The Bill before this House relates to a key constitutional office of State, that of Comptroller and Auditor General. Article 33 of the Constitution provides:
There shall be a Comptroller and Auditor General to control on behalf of the State all disbursements and to audit all accounts of moneys administered by or under the authority of the Oireachtas.
The office of Comptroller and Auditor General predates the State. Thus most of our existing legislation in relation to that office remains the British legislation which was in force in 1922, notably the Exchequer and Audit Departments Acts, 1866 and 1921. The Comptroller and Auditor General (Amendment) Act, 1923, applied these Acts to the new State and the 1937 Constitution essentially enshrined the existing practice. Much of what is contained in these Acts remains fundamental and will be consolidated and updated as necessary in this Bill. There is now a clear need to broaden the statutory functions of the Comptroller and Auditor General. The purpose of this Bill is to broaden the concept of accountability and introduce audits on the basis of value for money. At the kernel of the proposals in this Bill is the need for a more transparent and comprehensive kind of public accountability. The existing statutory role of the Comptroller and Auditor General in auditing the accuracy and regularity of public expenditure is no longer sufficient. Since the foundation of the State there has been a great increase in the volume and complexity of public expenditure and receipts and also in the number of different bodies and agencies administering or dependent upon public resources.
There is an ever more pressing need, therefore, to ensure not just accuracy and the avoidance of irregularities but also good administration in the bodies concerned, i.e. efficient, economical and effective administration of the public resources entrusted to them. The public have a right to be assured those receiving, spending and holding public resources are rendered accountable in a full and comprehensive manner for their stewardship of those resources.
As one of the great officers of State, the Comptroller and Auditor General has a crucial role to play in making public accountability a reality. The Oireachtas, as the supreme legislative organ of the State, appropriates the money required for the public services. The Comptroller and Auditor General's function is to assure the Dáil, representing the public, that the conditions set down by the Legislature are complied with by those charged with the stewardship of this money. This is one reason why the Constitutional independence of the Comptroller and Auditor General is so important.
While I have indicated that much of the existing legislation in regard to the Comptroller and Auditor General dates back before the foundation of the State, there have been significant non-statutory developments in the role of the Comptroller and Auditor General, on the basis of custom and practice.
The principal development has been the acceptance that the Comptroller and Auditor General has a function in identifying and reporting on instances where it appears to him that there has been loss, waste or uneconomic expenditure by Government departments. Over the years the Department of Finance has fully supported the Comptroller and Auditor General in the exercise of this important non-statutory function. The latest development on this front has been his recent initiative in preparing project audits which focus on particular issues or areas of expenditure or revenue together with his usual report on the Appropriation Accounts.
These changes reflect ongoing developments over the past twenty years or so in the practice of audit generally and, the national audit in particular. Internationally, there is now a much greater emphasis on value for money in the public sector. This is of course in addition to the traditional audit of accuracy and regularity. While avoidance of fraud and error is a sine qua non, it is also important to address the misuse of resources, potentially even more costly to the taxpayer, due to poor administration.
In formulating this Bill, the Department of Finance undertook a comprehensive review of the role of the Comptroller and Auditor General, including an examination of developments in national auditing in other countries in recent years, particularly those with a similar parliamentary tradition to our own. In the light of this review and a special report by the Dáil Committee of Public Accounts, the Government decided to modernise the rôle of the Comptroller and Auditor General on a statutory basis, having regard to best international practice and our own national needs. This Bill is being put forward to consolidate and modernise existing legislative provisions, to make additional provision to extend the range and scope of scrutiny by the Comptroller and Auditor General of public expenditure and the administative management of public resources in line with modern requirements, to provide for more effective arrangements for reporting by the Comptroller and Auditor General and to deal with other incidental and miscellaneous issues which now require attention.
The White Paper published with this Bill gives a detailed account of the issues and the reasoning behind the measures proposed. Therefore, I will not repeat what is in the White Paper. I want rather to focus on the intention of the Bill and on a number of its more significant features and to mention changes made during its passage through the Dáil. The two major new elements of the legislation relate to the nature of the audit process, and to the scope of that process.
The nature of the audit process will be enhanced by the addition of a new statutory role for the Comptroller and Auditor General in regard to value for money. This may be divided into, economy, efficiency and effectiveness. These concepts are of course inter-related and in practice cannot be so readily separated. With that caveat, it may be helpful to give the essence of the concepts. Economy relates to acquiring and using only the necessary resources at the least cost. Efficiency means achieving the required output with the minimum of resources or the maximum output from a given level of resources. Effectiveness means that the outputs achieve the desired results.
In relation to effectiveness, it is necessary to ensure that the Office of the Comptroller and Auditor General does not move into the assessment of policy, which is rightly an area dealt with by the Government and the Dáil. In the public sector in examining effectiveness there is a difficulty in establishing the degree to which changes in an area or a sector affected by a programme are the results of that programme. In real life programmes do not generally have a single objective with readily quantifiable results. Indeed, there are other factors affecting the change not just those resulting from the programme. It is most important, that Departments and other bodies should have the necessary systems in place to enable them to appraise the effectiveness of their own operations in achieving policy objectives.
The second area relates to the link between judgments on effectiveness and judgments on policy. The formulation of policy is the responsibility of Government and Ministers are answerable to the Dáil for policy matters in their Departments. National auditors in most countries would accept it is not their business to examine policy and they have no rôle in this regard. The problem is when examining effectiveness in practice, questions can easily arise as to the merits of the objectives of programmes being examined, as well as on the basis of validity or suitability of the programme itself. Thus an auditor could be drawn into considering whether the objectives of a programme were reasonable in the first place and, directly or by inference, expressing opinions on the merits of the policy on which the objectives were based.
It would not be desirable to draw the Comptroller and Auditor General into the political arena in this way. It could compromise the independence, and consequently the effectiveness of that office. The important consideration is that it is the responsibility of Departments and other bodies to have the necessary systems in place to enable them to appraise the effectiveness of their own operations.
This consideration has been the central one determining the Government's approach to examinations by the Comptroller and Auditor General in relation to effectiveness. The Bill provides therefore, that he may at his discretion examine and report on the economy and efficiency of Departments and bodies audited by him. Those Departments and bodies will be expected to have in place the necessary systems for carrying out such appraisal of effectiveness so as to provide Ministers and management with the necessary information to take any corrective or policy action which may be indicated. Such systems will be subject to examination for effectiveness by the Comptroller and Auditor General.
In this way the danger of the Comptroller and Auditor General becoming involved, directly or indirectly, in the area of policy is minimised. At the same time, the Oireachtas and the public have a reliable and independent assurance that there are systems in place for evaluating the effectiveness of expenditure. It will be noted that the power to examine efficiency, effectiveness and economy is discretionary while the normal financial audit is mandatory. This distinction is necessary because it would not be possible for the Comptroller and Auditor General to carry out every year a value for money examination in every body he audits.
However the section of the Bill dealing with value for money is the key provision of the Bill. It will give the Comptroller and Auditor General a statutory mandate to look at the administration, by Departments and publicly funded bodies, of the resources under their control, to assess whether their operations are economical and efficient and whether they have systems in place to allow them, on an ongoing basis, to appraise whether their operations are in fact effective. This is the major reform contained in this Bill. It is a positive step forward and one that has been recommended by the Dáil Committee of Public Accounts.
During the debates in the Dáil, I moved an amendment which will expressly authorise the Comptroller and Auditor General in the course of his examinations under this section, to make comparisons, including comparisons of systems, procedures and practices, as he considers appropriate. This will enhance the section as it will enable the Comptroller and Auditor General not merely to address cases in which he finds ground for criticism, but to identify instances of good practice which may warrant study or emulation by others.
The scope of the Comptroller and Auditor General's audit will be extended to cover all the non-commercial State bodies not already statutorily audited by him, and a number of other bodies, principally in the education sector. These bodies are listed in the First Schedule to the Bill. The health boards and the vocational education committees will also be audited by him. The Comptroller and Auditor General will, in addition, be empowered to audit funds under the aegis of bodies which he audits, and with appropriate ministerial approval, subsidiaries of such bodies.
The local authorities and commercial State bodies do not come within the Comptroller and Auditor General's remit. The local authorities are already accountable to elected local representatives and will continue to be audited by the Local Government Audit Service. Commercial bodies are audited by private sector auditors and are accountable to the Oireachtas Joint Committee on Commercial State-sponsored Bodies. It would be a duplication of effort if the semi-State bodies were accountable to both the Committee of Public Accounts and the Oireachtas Joint Committee on Commercial State-sponsored Bodies. It should be mentioned that the local government auditors' reports are made available to the Comptroller and Auditor General, and in his report on the Appropriation Accounts he may draw attention to any matter in those reports which he considers to be significant.
An important extension of the scope of the Comptroller and Auditor General's operations will be the introduction of a statutory power of discretionary inspection. He will be able to inspect and report on the accounts, books and records of commercial harbour authorities, the regional tourism organisations and any body — other than a commercial State body or a local authority — in respect of any year in which it received 50 per cent or more of its gross receipts directly from Departments or from the central fund. The Comptroller and Auditor General will be able to check that public moneys have been spent by the subsidiary bodies for the purposes for which they were provided.
On Report Stage in the Dáil I moved an amendment to the Bill, section 8 (1) (c), to empower the Comptroller and Auditor General to inspect bodies receiving 50 per cent or more of their gross annual receipts indirectly from public funds. This will enable the Comptroller and Auditor General, where he considers it necessary, to follow public money— such as grants awarded by State bodies —to private bodies where these bodies are at least 50 per cent dependent on such funds to ensure that the moneys have been spent in accordance with the intentions of the Oireacthas. This power of inspection is quite distinct from his power of audit. The Comptroller and Auditor General will not audit the accounts of the bodies which he will inspect; they will continue to have their own auditors as at present. The purpose of this power is to enable the Comptroller and Auditor General to follow public funds as far as may be necessary so that he can satisfy himself that they have been correctly appropriated.
The Bill also consolidates and updates existing provisions in legislation relating to the constitutional role of the Comptroller and Auditor General, principally in regard to the comptroller function and the auditor function. As a natural extension of his audit function in regard to the Government accounts, it provides for the audit by him of the Finance accounts. Also, a number of incidental and ancillary provisions have been made.
In addition to the measures which represent the major policy content of the Bill, a number of other provisions have been included. Many of these are of a consolidation nature and they are explained in the White Paper. There are, however, some notable innovations. Section 12 provides for the Comptroller and Auditor General, with the consent of the Minister for Finance, to charge fees in respect of audits, inspections and examinations carried out by him.
Section 13 provides for the appointment by the Comptroller and Auditor General of a suitably qualified independent person to audit on his behalf the Appropriation Account for his own office and, with the consent of the Minister for Finance, to examine his office in regard to economy, efficiency and management effectiveness. For constitutional reasons, that person's report will be appended to the Comptroller and Auditor General report on the Appropriation Account of his office. Section 17 provides for the transfer of staff from the office of the Minister for the Environment to the Office of the Comptroller and Auditor General as audits of health boards are transferred from the Local Government Audit Service to the Comptroller and Auditor General consequent on the provisions of this Bill. I moved an amendment to this section in the Dáil to give greater flexibility in dealing with the individual preferences of staff should they wish to remain with the Local Government Audit Service or to transfer to the Comptroller and Auditor General office.
Section 19 sets out, for the first time in statutory form, the duty of Accounting Officers to give evidence to the Committee of Public Accounts in regard to regularity and propriety, economy and efficiency, management effectiveness and matters arising from special reports of the Comptroller and Auditor General.
Section 24 provides that different provisions of the Bill can be brought into effect at different times by ministerial order. The large amount of new work passing to the Comptroller and Auditor General under this Bill will have to be introduced on a phased basis. It is the Government's intention to bring the different provisions of this Bill into effect with the minimum possible delay. Other sections provide for repeal of obsolete legislation and consolidation of existing measures so that there will be comprehensive modern legislation covering the Comptroller and Auditor General.
Senators will be aware of the close and complementary relationship which exists between the Comptroller and Auditor General and the Committee of Public Accounts. The Committee of Public Accounts is a Select Committee set up by the Dáil to consider the reports which the Comptroller and Auditor General makes to the Dáil under Article 33.4 of the Constitution. Heretofore, the Committee of Public Account's terms of reference related specifically to the examination of the Appropriation Accounts and the Comptroller and Auditor General's reports thereon. The committee functions by calling the Accounting Officers of Departments to give evidence to them, thereby ensuring accountability to the Dáil. As indicated in the White Paper, the Government will be proposing to the Dáil revised terms of reference for the Committee of Public Accounts to complement the extended scope of the Comptroller and Auditor General's statutory remit.
For the first time, the duties of Accounting Officers in giving evidence before the Committee of Public Accounts will be set down in legislation. This accountability will complement the additional powers proposed for the Comptroller and Auditor General in regard to Government accounts and for the Committee of Public Accounts.
I am aware of concerns among staff of the Local Government Audit Service about the implications for them of the transfer of certain audits to the Office of the Comptroller and Auditor General. I recently met some local government auditors to hear their views. The principle adopted in preparing the Bill following the White Paper on the role of the Comptroller and Auditor General, was that local bodies whose funding came largely from central government, should be audited by the central government auditor, the Comptroller and Auditor General. The health boards alone receive over £1 billion annually, 95 per cent of their annual resources, from the public purse and public accountability requires that the Comptroller and Auditor General should now audit these boards and the vocational education committees, which also receive over 90 per cent of their funds from central sources. The directly elected local authorities, on the other hand, raise a considerable share of their resources locally and have a direct democratic mandate, and these will continue to be audited by the Local Government Audit Service.
These proposals will not result in a situation where staff in that service will be left high and dry in the new audit environment. The basic approach will be that staff will be transferred to the Comptroller and Auditor General's office at the time the work is being transferred. There will be a much greater degree of co-operation and co-ordination between the Comptroller and Auditor General's office and the Local Government Audit Service. This Bill will cause no diminution of work, in terms of quality and quantity, for auditors.
Following my meeting with local government auditors and having regard to the representations made to me, I moved an amendment to section 17 of the Bill on Committee Stage in the Dáil to provide a more flexible procedure for the transfer of staff from the Local Government Audit Service to the Comptroller and Auditor General's office.
Rather than directly transferring those staff who have been working on the transferred audits, the new section 17 provides for a more flexible approach to allow local audit staff, as far as is practicable, to opt for the service of their choice. The decentralisation of Government departments means that there is likely to be regionalisation of the Comptroller and Auditor General's office and planning for new administrative structures will begin as soon as the Bill has been passed. I gave a commitment in the Dáil to have consultation with staff unions about the planned reorganisation of the audit service. I repeat that commitment here. I am sure that, through consultation, the new structures can be put in place in a way that facilitates staff.
In conclusion, I believe this Bill is an important reform that has the support of all parties. It will result in a more effective scrutiny of public expenditure with greater emphasis on value for money and the efficient use of resources in Departments and in bodies supported by public funds. This will ensure a more comprehensive public accountability, thereby contributing to improving the quality of the public services and to better use of public money. I commend the Bill to the House.
