Comptroller and Auditor General: Access to Information

Part of Orders of the Day — Government Resources and Accounts Bill – in the House of Commons at 2:15 am on 29 February 2000.

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Photo of David Davis David Davis Chair, Public Accounts Committee, Chair, Public Accounts Committee 2:15, 29 February 2000

That is an extraordinarily interesting question because we often hear the general argument that such access suppresses risk taking but we have never been given an example, so the answer is no. If there has been such an occurrence, I would be interested to hear about it. Perhaps the review will pick up some of those points.

On tax credits, access is necessary because they replace benefits that are currently delivered through Government agencies that are already subject to the CAG's inspection. Those credits are, in effect, payments from the state. In recognition of the concern about the burden on business, I have made the new clause clearer, to show that it allows access only for examining tax credits, which involve payments, and does not apply to the tax system as a whole because that is largely about receipts rather than payments.

I can assure, and reassure, the Government that the CAG's access would impose no burden beyond that already inherent in the tax credits system. The CAG has informed me that his staff would conduct examinations of tax credits by accompanying Inland Revenue staff on the visits that they make to check compliance, so the new clause will not, in any event, add any new burden.

The CAG estimates that, unless specific weaknesses become apparent and require further work, his staff would need to attend 0.5 per cent. of the Inland Revenue's visits. Based on the Revenue's latest figures, that would mean attendance by the CAG's staff at about 200 out of just under 40,000 visits. Access for the CAG would mean no additional visits to employers, but simply one or two extra people on a tiny proportion of visits that would take place in any case, so the additional burden argument does not stand up.

Thirdly, the Government have said that the existing arrangements to provide access work well and are preferable to a statutory provision. However, the Chief Secretary, in giving evidence to the Committee, recognised that the arrangements that stem from that approach are a bit of a hotch-potch. They have often required lengthy and costly negotiations, illustrated by the examples that I cited earlier.

The existing arrangements raise the further constitutional issue that the Government, and in practice the civil service, decide what Parliament may scrutinise. A statutory approach would bring administrative savings in negotiating access, avoid accidental omissions and ensure that Departments do not dictate the extent of parliamentary scrutiny. My reassurance to the Government in this matter, as with the previous point, is that wider access is not new—it is already in place in many parts of the public sector. We merely want the mechanism for securing wider access to be more consistent and robust. As an additional benefit, the statutory approach will be cheaper to operate.

Fourthly, the Government are concerned about duplication of audit. That stems from a misunderstanding about audit. There will never be more than one auditor who audits the accounts, and the CAG will not conduct a duplicate audit of the accounts of bodies in question. To continue with an earlier example, the CAG would examine the records of the new deal provider organisations, not to audit their accounts but to audit those of the Employment Service and ensure that the training and employment opportunities for which the service has paid have been delivered.

The Government are keen for the CAG to place reliance on work that other auditors have undertaken in auditing the accounts of bodies in which he has an interest. Sometimes that is appropriate and it is for the CAG to judge when it is. Unless specifically contracted to do so, other auditors will not examine whether funds provided to the body have been used as Parliament intended, because their responsibility is to the body itself, not to Parliament. Two cases illustrate the different remit and the role of auditors working on behalf of the bodies that they audit, rather than on behalf of Parliament, as in the case of the CAG.

Halton college claimed £6.4 million from the Further Education Funding Council, with no support from college records. That happened over several years, despite the fact that the college's auditors had been required to certify funding claims. The funding council subsequently reviewed the quality of work undertaken by private firms auditing colleges, and identified concerns in 11 of the 26 cases reviewed.

In the second case, Gwent tertiary college was taken to the brink of collapse by incurring a deficit of £6.8 million through significant weaknesses in the controls of claims for European funding. The college's auditors had repeatedly certified that all grants and income had been used for the purpose for which they were received, but had not taken any detailed testing of expenditure to primary records to support their audit opinion. Neither of the matters is new to the Minister, as both have been related in Public Accounts Committee reports, which the Treasury has received.

There is no risk of audit duplication. We are discussing different and complementary functions on the part of the auditors.

Fifthly, the Government said that the Bill is about resource accounts, not about audit. However, analysis of the Bill shows that it covers far more than is necessary to bring in resource accounts and resource-based supply, and that audit is indeed at its core. The Bill repeals 16 sections covering audit in the Exchequer and Audit Department Acts 1866 and 1921. Seven of its 28 clauses deal with audit. It is hard to imagine a Bill that is more about audit. The opinion that the Bill is only about resource accounts and resource-based supply and not about audit is simply not supported by the facts.