

Bodies in receipt of substantial State funding, other than SSBs

3.14.In an earlier paragraph the Group proposed that the C & AG be given access to the books and records of commercial SSBs. The essential point that Parliament should be assured that State moneys have been properly used applies equally in the case of bodies which are in receipt of public funds. The principle that any body which accepts public funds must expect the way in which those funds are spent to be scrutinised by Parliament is eminently sound. Obviously it is not intended that every issue from the State coffers should be subject to such scrutiny but rather that those bodies in receipt of issues which are substantial or of novel nature should be examined to ensure that the funds are used for the purposes for which they were intended. This principle should apply regardless of the method or public source of financing used. For example, loan financing/guarantees or share uptake via a SSB should be treated by reference to the same criteria as the issue of a straight grant, or grant-in-aid, from voted moneys.

3.15.The Group recommends that as a minimum the C & AG should have access inspection rights in all cases where

(b)the body receives 50 per cent or more of its annual revenues directly or indirectly from the State

(c)the body receives in excess of a specified amount directly or indirectly from the State - such amount to be agreed by the PAC, C & AG and the Department of Finance and to be reviewed periodically.

The C & AG should report to Dail Eireann on the results of these inspections and such reports should be subject to PAC examination and report.

Local Government

3.16.Local authorities derive their existence and their powers, functions and duties from Acts of the Oireachtas. These Acts set the parameters of local authority competence and define circumstances where actions of the local authorities are subject to the prior sanction of a Member of the Government. Subject to these constraints, local authorities are intended by the Oireachtas to enjoy a reasonable measure of freedom in the exercise of their powers and functions. The principal organs of local government in Ireland are ‘mainline’ local authorities such as city, county or urban district councils and ‘non-mainline’ authorities such as Health Boards, Vocational Educational Committees and harbour authorities. At present all of these bodies are audited by the Local Government audit service which is a division of the Department of the Environment. The subsequent audit reports, which are not restricted in content, are sent to the appropriate Minister and to the local authorities. The accounts also have an audit opinion appended. In the case of the Health Boards the accounts with the audit opinion are laid on the table of both Houses but the more detailed audit Report is not, while in the case of other local authorities the accounts are not presented to the Oireachtas. Significant items from the reports are followed up by the Department. Losses arising from expenditure which is ultra vires or from negligence are subject to surcharge or charge by the local government auditor.

3.17.In recent years central government has increasingly become the provider of funds for local government. Much of the centrally sourced local expenditure is incurred on the implementation of government policy particularly in the areas of education, health and roads. Partly as a response to this development the C & AG has adopted a practice of examining the local government auditors’ reports and including the subject matter on a selective basis in his annual report on the Appropriation Accounts. This practice has in turn enabled the PAC to examine the relevant Accounting Officer on the matters raised. The Group feels that while this practice goes some way towards solving the problem of achieving public accountability for the moneys supplied to local government from the Exchequer it is not a satisfactory solution. We see as the fundamental point the fact that at present primary accountability is to the Executive rather than to Parliament for these moneys when the opposite should apply.

3.18.In considering this point the Group was aware of the wider implications of any possible changes in the auditing and reporting arrangements and in particular the potential conflict between the needs of local democracy and Parliament’s legitimate interest in local authorities’ expenditure of centrally voted moneys. For this reason we have chosen to distinguish between ‘mainline’ local authorities, that is, those which are directly elected by the public, and the others such as health boards. In our view a distinction can also be made on the basis of the 90 per cent plus financing of the ‘non-mainline’ local authorities from the Exchequer as against a substantial but lower subvention in the ‘mainline’ bodies. Any change in the auditing arrangements must reflect these differences.

3.19.It has been represented to the Group that the present arrangements are appropriate in that the local government auditor performs a useful internal audit function on behalf of the ‘parent’ Departments and the replacement of such arrangements could result in the need for the establishment of separate internal audit sections. It has also been stated that the reporting process to the relevant Minister has to be safeguarded. We have taken these concerns into account in recommending revised arrangements for local government audit.

3.20.In our view there is a strong case for the transfer of responsibility for audit of the ‘non-mainline’ local authorities to the C & AG and we recommend accordingly. We feel that the reservations expressed can be overcome by the adoption of a flexible reporting system which could feed into Departments’ monitoring procedures. However the C & AG’s primary reporting responsibility would be to Dail Eireann, such reports to be subject to examination and report by the PAC.

3.21.There is a lesser case for the transfer of the audit of the ‘mainline’ local authorities however administratively desirable this might seem to be. The accountability of directly elected local authorities should be primarily to their electorate. However, in order to strengthen accountability to Dail Eireann it is recommended that the C & AG be given access inspection rights in the ‘mainline’ local authorities in respect of moneys provided by central government and that he should report to Dail Eireann, such reports to be subject to PAC examination and report.

3.22.Since 1986 an interdepartmental committee has been examining the local government audit service in detail with a view to making recommendations on its future structure and operation. We understand that the committee’s report will be finalised shortly.

3.23.Without wishing to prejudice the findings of that committee it appears to the Group, on the basis of evidence taken, that there are three main deficiencies associated with the present system:-

(a)The arrears of unaudited accounts in local government is a serious matter. The 100 per cent transaction check performed by some auditors in accordance with their literal interpretation of the governing legislation that ‘every auditor shall examine into the matter of every account which is to be audited by him’ has been a contributory factor to the build up of arrears of unaudited accounts. Because of the absolute independence he enjoys by virtue of his appointment as auditor on an individual basis to a specific local authority by the Minister for the Environment, the local government auditor has complete discretion in determining the level of check. A 100% transaction check is not in keeping with modern audit practice and is inconceivable if arrears are to be eliminated and future audit work completed on a timely basis.

(b)There is no scope for countrywide comparative studies of similar programmes of expenditure by local authorities because of the individual basis for auditor appointments. The results of such studies would be valuable and objective performance indicators in any assessment of value for money in local government.

(c)The impetus for corrective action on matters raised by the auditor is adversely affected by the lack of a PAC equivalent. Departmental censure of ‘erring’ local authorities has proved to be of limited effectiveness in this regard.

3.24.The possibility of a Local Government Audit Commission headed by the C & AG is worthy of consideration. The PAC should address this question separately when the report of the interdepartmental committee is available. See Senior Counsel’s opinion: Appendix 1.

4.NATURE OF C & AG’S AUDIT

Pre-Audit

4.1.Pre-audit relates to the examination of proposed expenditure before it is incurred. In some European countries, notably Belgium and Italy, this aspect forms the major part of the national audit authorities’ activity. This concentration on pre-audit is concerned with the legality of the proposed expenditure and is not an evaluative process. In Ireland the only element of pre-audit carried out by the C & AG is in pursuance of his responsibility under the Constitution ‘to control on behalf of the State all disbursements’. In practice this takes the form of the C & AG examining requisitions for credit by the Minister for Finance to enable the release of moneys from the Exchequer. The C & AG carries out a basic check that the sum sought is in accordance with the governing statutes and if this is in order he authorises the Central Bank to make that sum available to the Minister for Finance. It is from these moneys that all State payments are made. The expenditure is ultimately audited on a post-factum basis.

4.2.The C & AG’s pre-audit activity is usually referred to as the exercise of the Comptroller function. Its historical basis goes back to the early 19th century when it was perceived as a brake on potential Executive attempts to issue public moneys which were not in accordance with an Act of Parliament.

4.3.The Group is informed that the operation of the Comptroller function does not take up much time and that occasionally it prevents premature issues from the Exchequer. In the light of this we recommend no change although there may be a case for some streamlining of the credit requisition process generally.

Financial and Regularity Audit

4.4.The financial and regularity audit of the appropriation accounts is the foundation for the C & AG’s work as a whole. He is statutorily required by the 1921 Act to satisfy himself that the money has been expended for the purposes for which it was granted by Parliament and that the expenditure conforms to the authority which governs it. In practice this means ensuring that adequate systems of financial control are operating satisfactorily and that proper books and records are kept of all transactions which are properly reflected in the accounts. This requirement is as valid today as it was in 1921 when the law was enacted. The Act also requires that the C & AG must ensure that the expenditure is properly vouched but he may restrict the scale of his examination of the vouchers if he is satisfied with the internal control within a department. This, in effect, is his authorisation for carrying out test-checks rather than 100 per cent audits and is in line with generally accepted auditing standards applied in the private sector.

4.5.We are informed that the operational standards for financial and regularity auditing performed in the C & AG’s Office are on the same basis as those in the private sector. These standards refer to the planning, controlling, execution, documenting and reporting of audit work. The structure of the audit follows a systems - based approach without inhibiting the initiative of the individual auditor. We concur with this approach. We note that modern audit techniques including the use of computer software are being employed and developed further within the Office. We encourage these developments and feel that the C & AG should always be allocated the resources to equip his Office with the most up to date audit tools. In the long run such investment should pay for itself by way of a more efficient and effective audit.

4.6.In more highly developed countries there has been a tendency to downgrade the financial audit in importance - a move which stems from a belief that evaluative examinations are more relevant to the needs of today. For instance, in West Germany and USA, the C & AG’s equivalent does not carry out a financial audit but rather sets the standards by which such audits should be done. The Group accepts the reasoning behind this approach. However we believe that this approach presupposes that the financial and accounting systems in operation have been tried and tested and not found wanting over a long period and therefore can be relied upon. We do not feel that public accounts have reached that stage in Ireland. To illustrate the point: it is only in recent years that a meaningful attempt has been made to install proper internal audit units in Government Departments. We see great scope in the future for co-operation between the C & AG and internal audit with a view to freeing audit resources for other tasks. However, the financial and regularity audit should remain as an important part of the C & AG’s work. The Group recommends the structured development of the internal audit function within Government Departments and suggests that the PAC in consultation with the C & AG should address this question at an early date.

4.7.The Group feels that if accountability is to be effective it must be timely. The current annual reporting cycle of the C & AG does not lend itself to up to date review by the PAC. The C & AG’s statutory deadline for producing his annual report on the Appropriation Accounts is 31 October of the year following that under audit. It appears that this date is viewed as the target date rather than as an outside limit and production of the report is so geared. On occasion even the statutory deadline is not met. This timescale commits the PAC to working a year or more in arrears and is most unsatisfactory.

4.8.The Group proposes that, as well as a general forwarding of dates for submission and audit of accounts, the C & AG should aim towards an interim system of reporting which would enable the PAC to examine accounts and the report of the C & AG thereon on an individual Department basis as they become available. This would obviate the need for the PAC to wait until the published volume of all Appropriation Accounts had been referred to it by Dail Eireann. Such change would require some modification of the present arrangements for accounts and reports to be laid before the House before being referred to the PAC, and also for reporting more frequently than once a year.

4.9.In order to make the C & AG’s Report more meaningful the Group recommends that official queries (reference sheets) should be answered by Departments within a month of their issue to facilitate inclusion in his reports.

Value-for-Money Audit

4.10.The rapid growth of public expenditure in most developed countries in recent years fuelled by high public sector borrowing and taxation has led to a growing awareness and concern about how public money is managed and used and a demand that the concept of accountability for public expenditure should be broadened to incorporate value-for-money (VFM) considerations. This concern was first translated into positive action in the USA where a system of programme evaluations was introduced by the General Accounting Office. Other countries followed suit, notably Canada which introduced new methodologies to establish the extent to which VFM was being achieved in public expenditure programmes. The same concerns led to rapid development of the VFM concept in the U.K. in the late 1970s, initially by way of the Rayner scrutinies of departmental activities and subsequently by giving the C & AG statutory backing for VFM audit in 1983. Similar developments had earlier taken place in Australia, New Zealand and some European countries.

4.11.No examination of VFM audit would be complete without referring to its three generally accepted components - economy, efficiency and effectiveness. The British Green Paper on the role of the C & AG described the first two as a means of bringing to light examples of wasteful, extravagent or unrewarding expenditure, failure to maximise receipts or financial arrangements detrimental to the Exchequer and weaknesses leading to them. In technical terms an economy audit is concerned with establishing that resources of adequate standard are procured at least cost and an efficiency audit examines the extent to which maximum output is achieved for a given input or minimum input used for a given output. Effectiveness audit is described is that Green Paper as an examination to assess whether programmes or projects undertaken to meet established policy goals or objectives have met those aims. In short, economy is spending less, efficiency is spending well and effectiveness is spending wisely.

4.12.In Ireland it could be justifiably claimed that long before the current vogue for VFM in all its manifestations the C & AG incorporated some element of VFM in his audit programme. He was encouraged and supported by successive PACs in this regard even though there was no specific statutory basis for this work. The Department of Finance explicitly supported this development. In a letter dated December 1967 to the Chairman of the PAC the Secretary of the Department of Finance stated ‘It has always been the view of the Department of Finance that the C & AG should be facilitated in investigations designed to ensure that, in the carrying out of policy, there is no failure to get VFM, no waste or inadequate financial control. This important function of the C & AG has the sanction of custom and good sense rather than of an express statutory provision’.

4.13.Clearly then, there was a consensus among the principals about the C & AG having powers with regard to VFM audit. The C & AG’s growing emphasis on VFM matters over the years is reflected in the content of his Annual Report. However it could be fairly said that there is no structured process for undertaking VFM audits and that VFM aspects which are highlighted by the C & AG arise peripherally to his financial and regularity audit. Furthermore if VFM is taken to mean economy, efficiency and effectiveness it could also be fairly said that the aspects which come to the surface through the C & AG’s report relate to economy and efficiency but seldom to effectiveness.

4.15.An evaluative process of proposed expenditure programmes is in place in some countries but the Group has noted the practical difficulty in making it effective. Elaborate and costly pre-controls do not guarantee against things going wrong. While the objective of avoiding wasteful expenditure before rather than after it has been incurred is desirable, we believe that it can be best achieved in an Irish context by learning from the perspectives of the past and applying those lessons to the present and future.

4.16.The Group would like to emphasise that it sees the primary responsibility for attaining VFM as resting with the management of the organisations which carry out the expenditure programmes. Up to recent times many organisations in both the private and public sectors did not have the machinery in place to help them evaluate their performance. This is changing, particularly in the public sector, as a result of the stringent restrictions in public expenditure and the competing demands for resources. It has become not only fashionable to be promoting efficiency but necessary. The restrictions have given a fresh impetus to the Department of Finance’s efforts to have proper management systems installed in line Departments. The assurance being given to the Government by the Department that public expenditure is being managed efficiently and effectively must be matched by an independent assurance to Parliament of the position. We do not feel that this is being achieved at present.

4.17The audit carried out by the C & AG is basically a financial and regularity audit with a VFM slant. As stated above his VFM concerns tend to focus on specific examples of financial mismanagement which are likely to lead to PAC recommendations which in turn influence improvements to systems of control. Reports of both the C & AG and the PAC confine themselves to ‘what went wrong’ rather than setting out to assess both good and bad aspects of a particular administrative performance. We do not think that this approach meets the accountability requirements demanded by the highly complex and diverse nature of public expenditure today. A more structured approach is needed which takes advantage of the methodologies which have been devised to measure performance and VFM.

4.18.It is envisaged that this approach would initially, at least, be activity based rather than organisation based. The former holds out better prospects for more immediate cost benefit. Overall VFM reviews of organisations are likely to have a longer timespan and should await the application of the expertise accrued in the early stages of VFM audit implementation.

4.19.While not wishing to minimise the complexities inherent in VFM studies and the difficulties of developing such studies as part of the audit process, the Group recommends that a full mandate for VFM audit should be given to the C & AG. There is expertise within his Office which could be developed as a core group on which to build. It will however be necessary to import specialist staff of various disciplines into the C & AG’s Office both from inside and outside the public service if VFM audit is to develop along the right lines. We have noted the experience in other countries that VFM examination is most worthwhile when it uses audit-based methodologies and we recommend that for the most part this approach be used.

4.20.In its examination of witnesses the Group found that there was unanimity that the C & AG should be given the power to carry out economy and efficiency audits. On the other hand there were some differences on whether the C & AG’s remit should extend to effectiveness audit. These differences of opinion replicated similar debates which surrounded the introduction of VFM audit in other countries. The argument for giving the full remit is that, no matter how economically and efficiently expenditure programmes are managed, it is immaterial if the expenditure is ineffective. Therefore, effectiveness must be examined before the other two come into play. The counter argument is that matters of effectiveness in a public expenditure context often touch on policy issues which are rightly the prerogative of government. It can be contended that there is a very blurred line on occasion between ‘policy’ and ‘implementation of policy’.

4.21.We have noted the statutory position in Canada where the Auditor General’s mandate in this respect is to bring to light cases where satisfactory procedures have not been established to measure and report on the effectiveness of programmes, where such procedures could appropriately and reasonably be implemented. We have also noted from his most recent report that he has shifted his audit approach away from deficiencies of management procedures to a more programme results - based audit approach which places more emphasis on results and less on administrative systems and controls. This would appear to suggest that the Auditor General has had reservations about the usefulness of assessing procedures (per his statutory mandate) as a means of ensuring that effectiveness is attained.

4.22.In Britain the C & AG may carry out examinations into the effectiveness with which organisations have used their resources but he is expressly excluded from questioning the merits of the policy objectives of the organisations.

4.23.In the USA and West Germany they have no such reservations. Effectiveness audit in those countries is intended to prompt questions like, ‘Why is the work done by the Government ?’, ‘Why is it done in the way it is ?’ and ‘What alternatives are there ?’. The raising of these questions is deliberately intended to influence policy decisions.

4.24.We have considered this matter in some detail and we believe that the difficulties can be overcome if policy objectives are clearly defined and if the criteria by reference to which performance is to be measured are set out in advance. In this situation the C & AG or the PAC would have no function in questioning the merits of those policy objectives but would be entitled to evaluate whether the policy objectives had been attained or not.

4.25.We recommend that VFM audit as we have defined it in this report should be applied to all organisations which are or will be subject to audit by the C & AG viz. Government Departments and Offices, non-commercial SSBs, certain local authorities and educational institutions. VFM audit should also apply to ‘mainline’ local authorities for activities which are financed by central government. The commercial SSBs are already subjected to a type of VFM audit by consultants engaged by the Joint Committee. This audit should be strengthened and have regard to the criteria outlined in this report. We are convinced that if the introduction of VFM audit is to be successful it must firstly have the authority of a statutory base. It is not satisfactory to rely on convention. It goes without saying that adequate resources should be provided for the purpose and that the C & AG if he is to be given this mandate be empowered to engage such expertise as he deems necessary.

4.26.The Group envisages that reports on VFM audits should be made to Parliament on an individual basis rather than forming part of any annual report. This would enable them to be considered on a current basis by the PAC and would facilitate timely corrective action being taken.

5.COMMITTEE OF PUBLIC ACCOUNTS

The Committee of Public Accounts is appointed under Dail Eireann Standing Orders relative to Public Business as follows:

“130. There shall be appointed, as soon as may be after the beginning of each financial year, a Select Committee, to be designated “The Committee of Public Accounts”, to examine and report to the Dail upon the accounts showing the appropriation of the sums granted by the Dail to meet the public expenditure, and to suggest alterations and improvements in the form of the Estimates submitted to the Dail. The Committee, which shall have power to send for persons, papers and records, shall consist of twelve members, none of whom shall be a member of the Government or a Minister of State, and four of whom shall constitute a quorum. The Committee shall be otherwise constituted according to the provisions of Standing Orders 70 and 73, and so as to be impartially representative of the Dail.”

5.2Standing Orders 70 and 73 relate to the constitution of Select Committees and the appointment of a Chairman; Standing Order 71 deals with the power of a Select Committee to report its opinions and to make special reports.

5.3A Dail Committee of Selection, appointed under Standing Order 76, nominates members to serve on the Committee of Public Accounts and also has power to discharge members from time to time for non-attendance or at their own request and to appoint others in substitution for those discharged.

5.4The terms of reference of the Committee are normally ordered by way of motion in the Dail as follows:

“That, in pursuance of Standing Order No. 130 of the Standing orders relative to Public Business, the Committee of Public Accounts be appointed; and

That, the Appropriation Accounts, with the Report of the Comptroller and Auditor General for the year ended 31st December 19-, be referred to the Committee for examination and report”.

5.5The Advisory Group believes that the present mandate and powers of the Committee do not facilitate the Committee in discharging its obligations to Dail Eireann in the most effective manner. The following paragraphs will detail the present position and the Group’s conclusions and recommendations for the future role of the Committee.

ORGANISATIONAL

(i)an increase or decrease in the number of Committee members (numbering 12 at present)

(ii)whether there should be a procedure allowing for alternate members to act in the absence of Committee members

(iii)formal appointment of a Deputy Chairman to the Committee.

5.7Having considered these issues carefully the Group concluded that there were no compelling arguments or advantages in favour of a change in the present arrangements. In the case of item (iii) the Group would favour a system whereby the Chairman, with the Committee’s agreement, could informally nominate a Deputy Chairman for the time being from among the Committee members as required. This would formalise a tradition normally followed.

5.8Over the years greater demands have been placed on the Chairman of the Public Accounts Committee as indicated in paragraph 5.39. Recommendations in this report mean that these demands will be added to. At present no facilities are provided for the Chairman to reflect these demands.

The role and status of the Chairman of the Public Accounts Committee should be addressed by the Government and the Dail as soon as possible.

While the Advisory Group has not undertaken an analysis of attendance of members at Committee meetings it believes that regular attendance by the majority of members is vital from two viewpoints. Firstly the contribution of those members to Committee discussion, hearing of evidence on Appropriation Accounts, etc. will be reflected in the consensus of Committee reports to the Dail and, secondly, regular attendance in itself will be perceived to indicate an interest in, and the importance of, the work of the Committee of Public Accounts.

5.10By way of highlighting its emphasis on the importance of regular attendance the Group recommends that membership of the Committee should automatically lapse on failure to attend six consecutive meetings unless the Committee itself decides otherwise. The matter should be considered by the Public Accounts Committee who could then decide to refer to the Committee of Selection.

5.11The Group noted that the Committee had no facility for the appointment of sub-Committees and noted that other Oireachtas Committees had such arrangements laid down in their terms of reference. It believes that this should be rectified and that the Committee should be empowered to appoint sub-committees as it deems necessary. This recommendation is included in proposed amendments to the Committee’s terms of reference as set out in paragraph (5.34) below.

STATUTORY BASIS FOR THE COMMITTEE

5.12The Group considered carefully the question of whether the powers and functions of the Committee of Public Accounts should be enshrined in legislation. The background to the establishment under legislation of the National Audit Office in the United Kingdom and the specific reference to the U.K. Committee of Public Accounts in the Act was studied by the Group. However, it was felt that, while legislation relating to the Office of the Comptroller and Auditor General needs to be amended, there was no advantage, based on present evidence, for the Committee’s functions or powers to be the subject of inclusion in such legislation. Assuming there is agreement on the proposed new terms of reference by the Dail, the Group feels that this, along with the existing relevant Standing Orders, should be adequate for the proper and effective discharge of the Committee’s duties.

The staff assigned to the Committee by the Houses of the Oireachtas at present is two Principal Clerks and one Clerical Assistant. The Group recommends that, in order to ensure the independence of its examinations, the staff assigned to the Committee should come under the day to day supervision of the Chairman. This would enable the Committee to increase its activities under the proposed expanded terms of reference. Committee staff should not be subject to direction from any source which is itself the subject of examination by the Committee and should be subject to direction of the Committee or, between Committee meetings, the Chairman.

It is likely that the Committee will require the services of consultants from time to time to undertake specific studies of a technical nature. The Group recommends that adequate funds be provided for the Public Accounts Committee in the Houses of the Oireachtas Vote each year to enable such studies to be undertaken. (See 2.6).

5.15The Group wishes to emphasise that every effort should be made to avoid any possibility of overlap between the Committee and the Comptroller and Auditor General. The best means of avoiding this is for the Committee to discuss with the Comptroller and Auditor General before any formal decisions are taken on engaging consultants for the Committee.

5.16As stated above, the Group believes that the Committee should have its own resources to undertake studies independently of the Office of the Comptroller and Auditor General. In saying this it is recognised that the Committee and the Comptroller and Auditor General may have different objectives from time to time. In particular the Committee may wish to pursue inquiries of its own which could be of a non-audit nature and as such it would be inappropriate to depend on the Office of the Comptroller and Auditor General for specialist back up service.

ADDITIONAL FUNCTIONS

5.17The Group noted (a) that the Committee on Public Expenditure, which operated during the last Dail, has not since been re-appointed and (b) that the Taoiseach indicated in the Dail in April 1987 that a suggested merger of the two committees might be looked at.

5.18The Group considered this and recommends that the terms of reference of the Committee of Public Accounts should be amended to include powers and functions of the former Committee on Public Expenditure, particularly in the area of reviewing cost-effectiveness of public expenditure programmes.

5.19It is the Group’s opinion that Parliamentary accountability should extend to many sectors which benefit from considerable funding by the Exchequer. There are no reasonable grounds for excluding any person or body in receipt of substantial public funds from the Comptroller and Auditor General’s inspection and PAC scrutiny and any existing barriers to such action should be removed by legislation or other means. The very existence of these fundamental controls should reduce the risk of waste of public expenditure and reassure the public that funds allocated on their behalf are carefully monitored and controlled before and after their disbursement.

The Group examined the legal aspects of the above and other changes and is satisfied that the proposed amendments to the Comptroller and Auditor General’s role and that of the Committee are in order (see Appendix 1).

(i)Under Article 33.4 of the Constitution and Section 7 (2) of the Comptroller and Auditor General Act, 1923, the Comptroller and Auditor General reports to Dail Eireann. This is normally in the form of his report on Appropriation Accounts for each Financial Year.

(ii)By way of motion in the Dail the Committee of Public Accounts is appointed under Standing Order No. 130. Each year the Appropriation Accounts with the report of the Comptroller and Auditor General are referred to the Committee for examination and report.

(iii)The Committee, with the assistance of the Comptroller and Auditor General, takes evidence in public session.

(iv)The Committee draws up its report on the Appropriation Accounts.

(v)By way of motion in the Dail the Chairman of the Committee moves that the report be laid before the Dail and the report, proceedings and minutes of evidence printed.

(vi)The Committee’s report becomes a public document when it is laid before the Dail.

(vii)Subsequently the Minister for Finance provides a formal minute of observations on the Committee’s report and these are incorporated in the following year’s report and may be commented on by the Committee in that or subsequent reports.

5.21The Group is of the view that the above procedure is somewhat cumbersome and that the Committee should be enabled to lay its reports before the Dail immediately they are adopted (as in the case of the former Committee on Public Expenditure). The proposed new terms of reference have taken account of this aspect as well as the question of Dail debates on Committee reports which is discussed below. The Group recommends that (a) this change should not affect the present system of follow up action on Committee reports by the Minister for Finance and (b) an agreed time limit of, say, up to 60 days, should be fixed for a response by the Minister to the Committee’s reports.

5.22The Group was concerned that, in general, no Dail time is allocated for debates on reports of the Committee of Public Accounts. This is difficult to understand bearing in mind the fact that (a) other Committees’ reports have been debated and (b) more importantly, the concept of Parliamentary accountability would seem to require follow up to Committee reports by way of regular Dail debates on the findings of the C & AG and the Committee. Such public debate would, the Group believes, tend to increase the vigilance of budget managers in the area of monitoring and controlling public expenditure programmes. It would also ensure that reports were not merely “noted” by the Dail.

5.23Therefore, the Group recommends that the Committee should have discretion to request a reasonable allocation of time for a debate in the Dail on any report it lays before the House. This would provide all members of the Dail with an opportunity to participate in the review process initiated by the C & AG and the Committee. An additional and important advantage would also be the public airing of vital information by Dail members. In a situation where Committee reports are up to date this should also be helpful in the context of debating estimates for the following year.

5.24Under Section 2 of the Committees of the Houses of the Oireachtas (Privilege and Procedure) Act, 1976, members of the House have immunity in respect of any utterance in or before a committee and all documents, reports, publications and utterances in a committee of the members, advisers, officials and agents of the Committee are privileged.

5.25The Group understands that the 1976 Act does not extend immunity or privilege to witnesses appearing before Committees. There has been some doubt as to whether privilege extends to witnesses under Common Law. See Senior Counsel’s opinion: Appendix 1.

5.26An examination of the original draft of the Bill, as circulated, and Dail/Seanad debates in March 1976 revealed that the intention had been (a) to extend privilege to witnesses appearing before committees and (b) to impose legal sanctions on persons who refused to respond to a summons to appear before a committee or who refused to act as requested by the committee. It is clear from the debates at the time that there were doubts about the desirability of giving such powers to a committee and those aspects of the Bill were deleted by agreement of the members.

5.27The Group, while appreciating the difficulties involved, believes that there may be a potential problem for the Committee of Public Accounts, or indeed any Oireachtas committee, if witnesses simply refuse to respond to an invitation to appear before the Committee.

5.28While there have been no real difficulties in the past the Group feels that the rights of the Dail, through its committees, should not be undermined by lack of power in relation to summoning witnesses to appear as required from time to time, particularly where accountability for public money is concerned.

5.29Of equal importance is the protection of witnesses, their utterances and documents, when appearing before the Committee. The Group believes that the Committee should have the discretion to extend and withdraw privilege to witnesses. The main reason for this power is that, if the Committee is to extend its role and undertake in depth examination of any aspect of public expenditure, it must be in a position to grant privilege to witnesses as appropriate so that Committee reviews will not be hampered or inhibited through reticence on the part of witnesses due to a lack of such protection.

5.30The Group also sought legal opinion on this aspect and this is detailed in Appendix 1.

The main objection to section 3 of Committee of the Houses of the Oireachtas (Privilege and Procedure) Bill, 1976, as circulated seemed to be that it might not be desirable that all Committees for all time should have powers of imposing penalties for non-attendance of witnesses.

The P.A.C. is a Committee which has existed since the foundation of the State. Most parliaments on the Irish model have a Public Accounts Committee.

It seems reasonable to recommend that powers, similar to Section 3 of the 1976 Bill (before amendment) should be available to the PAC, particularly since witnesses who are not statutory Accounting Officers, and some of whom may not be in the public service, may be called in future.

The question of whether or not witnesses appearing before Oireachtas Committees have privilege for utterances made has been considered. The opinion of Senior Counsel clarifies the position. (Appendix 1).

It would seem desirable that privilege be available for bona fide witnesses. However, safeguards against abuse need to be built in.

(b)no privilege for evidence not requested by the Committee i.e. if a witness were to volunteer evidence outside the scope of the Committee’s requests

We recommend that privilege be extended to witnesses but that safeguards along the above lines should be built into the enabling legislation.

5.31The Group places particular emphasis on the need for the Committee to agree, in consultation with the C & AG, on targets and a carefully planned programme of work. As part of that process it recommends that an annual report should be published which (a) would summarise achievements of the previous year and (b) set down the Committee’s intended work programme for the year ahead.

(1)Review of progress made and follow up action taken over previous year(s).

(2)Aims/objectives for year ahead should be clearly stated

(3)Work programme

-interim examinations of named major departmental and other accounts as they become available (see 4.8)

-Timetable with list of appropriation accounts and C & AG’s report

-Issues for special examination by the Committee or its subcommittees. If these are not known at time of adoption of the annual report, there should be sufficient flexibility in the work programme to cater for such eventualities.

-Reference should be made where appropriate to work allocated to consultants.

5.33The main advantage of an annual report is that it would keep the Dail, the public sector and the public generally up to date and informed on the activities of the Commitee of Public Accounts. This, the Group believes, is an important element of improving the flow of information in the area of public accountability. The Committee itself can also learn from its experience as the new arrangements progress and should also be flexible enough to adapt its methodology in the light of feedback received after publication of its annual reports.

PROPOSED TERMS OF REFERENCE

5.34The Group recommends the following revised terms of reference for the Committee:

(1)That in pursuance of Standing Order No. 130 of the Standing Orders relative to Public Business the Committee of Public Accounts be appointed to examine and report to the Dail upon the accounts showing the appropriation of the sums granted by the Dail to meet the public expenditure; Departmental funds; Revenue Accounts; Finance Accounts; accounts of those authorities and those State-sponsored Bodies which are audited by the C & AG; and to suggest alterations and improvements in the form of the Estimates submitted to the Dail. The Committee shall consist of twelve members, none of whom shall be a member of the Government or a Minister of State, and four of whom shall constitute a quorum. The Committee shall be otherwise constituted according to the provisions of Standing Orders 70 and 73, and so as to be impartially representative of the Dail.

(2)That the Committee review in such areas as it may select the justification for and effectiveness of ongoing expenditure of Government Departments and Offices; of authorities audited by the C & AG; of State-sponsored Bodies not included in the Schedule to the Order establishing the Joint Committee on Commercial State-sponsored Bodies and report thereon to the Dail recommending cost effective alternatives and/or the elimination of wasteful or obsolete programmes, where desirable.

(3)That the Committee review how public moneys have been used in all other agencies, public or private, which receive substantial funds from the State and which are subject to inspection by the C & AG.

(6)That the Committee and any of its sub-committees shall, unless they decide otherwise, hold their meetings in public under the conditions specified in Standing Order No. 74.

(a)to send for persons, papers and records, and the Committee have power to engage the services of persons with specialist or technical knowledge to assist it or its sub-committees.

(b)to impose penalties for non-attendance by witnesses

(c)to extend and withdraw privilege to witnesses

(8)That every report which the Committee proposes to make shall, on adoption by the Committee, be laid before the Dail forthwith without the need for a motion in the House whereupon the Committee shall be empowered to print and publish such report together with such related documents as it thinks fit.

(10)That the Committee present annually to the Minister for Finance the Estimate for the Office of the C & AG.

(11)That, not withstanding anything in Standing Orders and unless the Dail shall otherwise order, when the Committee of Public Accounts lays before the Dail a report, three hours shall be set aside for debate on a Motion, if requested by the Committee, that Dail Eireann takes note of the report, to be taken on a day not later than the twelfth day on which the Dail shall sit after the day on which the report shall have been laid before the Dail and at such time as shall be announced on the Order of Business for that day by the Taoiseach; provided that where a division has been demanded on the Motion or any amendment proposed thereto the Ceann Comhairle shall postpone the taking of the division until 8.30 p.m. on the next Wednesday on which the Dail shall sit until that hour.

5.35The Group appreciates that the scale of public expenditure in the countries visited is far greater than that in Ireland. Nevertheless the nature and scope of the audit; the problems dealt with etc. are generally similar. It is also recognised that some systems of public accountability, monitoring and control evolved in different ways to that in Ireland for historical and constitutional reasons.

5.36Compared with the functions and powers of the Parliamentary Committees visited during this review (and in the case of published information on other countries studied by the Group) the proposed amendments to the terms of reference of the Committee of Public Accounts are reasonable. They are, however, necessary to establish a structure for proper public accountability to Dail Eireann and it is the Group’s hope that the proposed new systems will be accepted and put in place with the least possible delay.

5.37The Advisory Group, having undertaken the review as laid down in its terms of reference, believes that neither the Committee of Public Accounts nor the Comptroller and Auditor General will be able to discharge their duties fully to Dail Eireann unless and until there is recognition of the need to extend their roles, functions and powers as recommended in this report. These recommendations are summarised below.

5.38It will be seen from this report that any change in the C & AG’s role must be considered in the context of the role and functions of the Committee itself. Consideration of changes in one cannot be divorced from the impact on the other.

5.39The Group is confident that the effect of an enhanced role for the C & AG and the Committee will be a major step in the direction of greater public accountability for total public current and capital expenditure now far greater in size and complexity than when the Office of the C & AG and the PAC were set up.

5.40It is self evident that, if the improved controls recommended by the Group result in a saving of even a fraction of one per cent of public expenditure in terms of reducing waste, identifying better value for money etc. the effort will more than compensate for any additional resources that may be needed to implement those recommendations.

RECOMMENDATIONS

I OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL

STATUS

1.The PAC should be consulted before the name of the appointee for C & AG is put before Dail Eireann by the Government (2.2)

2.The appointment and removal provisions in the 1923 Act should be brought into line with the Constitution (2.3)

4.The C & AG should take the views of the PAC into account when drawing up his work programme (2.5)

5.The Department of Finance powers of direction to the C & AG should be terminated (2.9)

6.The PAC should have a central role in determining the Estimate for the C & AG’s Office (2.15)

7.Within the agreed Estimate the C & AG should have flexibility regarding staffing and remuneration matters (2.16)

8.The audit of the C & AG’s Office should be undertaken by an external auditor appointed by the PAC (2.17)

SCOPE OF AUDIT

9.The format of the Finance Accounts should be revised and they should be audited before submission to the Oireachtas (3.4)

10.The C & AG should be relieved of responsibility for audit of commercial SSBs (3.9)

11.The C & AG should be given access inspection rights with reporting responsibilities to Dail Eireann in the case of commercial SSBs and such reports should be subject to examination and report by the PAC (3.9)

12.The audit of non-commercial SSBs should continue to be the responsibility of the C & AG with reporting to Dail Eireann. Such reports should be subject to examination and report by the PAC (3.11)

13.The C & AG should examine the feasibility of using private sector auditors for the financial audit of SSBs (3.12)

14.There should be an audit report on all SSBs to Dail Eireann over and above the normal audit opinion or certificate (3.13)

(b)the body receives 50 per cent or more of its annual revenues or sums in excess of a specified amount directly or indirectly from the State

and he should report his findings to Dail Eireann. Such reports should be subject to examination and report by the PAC. (3.15)

16. The audit of non-directly elected local or regional authorities should be carried out by the C & AG with a reporting responsibility to Dail Eireann and such reports should be subject to examination and report by the PAC (3.20)

17.The C & AG should be given access inspection rights in directly elected local authorities in respect of moneys provided by central government and he should report to Dail Eireann on how those moneys are used. Such reports should be subject to examination and report by the PAC. (3.21)

18.The possibility of a Local Government Audit Commission headed by the C & AG should be looked at separately by the PAC following examination of the report of the interdepartmental committee (3.24)

NATURE OF AUDIT

20.The financial and regularity audit should remain as an important feature of the C & AG’s work (4.6)

21.There should be a structured development of the internal audit function within Government Departments (4.6)

22.Dates for the annual submission and audit of accounts should be brought forward (4.8)

23.A system of interim reporting by the C & AG to Dail Eireann should be introduced (4.8)

24.Official C & AG queries should be answered by Departments within a month of their issue (4.9)

25.A more structured approach to VFM audit using audit-based methodologies should be employed (4.17) (4.19)

26.VFM audit should include matters relating to effectiveness as well as economy and efficiency but not to the extent of questioning the merits of policy objectives (4.24)

27.VFM audit should be applied to all organisations in the State, semi-State and local government sectors (4.25)

29.VFM audit reports should be made to Dail Eireann on an individual basis (4.26)

II COMMITTEE OF PUBLIC ACCOUNTS

30.The Chairman should nominate a Deputy Chairman on an informal basis as required from time to time (5.7).

31.The role and status of the Chairman should be addressed by the Government and the Dail as soon as possible (5.8).

32.Membership of the Committee should automatically lapse in cases where a member fails to attend six consecutive meetings, unless the Committee decides otherwise (5.10).

34.Staff should be subject to direction and under the day-to-day supervision of the Committee and its Chairman (5.13).

35.The functions of the former Committee on Public Expenditure should be assigned to the Committee of Public Accounts. In addition the Committee should be empowered to review any agency or body which receives substantial sums from the State (5.18).

36.The Committee’s reports, when adopted, should be automatically laid before the Dail and published. There should be a fixed time limit for response by the Minister for Finance to Committee reports (5.21).

37.The Committee should have discretion to seek Dail debates on its reports (5.22).

38.The Committee should be empowered to extend privilege to witnesses appearing before the Committee (5.29).

REPORT

1.

INTRODUCTION

Background