Léim ar aghaidh chuig an bpríomhábhar

Seanad Éireann díospóireacht -
Thursday, 20 May 1993

Vol. 136 No. 6

Comptroller and Auditor General (Amendment) Bill, 1992: Committee and Final Stages.

Section 1 agreed to.
Question proposed: "That section 2 stand part of the Bill."

This section deals with the exercise of powers by the Comptrller and Auditor General and his constitutional duties to control disbursements from the Central Fund. As far as the section goes it is satisfactory but it does not go far enough. The Comptroller and Auditor General should be granted greater powers to exercise control over bodies in which the Government has a financial interest and control, such as semi-State bodies. I would like the Minister's views on this.

Section 2 deals with the control function of the Comptroller and Auditor General. The point the Senator is making arises later in the Bill. Perhaps we could deal with it then.

Question put and agreed to.
Question proposed: "That section 3 stand part of the Bill."

I am concerned and have been concerned for some time about the spending of some Government Departments. There are obvious and glaring areas where there is gross over-spending and procedures in these areas must be tightened. On Second Stage I spoke about the renovation of Government Buildings, the Royal Hospital, Kilmainham and Portlaoise Prison — we will be dealing with schools later. The expenditure incurred in these cases was far in excess of the original estimate.

This is only one area of excessive expenditure. It appears the Comptroller and Auditor General gets involved only after the money has been spent. Is the Minister satisfied that this section covers those points?

The Senator is concerned about semi-State bodies which are not under the control of this Comptroller and Auditor General. The legislation takes the view that in the non-commercial semi-State sectors the Comptroller and Auditor General will be the appropriate officer, but in the commercial semi-State sector it is the responsibility of the board of the company and of the Minister who appoints and supervises the board to ensure proper financial procedures are followed. Semi-State bodies are subject to the relevant Oireachtas committee and the work of the Comptroller and Auditor General comes under the Committee of Public Accounts. It is important that there be two separate committees.

In dealing with the commercial semi-State bodies, the commercial auditors should do the job they are employed to do. If they do not do it properly, they can be sacked or sued by the semi-State company concerned. It is their duty to do a proper commercial audit in line with the best commercial practice and to report back to the boards of those companies. In relation to the State sector and non-commercial semi-State bodies whose accounts are audited by the Comptroller and Auditor General, the point being made is whether we can identify and deal with potential waste of public money before it becomes a problem. Later sections in the Bill deal with value for money auditing.

The effect of the new powers in the Bill will be to tighten up procedures in Government Departments so that they will be very alert to potential waste and abuse of public money because they know they are potentially subject to this detailed value for money audit. This will result in improved monitoring and evaluation of projects.

Expenditure cannot be audited until the money is spent. The Senator wants to know if we can avoid future abuse and waste of public money. Nobody can guarantee that there will not be future waste or that things will not go wrong, but what we are trying to do is to devise models of best practice. The Bill gives the Comptroller and Auditor General the power not only to carry out value for money audits but also to report on accounting procedures as he did in his 1991 report, in relation to stores. This will contribute to better public administration. However, as I already pointed out, an audit by definition deals with actual rather than planned expenditure.

I accept that it is difficult to audit expenditure while money is being spent. However, in the commercial sector a person is usually given responsibility for monitoring expenditure. Such a person would monitor spending on a building project by examining the amount required to complete each stage of construction, such as the walls, the roof and internal works.

Expenditure should be continually monitored in areas where it has previously exceeded its target to ensure that planned expenditure is not exceeded in future. Such monitoring does not take place at present because, in some areas, there have been major spending over-runs. This is not widespread practice. Civil servants are generally competent, reliable and honest. However, in some areas there are insufficient checks to prevent over-spending.

This section deals only with standard audit procedures. I share Senator Enright's concern about waste of public money. A later section deals with value for money audits and envisages putting in place procedures to avoid waste, abuse, bad value for money and cost over-runs. It allows the Comptroller and Auditor General to examine practices and procedures and to report on their effectiveness in monitoring expenditure on contracts.

Some years ago, in response to public concern and concern expressed by the Committee of Public Accounts about cost over-runs, the Department of Finance prepared a report on practices and procedures in tendering for projects which identified areas where cost over-runs had occurred. Such change in policy by a Department in response to concerns expressed by the Comptroller and Auditor General is ongoing, and that will be tightened up by the provisions of the Bill on value for money audits. The Bill takes on board the concerns expressed by Senator Enright which are shared by all Members of the House.

The sections specifically deal with audited accounts of money administered by, or under the control of, the Oireachtas. Money is regularly allocated to commercial State-sponsored bodies. There is great dissatisfaction with the way a great deal of this money has been spent, or misspent in many instances. It is essential that the Comptroller and Auditor General has power to investigate this expenditure.

The Minister pointed out that the Oireachtas Joint Committee on Commercial State-sponsored Bodies has the power to investigate these bodies. I accept this but that committee is very short-staffed. When I was a member of that committee we experienced considerable difficulties and delays in obtaining reports and information because the staff were unable to cope due to staff shortages. A much more thorough and intensive investigation of how public money is spent is needed.

There have been many financial scandals in recent years. The problems in Greencore might never have occurred if the Comptroller and Auditor General had been empowered to monitor its expenditure and inspect its accounts. The public money which was misappropriated was allocated by the Oireachtas.

I am sure the Minister has studied in detail the White Paper on the role of the Comptroller and Auditor General.

An Leas-Chathaoirleach

You are straying from the section. Try to confine yourself to the section. We do not want a Second Stage debate.

We are not. This section forms the main thrust of the Bill. The Auditor General in other countries has investigatory powers. The Comptroller and Auditor General in Ireland should be given such powers.

This section deals only with the standard audit function of ensuring that money does not go into somebody's back pocket as distinct from being spent on the purpose for which it was voted, and it updates the law in that respect. Section 9 deals with value for money audits.

In regard to semi-State bodies, the position adopted in the Bill is that it would be the function of their boards and their sponsoring Departments to monitor what is going on and report to the Oireachtas Joint Committee on Commercial State-sponsored Bodies. I take the point made regarding shortage of resources. If a board is functioning well it will supervise the activities of senior management.

I have proposals in the draft ethics Bill, which I am preparing and which is virtually ready, to deal with conflicts of interest for senior management of semi-State bodies. Guidelines on that matter were issued by the Department of Finance in the wake of the scandals referred to. However, that is not appropriate to this Bill. If the Comptroller and Auditor General is given responsibility for all the semi-State bodies, resources would be spread too thinly and the job would not be done well. The decision has been made that the semi-State bodies are to be audited by the normal commercial auditors who will be subject to the boards. The relevant Minister supervises the board and the board supervises the company and its auditors. Accordingly there are sufficient checks and balances. The Oireachtas Joint Committee on Commercial State-sponsored Bodies supervises the whole process.

The extension of audits in this Bill is to deal with non-commercial semi-State bodies where those kinds of checks and balances do not operate, and the value for money auditing and the scrutiny of proceedings. They are dealt with in section 9 of the Bill and maybe we can continue discussion of this point on section 9.

Question put and agreed to.
Section 4 agreed to.
Question proposed: "That section 5 stand part of the Bill."

Subsection (1) outlines the different schedules and the different bodies which come under the control of the Comptroller and Auditor General; it lists the different bodies to be audited by the Comptroller and Auditor General. Section 5 (1) (a) (i) states: "the accounts for each financial year of the persons specified in the First Schedule,". Many different bodies are mentioned in their schedule, including Shannon Free Airport Development Company Limited, St. Patrick's College, Maynooth, and the Board for Employment of the Blind. On what basis were those decisions arrived at? Why were some bodies included and others left out?

The basis on which they were chosen was that there are some bodies which are already audited by the Comptroller and Auditor General under their own legislation, for example, the Central Bank. There are non-commercial semi-State bodies or bodies such as Trinity College, Dublin, which are substantially funded from State funds and are not audited by the Comptroller and Auditor General. The Bill gives power, on a phased basis, to take over those audits. The Bill also proposes to include the health boards which previously had been audited by the local government audit service.

The principle behind this was that bodies which were predominantly in receipt of State money, where that was their main source of income, should be audited by the Comptroller and Auditor General. Bodies whose main source of income would not be the Exchequer, for example, the ESB whose main source of income is from the sale of electricity, would be audited in the normal commercial way. It is, so to speak, chasing the money.

The decision was taken to include the health boards because first, they are not responsible in the same way as local authorities to directly elected members and a directly elected board. Second, most of their money comes from the Central Fund. It is felt that the Exchequer's auditor, who is the Comptroller and Auditor General, should audit them.

In the case of local authorities, on average only half their income comes from central sources. Furthermore, there is direct accountability — as most of us here are aware having been members of local authorities — of the directly elected members. It is an accountable form of government where the elected members take a keen interest in all aspects of local authority activities. That gave enough checks and balances and the local authorities will be left with the local government audit service. These principles underly the decisions on who would audit which bodies. I have already said what the dividing line was in assigning the commercial semi-State bodies and the line of principle drawn there.

Question put and agreed to.
Section 6 agreed to.
Question proposed: "That section 7 stand part of the Bill."

Up to now vocational education committees had not been under the control of the Comptroller and Auditor General. My experience of vocational education committees has been that they have been run efficiently up to now. The Minister said that moneys were specifically allocated to these bodies and that is part of the reason they come under this criterion. I find it difficult to see why the Minister omits commercial semi-State bodies which have caused major problems. There have been serious and gross abuses of public moneys. To date I have not been made aware of any abuses by the vocational education committees. Their accounts are normally well kept. I was under the impression they were being looked after by the local authorities. Why is the Minister including them here?

It is the same principle as applies to health boards. Most of the money going to the vocational education committees comes from Government; only an insignificant amount comes from local authorities. Since it is Department of Education money going directly into vocational education committees, the person who audits the Department of Education accounts should also audit the vocational education committees'. That is the underlying principle. It means that the Comptroller and Auditor General is entitled to do a value for money audit in relation to vocational education committees.

I was told recently of a vocational education committee that was costing £110,000 to run and was administering a payroll budget in schools of £120,000. Questions need to be asked there about how the vocational education committee is run in terms of value for money. The powers conferred under section 9 of the Bill are necessary to follow up those issues. It is appropriate that the accounts of the vocational education committee should be audited by the Comptroller and Auditor General. That is the principle adopted here.

Question put and agreed to.
Section 8 agreed to.
Question proposed: "That section 9 stand part of the Bill."

This is the main issue regarding semi-State bodies. It is my understanding that in Australia and Canada commercial State bodies come under the control of their respective comptrollers and auditors general. That seems to work satisfactorily in other countries and it surprises me why it is not the case here. Some of the bodies listed in the First Schedule strike me as strange. SFADCo, which deals with the midlands, the south and along the west coast, comes under the control of the Comptroller and Auditor General. I cannot understand why the Industrial Development Authority would not have the same criteria for examination. I am not aware of any significant problems that have arisen to date, although there may have been minor difficulties. It strikes me as strange that Bord na Móna is excluded. Some of the semi-State bodies mentioned are subject to Government control.

You are revisiting section 5 at this stage.

The heading of section 9 reads: "Examination by Comptroller and Auditor General of economy and efficiency in use of resources and of effectiveness of certain management systems." We are dealing with the First and Second Schedule. I do not think the Government is going to change this Bill but I am suggesting that it may be worth considering at another stage. The level of public anxiety, unrest and hysteria over financial scandals in recent years is unparalleled. In my time as a public representative I have not seen anything like it. Further scandals of this nature involving gross abuse of moneys allocated to semi-State bodies by the Houses of the Oireachtas, will provide a large scale public revolt in years to come.

We cannot undo what happened in the past, but the Minister of State will be in a position to deal with future developments when further legislation is introduced in this area. It is essential to act now because those scandals occurred in circumstances outside the control of elected politicians. People were appointed or elected to positions of trust in which integrity and honesty were expected from them, but much of that trust was betrayed. It was not the culpable people in semi-State bodies who were blamed; much of the blame was attributed to elected public representatives who were powerless in the matter. By allowing this Bill to be enacted in its present form we are failing to grasp the nettle.

There is no need for me to go through the list of scandals because they have been publicly recorded. We have the power to deal with them, however, by including the Second Schedule and, though it is late in the day, I feel we should do so. I take the Minister of State's point that to spread the powers of the Comptroller and Auditor General too thinly weakens those powers. In this instance, the amount of money misspent was so substantial that money spent on expanding the powers of the Comptroller and Auditor General's office would be well spent.

As regards some of the bodies listed in the First Schedule, such as the Shannon Free Airport Development Company otherwise known as SAFDCo, will the same powers apply to sub-companies set up by these bodies? SFADCo has established quite a number of commercial bodies that operate under its aegis. Will the Comptroller and Auditor General's power apply equally to the parent body and to its sub-groupings?

In examining a parent body the Comptroller and Auditor General can examine its subsidiaries. To come back to the point made by Senator Enright, the Comptroller and Auditor General in Canada only audits bodies which do not operate in a competitive environment. It is quite similar, therefore, to our situation where we are putting the non-commercial, semi-State bodies under the Comptroller and Auditor General and leaving the commercial semi-State bodies to operate in the commercial world, and, in the normal commercial way, to employ commercial auditors.

I agree with Senator Enright about the problem of public disquiet at financial scandals in certain semi-State bodies. These appear to have involved strong conflicts of interest where people acted on their own behalf rather than on behalf of the company. I will address that issue in the Ethics Bill which is virtually ready to roll. That is the appropriate area in which to deal with interest and conflicts of interest involving senior figures in the semi-State sector. Following the financial scandals, guidelines were issued by the Department of Finance for the tightening up of procedures after a thorough investigation of what went wrong. Those guidelines have been issued to all the commercial semi-State bodies and include provision for a declaration of interests by members of boards as well as advice on how to abstain from acting on something in which they have a financial interest. Those procedures will be given statutory backing in the ethics legislation. That is the appropriate way to deal with that concern.

The Comptroller and Auditor General's role under this Bill will be to ensure that there are mechanisms in place in Government departments that adequately supervise the operation of the semi-State bodies under their aegis. It is then up to the Government departments, boards and auditors concerned to see that no funny dealing goes on in semi-State bodies. That is the correct chain of command; it does not mean that no attempt is being made to address the issue. I do not think that extending the remit of the Comptroller and Auditor General to the commercial semi-State area is the most effective way of dealing with the issue. The point was raised in the Dáil debate and I subsequently discussed it with professional auditors. My advice is that mismanagement of funds would be more effectively picked up by commercial auditors operating in the commercial world. That is the job they are paid to do, and if they do not do it effectively they can be sued, dismissed or otherwise dealt with by the board of a company.

It is the Comptroller and Auditor General's responsibility to ensure that proper procedures are initiated in Government departments to monitor the semi-State bodies under their aegis. That mechanism together with what is in the pipeline to give statutory effect to guidelines in relation to senior people in semi-State bodies, is the correct way in which to deal with the issues which have been raised.

In litigation one has no chance if one is up against a judge who is judging his own case. To some extent, asking the commercial auditors whether one should change the procedure and have the Comptroller and Auditor General take over some of the powers that are theirs at present, is akin to a judge judging his own case. I do not mean to be disrespectful but I do not believe auditors are the best people to ask for an opinion on that issue.

They are not prepared to work as commercial auditors.

The proposed ethics Bill will deal with this matter. I have listened to the Minister of State and I wish her well with this Bill.

I look forward to the support of the Senator's party.

Everyone has their own standard of ethics. I do not want us to go overboard on this matter because it may drive many good people out of public life and public office.

Acting Chairman

May I remind Senator Enright that he is straying from the Bill.

The problems of Greencore, Telecom Éireann and Aer Lingus Holidays would never have arisen if the Comptroller and Auditor General had been given the power to investigate. These scandals have arisen because, until now, there were no proper controls over commercial State-sponsored bodies. We are failing to take the necessary action and I feel strongly about this.

Question put and agreed to.
Sections 10 to 14, inclusive, agreed to.
Question proposed: "That section 15 stand part of the Bill."

Is 65 years the retirement age for the Comptroller and Auditor General?

At present it is 70 years, but it is being reduced to 65 years, which is the normal retirement age.

Question put and agreed to.
Section 16 agreed to.
Question proposed: "That section 17 stand part of the Bill."

Were officers attached to the Department of the Environment? What is the new procedure?

There will be consultation between unions and management in relation to staff transfers. I have amended section 17 to allow flexibility in this area. For example, an individual working on the Southern Health Board audit and who wishes to remain in County Cork, may do so if somebody else wants to move with the audit.

A regional dimension to the Office of Comptroller and Auditor General is envisaged because a lot of regionalisation and decentralisation has taken place in Government Departments. Government Departments are now located in Letterkenny, County Donegal and County Sligo. If such regionalisation takes place there will be scope to accommodate the wishes of staff.

Question put and agreed to.
Sections 18 to 24, inclusive, agreed to.
First Schedule agreed to.
Second Schedule agreed to.
Third Schedule agreed to.
Fourth Schedule agreed to.
Title agreed to.
Bill reported without amendment and received for final consideration.
Question proposed: "That the Bill do now pass."

I thank the Minister of State for her attendance. I congratulate her on the passage of this legislation and on her command of her brief.

I too congratulate the Minister on the way she handled this Bill and I commend the open manner in which she has answered questions.

I congratulate the Minister of State on the way she handled this Bill. We are always glad to see her here.

I thank the Members of this House and, in particular, Senator Enright for the structured contributions made to this legislation.

Question put and agreed to.
Sitting suspended at 1.15 p.m. and resumed at 3.00 p.m.