I move:
That Dáil Éireann takes note of the Special Report of the Committee of Public Accounts on the future role of the Comptroller and Auditor General and the Committee of Public Accounts.
The special report was formally laid before the House in June of last year and I regret that it has taken so long to get time in the House to debate this important report. Nonetheless, I appreciate this opportunity to debate the report and hope that it will be the final step in legislation to up date the role of the Comptroller and Auditor General and the Dáil's watchdog, the Public Accounts Committee.
It is wholly unacceptable, and totally anachronistic that the Public Accounts Committee should operate under terms of reference more applicable to the level of expenditure at the foundation of the State, and that the Comptroller and Auditor General should derive his powers largely from legislation made in 1866, supplemented by minor legislation in 1921 and 1923.
There is little point in the 1937 Constitution giving the Comptroller and Auditor General independence akin to that of a High Court Judge if we then do not give him the powers and authority to carry out a modern audit function on behalf of the State.
Every Parliament on the British model has a Public Accounts Committee. By long tradition it was chaired by a Member of the main Opposition party, again to ensure independence of functions. Similarly, there is little point in giving the committee independence without giving it the tools with which to do its jobs in keeping with the needs of a modern 20th century state.
In his 1982 report the Comptroller and Auditor General referred to the embargo on recruitment and the effect it had on staffing levels in his office and on his capacity to carry out his constitutional and statutory functions. The Public Accounts Committee made a special report in January 1985 to Dáil Éireann entitled "The resources and functions of the Comptroller and Auditor General" in which it expressed concern that the audit of public expenditure and revenue should be restricted by such a lack of resources. It also recommended that an in-depth examination should take place into the statutory role of the Comptroller and Auditor General with emphasis "on value for money" auditing.
In May 1986 during the debate on the Estimate for the Comptroller and Auditor General Office's, the Minister for Finance announced that he would undertake a review of the legislation in relation to the Comptroller and Auditor General and he invited the comments of the Public Accounts Committee. This invitation was repeated in April 1987 in the official response by the Minister for Finance to the January 1985 report of the committee. Also in April 1987 the Taoiseach told the Dáil that "there has been a suggestion worthy of consideration that the Public Expenditure Committee and the Public Accounts Committee might merge into one powerful Dáil Committee", the Public Expenditure Committee was therefore not being reappointed.
In January 1988 the Public Accounts Committee set up the "Advisory Group on Public Financial Accountability" to review the role of the Comptroller and Auditor General and the Public Accounts Committee and to see how the system of public accountability might be improved and to present its report to the Public Accounts Committee. This report was endorsed by the all party committee and laid before the House. This is the report now being debated.
The advisory group was chaired by myself, and at this stage I would like to place on the record of the House my appreciation and that of the Public Accounts Committee for the dedicated work of the advisory group, speedily and efficiently carried out. The other members were Mr. John Gallagher, Director General of the Institute of Public Administration, Mr. William Donnelly, Chief Executive of the Institute of Certified Public Accountants in Ireland, Mr. Cecil Donovan, member of the Consultative Committee of Accountancy Bodies in Ireland and also partner in Touche Ross and Company, and the Comptroller and Auditor General, Mr. P.L. McDonnell. The secretariat to the advisory group were Mr. John Purcell of the Office of the Comptroller and Auditor General and Mr. Paddy Judge of the Houses of the Oireachtas. I should also like to express my appreciation and that of the committee to the Clerk of the Committee, Padraic Donlon, and the other staff involved in preparing the report. I should like to thank the other Members of the Public Accounts Committee for the confidence they placed in me in bringing forward this report.
The State's accounting procedures are largely based, in a legislative sense, on the Exchequer and Audit Departments Act, 1866. This Act sets down the manner in which the financial transactions of the State should be accounted for and the role to be played by the Department of Finance and the Comptroller and Auditor General in this respect. The Exchequer and Audit Department's Act, 1921, refined and updated the original provisions without interfering with the basic principles underlining the 1866 Act. In 1922, the Irish Free State written Constitution incorporated a provision for a Comptroller and Auditor General which mirrored the British concept of parliamentary control of public finances. The enabling legislation covering the appointment and functions of a Comptroller and Auditor General and a provision for a Department of the Comptroller and Auditor General was enacted in early 1923. The 1923 Act merely adopted the British practice with minimal alteration. That corpus of legislation has remained unchanged to this date. The 1937 Constitution reiterated the provision for the Office of the Comptroller and Auditor General and defined his functions in broad terms.
The Comptroller and Auditor General has a key role to play in the system of public accountability. He is not a servant of the Executive, but is rather a servant of the State who reports directly to Parliament which in turn sends his report for examination by the PAC. His function is one of giving an independent assurance to Dáil Éireann that public moneys have been spent in accordance with its wishes and in accordance with statutory and other provisions. Constitutionally, this is a matter for the Dáil and the Seanad does not have a role. Under legislation, the Comptroller and Auditor General carries out a financial and regularity audit but also refers to instances of loss, waste and uneconomic expenditure which have not got expressed statutory provision, and in doing this has the blessing of the Dáil, the Public Accounts Committee and the Department of Finance.
However, the legislation affecting the Comptroller and Auditor General is outdated and difficult to relate to modern Government accounting for public spending. It is 120 years now since the main legislation concerning the Comptroller and Auditor General was enacted. In this period there has been a radical change in the level and nature of public expenditure. Time is long since right to look at our public accountability arrangements.
It is important to note that this function is primarily a parliamentary and not an executive function. However, in the Executive there have been recent manifestations of the need to update public accountability in Government White Papers "A Better Way to Plan the Nation's Finances” and “Serving the Country Better — A White Paper on the Public Service”.
Recent developments in other countries, particularly those with a similar system of parliamentary democracy to Ireland, have seen a widening of the role of the Comptroller and Auditor General to include value for money audits, for example, in Great Britain — National Audit Act, 1983; Australia — Audit Amendment Act, 1979; New Zealand — Public Finance Act, 1977; Canada — Audit General Act, 1977.
There are three elements of value for money, VFM, audit-economy which is concerned with minimising the cost of resources acquired or used, in short, spending less; efficiency, that is the relationship between output and resources used in that output, in short, spending well; and effectiveness, how successful do outputs achieve policy objectives, in short, spending wisely.
Because the Public Accounts Committee has been established for so long its terms of reference do not specifically include authority to hire outside consultants, a power which has been given to the other functional committees of the House. Nonetheless, the liaison committee of chairmen assigned a small portion of the already small budget for consultants to the Public Accounts Committee. When the committee sought to use this recently an objection was raised by the Department of Finance where an official of that Department wrote to an official of the Houses of the Oireachtas on 29 December 1988 stating that:
Pending any change which the Oireachtas may decide to make to the roles of the Comptroller and Auditor General and the Committee of Public Accounts, the position is that the Committee's present terms of reference do not provide for the engaging of Consultants. Furthermore the specific responsibility for the promotion of administrative efficiency has for many years been the accepted responsibility of each Department under the general supervision of the Department of Finance.
The letter went on to say that it would be inappropriate to convey the sanction requested. Similarly the Department of Finance raised objections when the Committee on Procedure and Privileges were considering recently extending the terms of reference of the Committee of Public Accounts to give them the normal power written into the terms of the other functional committees. Indeed, committees already carry out a variety of exercises that are not specifically written into their terms of reference. For instance, where does it say in the terms of reference of any committee that that committee can travel to take evidence or make examinations? It seems that within the Department of Finance there is an attempt to frustrate and deny the legitimate role of Parliament in these matters and this is a situation which simply cannot be allowed to continue given the prevailing state of the public finances.
If Government Departments over the years have had, to quote the letter, "specific responsibility for the promotion of administrative efficiency" why have the following examples, which were certainly not value for money, arisen (1) 60 three-bedroom houses in Portlaois built for prison officers costing £78,000 each, exclusive of site costs; (2) two patrol vessels for the naval service expected to cost a total of £24 million but one only eventually received for this sum; (3) a building for a radio station at Valentia Island contracted to cost £90,000 but ending up costing ten times that amount without even going to tender; (4) a new administration building for the IIRS which was contracted at a cost of £2,875 million and ended up costing £7 million approximately; and (5) the development at Howth Harbour which was contracted for £3.7 million but had a final cost of £11.5 million approximately? These are only some examples of the items which have been highlighted by the Comptroller and Auditor General and the Committee of Public Accounts under existing powers. If the Comptroller and Auditor General had value for money powers and the committee had the right to consult outside consultants, could we find out if that vessel was worth £24 million or if it was only worth a portion of the amount? As things stand all we can state is that the project over-ran. The position is that irrespective of which political party or parties happen to form the Government of the day these practices have continued. The gamekeeper is the Dáil and it is our position to police the regulations, to commend where good work has been done and to prosecute where poachers have been found. It is an outrage for any civil servant to suggest that Dáil Éireann does not have a function in this regard.
The Comptroller and Auditor General works for the Dáil and is not a servant of the Government. He is an important part of the parliamentary system of control. He should be and must be wholly indepentent of the Executive of the day. Existing legislation suggests that the Department of Finance have powers of direction over the Comptroller and Auditor General. This is inconsistent with the independence concept. For instance, section 1 (2) of the 1921 Act which gives statutory backing to the Comptroller and Auditor General test checks reads "... provided that if the Treasury desire the vouchers or any of them to be examined in greater detail, the Comptroller and Auditor shall take action accordingly". A similar provision is provided in section 1 (3). These subsections were amended in Britain by the National Audit Act 1983. Section 3 (3) of the 1921 Act reads: "if in the course of any such examination any question arises between the Comptroller and Auditor General and the Accountant, it shall be referred to the Treasury, whose decision thereon will be final." Again this provision was repealed in Britain by the National Audit Act, 1983.
A serious gap exists at present in the accountability process. The Committee of Public Accounts examine voted expenditure, in a limited way, and the Joint Oireachtas Committee on Commercial State-Sponsored Bodies examine the commercial sponsored bodies. Non-commercial State-sponsored bodies are not subject to parliamentary committee review but the Committee of Public Accounts touch on these in their examination of various accounting officers.
There is a fundamental difference between commercial and non-commercial State-sponsored bodies. Commercial State-sponsored bodies derive the greater part of their current revenue from the sale of goods and services; non-commercial State-sponsored bodies are similar to executive branches of Government Departments with almost all revenue provided by way of voted moneys. It is the view of the Committee of Public Accounts that the Comptroller and Auditor General should be relieved of his present powers and duties to audit certain commercial State-sponsored bodies but that he should have the right of inspection of all these bodies and to report to the Committee of Public Accounts who should have the right to look at the financial regularity of spending by these bodies. It was, for instance, the public accounts committee in the UK who followed the De Lorean expenditure, not any other committee. That kind of inquiry should also be a function of the Committee of Public Accounts here. Similarly, in the case of non-commercial bodies the Comptroller and Auditor General should have a role in ensuring that they are treated no differently from the way he would treat expenditure by Government Departments and they should be reported on and examined by this House through the Committee of Public Accounts.
As with State-sponsored bodies, a serious gap exists in the process of accountability of local authorities. The committee are aware of potential conflict between the needs of local democracy and the Dáil's legitimate interest in local authority expenditure of centrally voted moneys. Therefore, the committee choose to distinguish between "mainline" local authorities and other local authorities such as health boards, VECs etc. The latter have 90 per cent or more financing as against much lower subvention in the case of mainline local authorities. There has been a serious problem in recent years with arrears of local government audit. The departmental group on the reform of the local government service have made some progress and produced an interim report dealing mainly with the temporary solution of the arrears problem, but what about reform of the system generally? When are they going to report on this? The main inefficiencies associated with the present system are: (1) in certain cases 100 per cent transaction checks are required; (2) there is no scope for countrywide comparative studies of similar programmes of expenditure by local authorities and (3) there is a lack of impetus for corrective action on matters raised by auditors.
In the case of other bodies in receipt of moneys there is a prima facie case for the Comptroller and Auditor General to have inspection rights of bodies who are in receipt of substantial amounts of State funds either directly or indirectly. The main reason for giving him such rights is to ensure, on behalf of the State, that the money has been used for the purpose for which it was granted. Such bodies include voluntary hospitals which are 85 per cent State funded, charity organisations which receive substantial amounts of State funds, educational institutions and commercial firms which receive substantial amounts of State money.
In Britain, following the National Audit Act, 1983, the Comptroller and Auditor General's estimate is no longer presented to the House of Commons by the Chancellor of the Exchequer. The Committee of Public Accounts here believe they should have a role in preparing the estimate. There may be a constitutional problem in the Committee of Public Accounts presentating the estimate to the House and we, therefore, suggest in the report that we should present the estimate to the Minister for presentation to the House. The Comptroller and Auditor General should have the power to engage outside consultants to assist him in his work. This should not be restricted to accounts and he should have the right to hire quantity surveyors, engineers, economists and such people as he requires.
A large number of recommendations are made in this report. The committee do not have the same terms of reference to hire consultants as other committees, although it is one of the senior committees of the House. There is an element of post factum examination of expenditure which is unsatisfactory since the committee examine the expenditure too long after it has been made. The procedure for laying reports before the House is outmoded and no time has been given in the Dáil to debate the reports of the committee. There seems to be a lack of urgency with regard to the needs of the committee and the question of privilege for witnesses needs to be examined.
The Committee of Public Accounts have made a number of recommendations which I have barely touched on during the short time available to me tonight. However, just because I have not touched on all those recommendations does not mean that any of them is less important than others. All of those recommendations are recommendations of the Committee of Public Accounts in so far as they effect the Comptroller and Auditor General and the committee. What we are saying is that no matter who is in Government — and it seems to the Committee of Public Accounts that it does not matter who is in Government at any given time — the statutory accounting officers who are permanent public servants need to be told "You are no longer going to be allowed to account to Dáil Éireann under legislation passed in 1866; you are going to have to account under legislation passed in 1989 and account in modern terms of public financial accountability in keeping with the 20th century". It is of vital importance to the whole question of proper financial accountability that those authorised to spend money on behalf of the State, to spend hard pressed tax-payer's punts, have a modern system of accountability through which they can answer to Dáil Éireann, and one which is in keeping with good 20th century practice. We are now a little over 11 years from the 21st century and it is not good enough that the legislation governing this essential and important area of the public sector should date from 1866.
I thank you, Sir, and the House for giving me the opportunity to place my comments on the record. I hope we shall soon see a response, by way of legislation, from the Department of Finance and that the Department will realise that all those very high-standing people who gave their services free of charge to the committee did so in the best interests of the public and the all-party committee on behalf of this House have endorsed that report. I trust the Department of Finance and the Minister will give the report the consideration due to it.